Assignment: Mastery Finance Calculations
Problem 1
Hologram Corporation is a holding company with four main subsidiaries. The percentage of its business coming from each of the subsidiaries, and their respective betas, are as follows:
|
Subsidiary
|
Percentage of Business
|
Beta
|
|
Water Company
|
60%
|
.70
|
|
Cable Company
|
25%
|
.90
|
|
Real estate
|
10%
|
1.30
|
|
Technology companies
|
5%
|
1.50
|
1. What is the company's beta?
2. Assume that the risk-free rate is 6% and that the market risk premium is 5%. What is the holding company's required rate of return?
Problem 2
Surf Bicycles Inc. Will manufacture and sell 200,000 units next year. Fixed costs will total $500,000, and variable costs will be 60% of sales. The bicycles will sell for $200 each.
The firm wants to achieve a level of earnings before interest and taxes of $250,000. How many units must they sell to achieve that result?
Problem 3
Alpha Electronics has the following income statement:
|
Sales
|
400,000
|
|
Total variable costs
|
240,000
|
|
Contribution margin
|
160,000
|
|
Fixed costs
|
140,000
|
|
EBIT
|
20,000
|
Calculate the new EBIT and percent change, assuming:
1. Sales increase by 20%
2. Sales decrease by 20%
Problem 4
Given the following information:
|
Total asset turnover
|
2.0 times
|
|
Accounts receivable turnover
|
25 times
|
|
Fixed asset turnover
|
5 times
|
|
Inventory turnover (based on cost of goods sold)
|
5 times
|
|
Current ratio
|
2
|
|
Sales (all on credit)
|
$5,000,000
|
|
Cost of goods sold
|
70% of sales
|
|
Debt ratio
|
60%
|
Calculate:
Cash
Accounts receivable
Inventories
Net fixed assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Common equity
Total liabilities and common equity
Problem 5
Given the following information:
|
Total asset turnover
|
2.0 times
|
|
Accounts receivable turnover
|
25 times
|
|
Fixed asset turnover
|
5 times
|
|
Inventory turnover (based on cost of goods sold)
|
5 times
|
|
Current ratio
|
2
|
|
Sales (all on credit)
|
$5,000,000
|
|
Cost of goods sold
|
70% of sales
|
|
Debt ratio
|
60%
|
Calculate the following information for 20X1:
|
Income Statement (000)
|
|
|
|
20X0
|
20X1
|
|
Sales
|
1500
|
|
|
Cost of goods sold
|
975
|
|
|
Gross profit
|
525
|
|
|
Operating costs
|
300
|
|
|
Depreciation expense
|
40
|
|
|
Net Operating Profit
|
185
|
|
|
Interest Expense
|
10
|
|
|
Earnings Before Taxes
|
175
|
|
|
Taxes
|
70
|
|
|
Net Income
|
105
|
|
|
Dividends
|
$20
|
|
|
Addition to Retained Earnings
|
$85
|
|