# Problem set

Topics: Financial ratios, Interest, Money Pages: 11 (1065 words) Published: February 17, 2014
﻿

1. EP Enterprises has the following income statement. How much net operating profit after taxes (NOPAT) does the firm have?

Sales

\$1,800.00

Costs

1,400.00

Depreciation

250.00

EBIT

\$ 150.00

Interest expense

70.00

EBT

\$ 80.00

Taxes (40%)

32.00

Net income

\$ 48.00

a.
\$81.23

b.
\$85.50

c.
\$90.00

EBIT \$150.00

d.
\$94.50

Tax Rate 40%

e.
\$99.23

NOPAT=\$90.0

2. Tibbs Inc. had the following data for the year ending 12/31/07: Net income = \$300; Net operating profit after taxes (NOPAT) = \$400; Total assets = \$2,500; Short-term investments = \$200; Stockholders' equity = \$1,800; Total debt = \$700; and Total operating capital = \$2,300. What was its return on invested capital (ROIC)?

a.
14.91%

NOPAT = \$400

b.
15.70%

To OCap=\$2500

c.
16.52%

NOPAT

d.
17.39%

TOC = ROIC
\$400/\$2300=

e.
18.26%

3.
Aziz Industries has sales of \$100,000 and accounts receivable of \$11,500, and it gives its customers 30 days to pay. The industry average DSO is 27 days, based on a 365-day year. If the company changes its credit and collection policy sufficiently to cause its DSO to fall to the industry average, and if it earns 8.0% on any cash freed-up by this change, how would that affect its net income, assuming other things are held constant?

a.
\$267.34

b.
\$281.41

c.
\$296.22

d.
\$311.81

e.
\$328.22

4.
Heaton Corp. sells on terms that allow customers 45 days to pay for merchandise. Its sales last year were \$425,000, and its year-end receivables were \$60,000. If its DSO is less than the 45-day credit period, then customers are paying on time. Otherwise, they are paying late. By how much are customers paying early or late? Base your answer on this equation: DSO - Credit period = days early or late, and use a 365-day year when calculating the DSO. A positive answer indicates late payments, while a negative answer indicates early payments.

a.
6.20

b.
6.53

c.
6.86

d.
7.20

e.
7.56

5.

Bonner Corp.'s sales last year were \$415,000, and its year-end total assets were \$355,000. The average firm in the industry has a total assets turnover ratio (TATO) of 2.4. Bonner's new CFO believes the firm has excess assets that can be sold so as to bring the TATO down to the industry average without affecting sales. By how much must the assets be reduced to bring the TATO to the industry average, holding sales constant?

a.
\$164,330

b.
\$172,979

c.
\$182,083

d.
\$191,188

e.
\$200,747

6.
Ziebart Corp.'s EBITDA last year was \$390,000 (= EBIT + depreciation + amortization), its interest charges were \$9,500, it had to repay \$26,000 of long-term debt, and it had to make a payment of \$17,400 under a long-term lease. The firm had no amortization charges. What was the EBITDA coverage ratio?

a.
7.32

b.
7.70

c.
8.09

d.
8.49

e.
8.92

7.
LeCompte Corp. has \$312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were \$620,000, and its net income after taxes was \$24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else constant?

a.
7.57%

b.
7.95%

c.
8.35%

d.
8.76%...