Recitation 1
BA 2802 – Principles of Finance
Problems for Recitation hour
1. Use the following financial information to answer this question.
a. Using these financial statements, calculate all the ratios that you can for this company in 2009 and 2010.
b. Prepare the DuPont decomposition of ROA and ROE for this company.
c. Assume that the company distributes 40% of its net income as dividends to its shareholders. Given this assumption, calculate the Internal and Sustainable Growth Rates for this company.
2. a. ABC Company has total debt ratio of 0.6. Given this information, calculate the Debt/Equity ratio of this firm.
b. A fire has destroyed a large percentage of the financial records of the Strongwell Co. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 13.8 percent. Sales were $979,000, the total debt ratio was 0.42, and total debt was $548,000. Calculate the return on assets for this firm.
c. Global Ventures has a return on equity of 9.8 percent, a retention ratio of 60 percent, and a profit margin of 4.5 percent. The company paid $378 in dividends and has net working capital of $100. Net fixed assets are $18,550 and current liabilities are $520. Calculate the total equity of the firm.
3. Your parents just gave you a gift of $15,000. You are investing this money in a bank account for 12 years at a 5% interest rate per year.
a. Suppose bank pays you simple interest over that time period. Calculate the amount of money you will have at the end of 12 years.
b. Suppose bank pays you compound interest over that time period. Calculate the amount of money you will have at the end of 12 years.
c. Calculate the amount of interest you earned on the interest during this time period.
4. Travis invests $12,500 today into a retirement account. He expects to earn 8 percent compounded interest per year, on his money for the next 26 years. After that, he wants to be more
Problems for Recitation hour
1. Use the following financial information to answer this question.
a. Using these financial statements, calculate all the ratios that you can for this company in 2009 and 2010.
b. Prepare the DuPont decomposition of ROA and ROE for this company.
c. Assume that the company distributes 40% of its net income as dividends to its shareholders. Given this assumption, calculate the Internal and Sustainable Growth Rates for this company.
2. a. ABC Company has total debt ratio of 0.6. Given this information, calculate the Debt/Equity ratio of this firm.
b. A fire has destroyed a large percentage of the financial records of the Strongwell Co. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 13.8 percent. Sales were $979,000, the total debt ratio was 0.42, and total debt was $548,000. Calculate the return on assets for this firm.
c. Global Ventures has a return on equity of 9.8 percent, a retention ratio of 60 percent, and a profit margin of 4.5 percent. The company paid $378 in dividends and has net working capital of $100. Net fixed assets are $18,550 and current liabilities are $520. Calculate the total equity of the firm.
3. Your parents just gave you a gift of $15,000. You are investing this money in a bank account for 12 years at a 5% interest rate per year.
a. Suppose bank pays you simple interest over that time period. Calculate the amount of money you will have at the end of 12 years.
b. Suppose bank pays you compound interest over that time period. Calculate the amount of money you will have at the end of 12 years.
c. Calculate the amount of interest you earned on the interest during this time period.
4. Travis invests $12,500 today into a retirement account. He expects to earn 8 percent compounded interest per year, on his money for the next 26 years. After that, he wants to be more