1. (DuPont analysis) Dearborn Supplies has total sales of $200 million, assets of $109 million, a return on equity of 30 percent, and a net profit margin of 7.6 percent. What is the firm's debt ratio?
2. (Calculating rates of return) The common stock of Placo Enterprises had a market price of $8.34 on the day you purchased it just one year ago. During the past year, the stock had paid a dividend of $0.54 and closed at a price of $10.47. What rate of return did you earn on your investment in Placo's stock? (Round to two decimal places.)
3. (Present value) Ronen Consulting has just realized an accounting error that has resulted in an unfunded liability of $380,000 due in 28 years. In other words, they will need $380,000 in 28 years. Toni Flanders, the company's CEO, is scrambling to discount the liability to the present to assist in valuing the firm's stock. If the appropriate discount rate is 9 percent, what is the present value of the liability?
4. (Annuity payments) Ford Motor Company's current incentives include 4.7 percent APR financing for 72 months or $1,100 cash back on a Mustang. Let's assume Suzie Student wants to buy the premium Mustang convertible, which costs $34,000, and she has no down payment other than the cash back from Ford. If she chooses the $1,100 cash back, Suzie can borrow from the VTech Credit Union at 6.7 percent APR for 72 months.
- If Suzie chooses 4.7 percent APR financing for 72 months to buy the premium Mustang convertible, which costs $34,000 = PMT(62.632529), what will her monthly payment be? (Round to the nearest cent.)
- If Suzie chooses $1,100 cash back to buy the premium Mustang convertible and borrows $32,900 from the VTech Credit Union at 6.7 percent APR for 72 months, how much will her monthly payment be?
- Which option should Suzie Student choose?
5. (Cost of preferred stock) The preferred stock of Walter Industries Inc. currently sells for $36.02 a share and pays $2.48 in dividends annually. What is the firm's cost of capital for the preferred stock?