Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Chapter 14, Problem 4PS
The ABC Corporation has a profit margin on sales below the industry average. yet its
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10) The DuPont formula allows a firm to break down its return into the net profit margin, which measures the firm's profitability on sales, and its total asset turnover, which indicates how efficiently the firm has used its assets to generate sales.
TRUE FALSE?
(Please show work and explain)
M&M Proposition II, without taxes, puts forth that,
Multiple Choice
the capital structure of a company has no effect on that company's value.
the cost of equity depends on the return on debt, the debt-equity ratio, and the tax rate.
O a company's cost of equity is a linear function with a slope equal to (RA - Rpl-
the cost of equity is equivalent to the required rate of return on assets.
the size of the pie does not depend on how the pie is sliced.
If the profit margin is 0.2158, asset turnover is 0.5389 and financial leverage is 1.2047, what is the return on equity?
Multiple Choice
0.1163
0.1401
0.6492
0.5389
Chapter 14 Solutions
Essentials Of Investments
Ch. 14 - Prob. 1PSCh. 14 - Prob. 2PSCh. 14 - The Crusty Pie Co., which specializes in apple...Ch. 14 - The ABC Corporation has a profit margin on sales...Ch. 14 - A company’s current ratio is 2. If the company...Ch. 14 - Cash flow from investing activities excludes:...Ch. 14 - Cash flow from operating activities includes:...Ch. 14 - Prob. 8PSCh. 14 - Prob. 9PSCh. 14 - Prob. 10PS
Ch. 14 - Prob. 11PSCh. 14 - Use the DuPont system and the following data to...Ch. 14 - A firm has an ROE of 3 , a debt/equity ratio of...Ch. 14 - A firm has a tax burden ratio of 0.75 , a leverage...Ch. 14 - A11 analyst gathers the following information...Ch. 14 - Here are data On two Firms: LO142 Equity ($...Ch. 14 - Prob. 1CPCh. 14 - Which of the following best explains a ratio of...Ch. 14 - Use the Financial statements for Chicago...Ch. 14 - Prob. 4CPCh. 14 - The information in the following table comes from...Ch. 14 - Scott Kelly is reviewing Master Toy’s financial...Ch. 14 - The DuPont formula defines the net return on...Ch. 14 - Go to finance.yahoo.com to find information about...Ch. 14 - Answer the following questions for these two toy...Ch. 14 - Prob. 3WM
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- D All else being equal, which one of the following will decrease a firm's current ratio? Question 17 a decrease in the net fixed assets a decrease in depreciation O a decrease in accounts payable O a decrease in a counts receivablesarrow_forwardCompany X has a profit margin of 0.08, asset turnover of 1.3, and equity multiplier of 4.0. Which of the following needs to happen for their ROE to be equal to their ROA. O Sales have to increase O Profit margins have to increase O Their equity multiplier has to increase O They have to repay all of their debt and not borrow morearrow_forwardA firm with a below industry net profit margin can improve its return on total assets by: a. increasing its current ratio c. decreasing its fixed asset turnover b. decreasing its total asset turnover d. increasing its total asset turnoverarrow_forward
- Give typing answer with explanation and conclusion _____ 2.) A company has a tax burden ratio of 0.4, a compound leverage factor of 0.6, a return on sales of 0.9, a leverage ratio of 0.7, and an asset turnover of 0.3. What is the ROE for the company? A.) 2.90% B.) 4.54% C.) 6.48% D.) 11.4% E.) None of the abovearrow_forwardWhich of the following statements is/are true? O In the case of flat-rate write-offs on receivables, the sales tax must also be corrected. All deposits are income effective. O If a company's profit is to be reported as high, administrative costs are taken into account when determining the production costs. O Compared to straight-line depreciation, declining-balance depreciation means that profits tend to be higher in the future.arrow_forwardis this a negative for the $6,185 or a gain? Compute the unrealize gains or losses = Unrealizes holding ( gains / loses) = Faire Value - Cost Step 2 Security Cost Faire Value Unrealized holding ( gains / loses) Sanchez Co. 238451.44 $ 2,12,280 ( $ 26,171.44 ) =(7076*390904)/11600 =7076*30 Vicario Co. 305502 $ 3,19,000 $ 13,498 =5800*55 WTA Co. 220872 $ 2,27,360 $ 6,488 =8120*28 764825.44 $ 758640 ( $ 6185.44 ) Unrealized holding ( gains / loses) = ( $ 6,185 ) Dec-31 Unrealizes gain/loss - Equity $ 6,185 Security Fair Value Adjustment $ 6,185arrow_forward
- Which of the following would increase a company’s additional financing needed (AFN)? a) the company’s profit margin increases b) the company’s dividend payout ratio decreases c) the company’s profit margin decreases d) the company has a lot of excess asset capacity e) none of the abovearrow_forwardNEED ASAP. THANK YOU!! 1. Which of the following statements is correct? Group of answer choices - Higher sales usually require higher asset levels, and this leads to what we call AFN. However, the AFN will be zero if the firm chooses to retain all of its profits, i.e., to have a zero dividend payout ratio. - If a firm’s assets are growing at a positive rate, but its retained earnings are not increasing, then it would be impossible for the firm’s AFN to be negative. - Dividend policy does not affect the requirement for external funds based on the AFN equation. - AFN is not always positive. - If a firm increases its dividend payout ratio in anticipation of higher earnings, but sales and earnings actually decrease, then the firm’s actual AFN must, mathematically, exceed the previously calculated AFN.2. When we use the AFN equation to forecast the additional funds needed (AFN), we are implicitly assuming that all financial ratios are constant. Group of answer choices - True…arrow_forwardHow would an increase in each of the following factors affect the AFN?1. Payout ratio2. Capital intensity ratio, A0*/S03. Profit margin4. Days sales outstanding, DSO5. Sales growth rateIs it possible for the AFN to be negative? If so, what would this indicate?If excess capacity exists, how would that affect the calculated AFN?arrow_forward
- Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Brandtly's stock. The pension fund manager has estimated Brandtly's free cash flows for the next 4 years as follows: $2 million, $7 million, $12 million, and $14 million. After the fourth year, free cash flow is projected to grow at a constant 5%. Brandtly's WACC is 13%, the market value of its debt and preferred stock totals $50 million, the firm has $15 million in nonoperating assets, and it has 12 million shares of common stock outstanding. a. What is the present value of the free cash flows projected during the next 4 years? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. $ 51339694.5arrow_forwardSuppose a company increases the price of its product and demand hardly declines.which of the following will increase? A) profit margin B) return - on - equity C) taxes D) all the abovearrow_forwardWhich of the following statements is CORRECT? O The more depreciation a firm reports, the higher its tax bill, other things held constant. O People sometimes talk about the firm's net cash flow, which is shown as the lowest entry on the income statement, hence it is often called "the bottom line." O Depreciation and amortization are not cash charges, so neither of them has an effect on a firm's reported profits. O Net cash flow (NCF) is often defined as follows: Net Cash Flow = Net Income + Depreciation and Amortization Charges. O Depreciation reduces a firm's cash balance, so an increase in depreciation would normally lead to a reduction in the firm's net cash flow.arrow_forward
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