Problem 1. Based on the following information, calculate stockholders' equity: cash = $30; total current liabilities = $80; accounts receivable = $30; inventory = $90; net fixed assets = $220; accounts payable = $20; long term debt = $50.
Problem 2. Calculate the value of cost of goods sold for Large Stone Brewing given the following information: Current liabilities = $340,000; Quick ratio = 1.8; Inventory turnover = 4.0; Current ratio = 3.3.
Problem 3. Inkheart Inc has a profit margin of 11% and a retention ratio of 70%. Last year, the firm had sales of $500 and total assets of $1,000. The desired total debt ratio is 75%. What is the firm's sustainable growth rate (SGR)?
Hint: SGR = (ROE x Retention Ratio) / (1- ROE x Retention Ratio)
Problem 4. Explain why it is that in an efficient market, investments have an expected NPV of zero.
Problem 5. You have $10,000 to invest. The Big Federal Bank offers one-year certificates of deposit with a stated rate of 5.50% compounded quarterly. What rate, compounded semi-annually, would provide you with the same amount of money at the end of one year?
Problem 6. What is the standard deviation of a portfolio that is invested 40% in stock A and 60% in stock B, given the following information?
Economic State Probability of State Return on Stock A Return on Stock B
Normal 70% 9% 12%
Boom 30% 14% 18%
Problem 7. What is the expected return on asset A if it has a beta of 0.3, the expected market return is 14%, and the risk-free rate is 5%?
Problem 8. A company owns a building that is totally paid for. This building has been sitting idle for the past three years. Now the company is trying to analyze a project that would include the use of this building. Which of the following costs should be included in that analysis?
A) The property taxes paid on the building over the past three years
B) The insurance paid on the building over the past three years
C) The current market value of the building
D) The cost to survey the lot to construct a drainage pond required for the project
E) All but A and B.