财务管理双语课后练习答案.doc

财务管理双语部分课后练习答案2-7a.Calculationofgrossincome:2000$60,00010,0005,000SalaryDividendIncomeInterestIncome(IBMbondsonly)STcapitalgains1,000=$22,000-$21,000GrossIncome(excludingLTcapitalgains)$76,000LTcapitalgains=$22,000-$9,000=13,000*LTCapitalgainstaxrate=20%.Nottaxed:$10,000interestonFloridamunicipalbondsCalculationoftaxableincome:GrossIncomeExemption$76,000(2,750)(5,000)$68,250DeductionsTaxableIncome(excludingLTcapitalgains)Personaltax=Taxontaxableincome(excludingLTcapitalgains)+LTcapitalgainstax=$14,138.5+($68,250-$62,450)(0.31)+$13,000(0.2)=$14,138.5+$1,798+$2,600=$18,536.50b.c.Marginaltaxrate=31%.Averagetaxrate=$18,536.50/($68,250+$13,000)=22.8%.After-taxreturns:IBM=(0.11)-(0.31)(0.11)=7.59%FLA=(0.09)-0=9.00%TheFloridabondsprovideahigherafter-taxreturn.d.9%9%=11%(1-T).NowsolveforT:=11%-11%T11%T=2T=2/11=18.18%.Atataxratelessthan18.2percent,Margaretwouldbebetteroffholding11percenttaxablebonds,butatataxrateover18.2percent,shewouldbebetteroffholdingtax-exemptmunicipalbonds.Givenourprogressivetaxratesystem,itmakessenseforwealthypeopletoholdtax-exemptbonds,butnotforthosewithlowerincomesandconsequentlylowertaxrates.2-8a.Salaryandincome:aDonaldssalary$50,000.02,500.0InterestfrombondsIncomefromrentalpropertyAdjustedincome42,000.0=$3,500x12months$94,500.0Expenses,exemptions,anddeductions:Exemptions=2x$2,750Interestonmortgagesb$5,500.018,000.01,250.0PlumbingexpensescTotalexpensesanddeductions$24,750.0Taxableincome$69,750.0Taxes=$6457.5+($69,750-$43,050)x0.28=$13,933.50aWecouldhaveincludedMaryannessalaryinthissection,butthenwewouldhavehadtorecognizetheamountsheearnedasanexpenseassociatedwiththerentalproperty.Becausethetwoitemscanceleachother,weneednotincludethemhere.Also,weignoreemploymenttaxesinthisproblem.bTheamountoftheinterestandpropertytaxespaidonbothhousesistaxdeductible.cOnlytheplumbingexpenseassociatedwiththerentalpropertyistaxdeductiblebecauseitwasincurredinthegenerationofbusinessrevenues.Suchpersonalexpensesarenotdeductible.b.Salaryandincome:DonaldssalaryInterestfrombondsAdjustedincome$50,000.02,500.0$52,500.0Expenses,exemptions,anddeductions:Exemptions=2x$2,750Interestonmortgagesa$5,500.05,350.0Totalexpensesanddeductions$10,850.0Taxableincome$41,650.0Taxes=$0+$41,650x(0.15)=$6,247.50aOnlytheamountofinterestandpropertytaxespaidonthecouplesresidenceisapplicable.c.Expensesincurredtogeneratebusinessincomearetaxdeductible,butpersonalexpensesarenot.Thecostoffixingtheplumbingintherentalhousewouldbeconsideredabusinessexpense,butthecostoffixingtheplumbingintheJeffersonsownhousewouldbeconsideredapersonalexpense.3-2a.IndustryCampsey1.98xAverageCurrentassets$655,0002.0xCurrentliabilities$330,000Accountsreceivable$336,00075.0days5.60x35.0days5.6xSales/360$4,465.28Costofgoodssold$1,353,000Inventories$241,500$1,607,500Sales1.70x3.0xTotalassets$947,500NetincomeSales$27,3001.7%1.2%$1,607,500Netincome$27,3002.9%3.6%Totalassets$947,500Netincome$27,3007.6%9.0%Commonequity$361,000Totaldebt$586,50061.9%60.0%Totalassets$947,500b.ForCampsey,ROA=PMxTAturnover=1.7%x1.7=2.9%.Fortheindustry,ROA=1.2%x3.0=3.6%.c.Campseysdayssalesoutstandingismorethantwiceaslongastheindustryaverage,indicatingthatthefirmshouldtightencreditorenforceamorestringentcollectionpolicy.Thetotalassetsturnoverratioiswellbelowtheindustryaveragesosalesshouldbeincreased,assetsdecreased,orboth.WhileCampseymarginishigherthantheindustryaverage,itsotherprofitabilityratiosarelowcomparedtotheindustryincomeshouldbehighergiventheamountofequityandassets.However,thecompanyseemstobeinanaverageliquiditypositionandfinancialleverageissimilartoothersintheindustry.netd.If2005representsaperiodofsupernormalgrowthforCampsey,ratiosbasedonthisyearwillbedistortedandacomparisonbetweenthemandindustryaverageswillhavelittlemeaning.wholookonlyat2005ratioswillbemisled,andareturntonormalconditionsin2006couldhurtthestockprice.Potentialinvestorsfirms3-4a.FinnertyIndustryAverageFurnitureCurrentassets$3032.73x30.00%11.00x4.15x2.0x30.0%7.0xCurrentliabilities$111Debt$135DebtratioTotalassets$450EBIT$49.5$4.5TimesinterestearnedInterestCostofgoodssold$660Inventoryturnover8.5xInventories$159AccountsreceivableSales/360$66DSO29.89days5.41x24.0days6.0x$795/360Sales$795FixedassetsturnoverFixedassets$147Sales$795Totalassetsturnover1.77x3.0xTotalassets$450NetincomeSales$27Netprofitmargin3.40%6.00%8.57%3.0%$795Netincome$27Returnontotalassets9.0%Totalassets$450Netincome$27Returnonequity12.9%Totalequity$315b.ROA=ProfitmarginxTotalassetsturnoverNetincomeSalesSalesTotalassets$27$795$795$4503.4%1.776.0%Finnerty3.4%Industry3.0%CommentGoodProfitmarginTotalassetsturnoverReturnontotalassets1.8x3.0xPoor6.0%9.0%Poorc.d.AnalysisoftheDuPontequationandthesetofratiosshowsthattheturnoverratioofsalestoassetsisquitelow.Eithersalesshouldbeincreasedatthepresentlevelofassets,orthecurrentlevelofassetsshouldbedecreasedtobemoreinlinewithcurrentsales.Thus,theproblemappearstobeinthebalancesheetaccounts.ThecomparisonofinventoryturnoverratiosshowsthatotherfirmsintheindustryseemtobegettingalongwithabouthalfasmuchinventoryperunitofsalesasFinnerty.IfFinnertysinventorycothiswouldgeneratefundsthatcouldbeusedtoretiredebt,thusreducinginterestchargesandimprovingprofits,andstrengtheningthedebtposition.Theremightalsobesomeexcessinvestmentinfixedassets,perhapsindicativeofexcesscapacity,asshownbyaslightlylowerthanaveragefixedassetsturnoverratio.However,thisisnotnearlyasclear-cutastheover-investmentininventory.e.IfFinnertyhadasharpseasonalsalespattern,orifitgrewrapidlyduringtheyear,manyratiosmightbedistorted.Ratiosinvolvingcash,receivables,inventories,andcurrentliabilities,aswellasthosebasedonsales,profits,andcommonequity,couldbebiased.Itispossibletocorrectforsuchproblemsbyusingaverageratherthanend-of-periodfigures.4-2a.NosoTextilesProFormaIncomeStatementDecember31,2005($thousands)ProForma20062005$36,000(32,440)$3,560(560)$3,000(1,200)$1,800(1+g)(1.15)(1.15)SalesOperatingcostsEBITInterestEBT$41,400(37,306)$4,094(560)$3,534(1,414)$2,120Taxes(40%)NetincomeDividends(45%)AdditiontoRE$810$990$954$1,166NosoTextilesProFormaBalanceSheetDecember31,2005($thousands)ProA2005$1,0806,480(1+g)Additions(1.15)(1.15)ProFormaFinancingFinCash$1,2427,452$17AccountsreceivableInventories9,000(1.15)10,35010Totalcurr.assetsFixedassetsTotalassets$16,56012,600$29,160$19,04414,490$33,534$1914$33(1.15)AccountspayableAccruals$4,3202,880(1.15)(1.15)$4,9683,312$43Notespayable2,1002,100+2,1284Totalcurrentliabilities$9,300$10,3803,500$13,8803,500$123$163Long-termdebtTotaldebtCommonstockRetainedearnings3,500$12,8003,50012,8601,166*AFN=14,026$31,40614$33Totalliab.andequity$29,160$2,1284-6a.5,000units$225,000(100,000)(175,000)$(50,000)12,000unitsIncome($45/unit)Variablecosts($20/unit)Fixedcosts$540,000(240,000)(175,000)$125,000Gain(loss)F$175,000=7,000units$25b.QOpBE=P-VSOpBE=7,000x$45=$315,000.Grossprofit$10,8004-3a.DOL2.5EBITEBIT$4,320$4,320$4,320DFLDTL3.0EBIT-I$4,320$2,880$1,440GrossprofitEBIT-I$10,800$10,800$1,4407.5$4,320$2,880b.DOL=2.5;soforevery1percentchangeinsales,EBITwillchangeby2.5percent.DFL=3.0;soforevery1percentchangeinEBIT,EPSwillchangeby3.0percent.Combiningthesetwoleverages,wehaveDTL=7.5;soforevery1percentchangeinsales,EPSwillchangeby7.5percent(2.5x3.0).Forexample,ifVanAukenssalesdecreaseby2percent,EBITwilldecreaseby5percent(operatingleverage),andthis5percentdeclineinEBITwillresultina15percentdecreaseinEPS(financialleverage).Incombination,then,leveragewillcausea15percentdecreaseinEPSwhensalesdecreaseby2percent,andviceversa.c.VanAukencanreduceitstotalleveragebyreducingthedegreeofoperatingleverage,thedegreeoffinancialleverage,orboth.Allelseequal,thecompanycanreduceitsdegreeofoperatingleveragebyreducingfixedoperatingcosts,decreasingthevariablecostratio,orbyincreasingthesellingpricesoftheproducts.Thedegreeoffinancialleveragecanbereducedbydecreasingfixedfinancialcosts,suchasinterestandpreferreddividends.4-5a.8,000units$200,000(120,000)(140,000)($60,000)18,000unitsSales($25/watch)Variablecosts($15/watch)Fixedcosts$450,000(270,000)(140,000)$40,000Gain(loss)F$140,000=14,000units$10b.c.QOpBE=P-VSOpBE=QxP=(14,000)($25)=$350,000.FC=140,000,SOpBE=350,000,QOpBE=14,000.8,000($25-$15)=-1.338,000($25-$15)-$140,000-$60,000$80,000=DOL8,000units18,000($25-$15)18,000($25-$15)-$140,000$40,000d.Ifthesellingpricerisesto$31,whilethevariablecostperunitremainsfixed,P-Vincreasesto$16.=18,000units=$180,000=4.5DOLF$140,000=8,750units$16QOpBE=P-VSOpBE=QxP=(8,750)($31)=$271,250.Thebreakevenpointdropsto8,750units.ThefirmnowhaslessoperatingleveragethanunderPartsaandb;hence,thevariabilityinthefirmpsrofitstreamhasbeendecreased,buttheopportunityformagnifiedprofitshasalsobeendecreased.e.Ifthesellingpricerisesto$31andthevariablecostperunitrisesto$23,P-Vfallsto$8.F$140,000=17,500units$8QOpBE=P-VSOpBE=QxP=(17,500)($31)=$542,500.Thebreakevenpointincreasesto17,500units.ThefirmnowhasmoreoperatingleveragethanunderPartsaandb.4-6a.5,000units$225,000(100,000)12,000units$540,000(240,000)(175,000)$(50,000)Income($45/unit)Variablecosts($20/unit)FixedcostsGain(loss)(175,000)$125,000F$175,000=7,000units$25b.QOpBE=P-VSOpBE=7,000x$45=$315,000.4,000($45-$20)=$100,000whichfallsshortofcoveringallfixedcharges.However,thefirm'scashflowc.coverscashfixedchargesof$65,000byawidemargin.CreditorsareadvisedtobewillingtoacceptlatepaymentsfromDellva.Thecompanygeneratessufficientcashtopayitscashfixedcharges.4-7a.EBITFinBE=$2,000EBIT$2,000Interest(2,000)Earningsbeforetaxes000Taxes(40%)Netincome$EPS=$0/1,000=$0EBIT$4,500b.c.DFL1.8EBITI$4,5002,000Every1percentchangeinEBITwillresultina1.8percentchangeinEPS.$600=$2,000+FinBE=$2,000+$1,000=$3,000EBIT1-0.40EBIT$3,000(2,000)1,000InterestEarningsbeforetaxesTaxes(40%)(400)$600(600)NetincomePreferreddividendsEarningsavailabletocommonstockholders$0EPS=$0/1,000=$0k?=0.1(10%)+0.2(12%)+0.4(13%)+0.2(16%)+0.1(17%)=13.5%.M5-2a.b.Todeterminethefund'sbeta,?,theweightfortheamountinvestedineachstockneedstobeFcomputed.A=$160/$500=0.32B=$120/$500=0.24C=$80/$500=0.16D=$80/$500=0.16E=$60/$500=0.12?F=0.32(0.5)+0.24(2.0)+0.16(4.0)+0.16(1.0)+0.12(3.0)=0.16+0.48+0.64+0.16+0.36=1.8.c.k=8%(given)RFTherefore,theSMLequationiskF=kRFMRFFFF+(k-k)?=8%+(13.5%-8%)?=8%+(5.5%)?.d.Use?F=1.8intheSMLdeterminedinPartb:k?=8%+(13.5%-8%)1.8=8%+9.90%=17.90%.Fe.k=Requiredrateofreturnonnewstock=8%+(5.5%)2.0=19%.NAnexpectedreturnof18percentonthenewstockisbelowthe19percentrequiredrateofreturn=19%>k?onaninvestmentwithariskof?=2.0.BecausekN18%,thenewstockshouldnotNbepurchased.TheexpectedrateofreturnthatwouldmakeMcAlhanyindifferenttopurchasingthestockis19percent.5-5a.k?=0.1(-35%)+0.2(0%)+0.4(20%)+0.2(25%)+0.1(45%)=14%Yk?=12%X222=(10%12%)(0.1)+(2%12%)(0.2)+(12%12%)(0.4)b.2X22+(20%12%)(0.2)+(38%12%)(0.1)=148.8148.812.20%X20.35%YCV=12.20%/12%=1.02XCV=20.35%/14%=1.45.Y5-81.Oldportfoliobeta=1.12=(0.05)?+(0.05)?+.+(0.05)?20121.12=()(0.05)j=1.12/0.05=22.4=20(1.12)jNewportfoliobeta=(22.4-1.0+1.75)/20=1.1575=1.162.excludingthestockwiththebetaequalto1.0is22.41.0=21.4,sothebetaofjtheportfolioexcludingthisstockis?=21.4/19=1.1263.Thebetaofthenewportfoliois:1.1263(0.95)+1.75(0.05)=1.1575=1.166-16a.012341617181920Periods-600-600-600-600-600-600-600-600-600(1)Dealers“specialfinancingpackager=4%/4=1%,t=5x4=20,PVA=600×(P/A,1%,20)=600×18.0456=10827.36SoSarahmustuse$2,172.64=$13,000-$10,827.36ofthe$3,000inhercheckingaccountifthedealer'sfinancingisused.(2)Bankloanr=12%/4=3%,t=5x4=20,PVA=600×(P/A,3%,20)=600×14.8775=8926.48ThedifferencebetweenthisamountandthePVAofthedealer's“specialfinancingp$1,900.86=$10,827.36-$8,926.50,soSarahwouldhavetonegotiateareductioninthestickerpriceequalto$1,901tomakethebankfinancingmoreattractivethanthedealersfinanc6-17Informationgiven:1.Janetwillsavefor40yearsat7percentcompoundedannually,thenretire.2.Whensheretires,Janetwantstotakeatriparoundtheworldatacostof$120,000.3.Afterthetrip,Janetwantstoreceivepaymentsequalto$70,000peryear,andthesepaymentsareexpectedtolastfor20years.4.Uponretirement,Janet'sfundswillearn5percentcompoundedannually.ThecashflowtimelineforJanetis:012340015%219207%-PMT-PMT-PMT-PMT120,000Trip70,00070,00070,00070,000FVA=70000×(P/A,5%,20)+12000040=7000×12.4622+120000=992354=A×(F/A,7%,40)=A×199.64A=4970.724971Janetneedstocontribute$4,971eachyearfor40yearstomeetherretirementgoals.7-7a.Thecouponinterestis5%peryear,andtheoriginalyieldtomaturitywas5percent;sobothbondswouldhavesoldforpar,orfor$1,000,atthetimeofissue.VIBMVGM$1,000$1,000b.OnJanuary1,2005,theIBMbondhadaremaininglifeof9years.calculatedasfollows:Thus,itsvalueis=10005%P/A,8%,91000P/F,8%,9VIBM$50(6.24689)+$1,000(0.50025)=$812.59OnJanuary1,2005,theGMbondhadaremaininglifeof19years.calculatedasfollows:Thus,itsvalueis=10005%P/A,8%,191000P/F,8%,19VGM$50(9.60360)+$1,000(0.23171)=$711.89c.Thecapitalgainsyieldsforthebondsare:Capitalgains=$812.59-$1,000=-18.74%IBM$1,000Capitalgains=$711.89-$1,000=-28.81%GM$1,000d.e.Thecurrentyieldforbothbondswas$50/$1,000=0.05=5.0%TotalreturnIBM=5%+(-18.75%)=TotalreturnGM=5%+(-28.81%)=13.75%23.81%f.TheIBMbond,whichhastheshortertermtomaturity,lostlessthantheGMbond.Thepriceoftheshorter-termbondchangeslesswitheachchangeininterestrates(yields),sowhenthemarketratesincrease,thepricesforshorter-termbondswilldecreaselessthanforlonger-termbonds.g.Atmaturity,thevaluesofbothbondsmustequal$1,000,becausethisisthefacevalueofboth.So,ifmarketratesdonotchange,aseachbondgetsclosertoitsmaturitydate,itsmarketvaluewillapproachits$1,000facevalue.Thecloserthematuritydate,thequickerthemarketvaluewillapproachitsfacevalue(thevalueoftheIBM