1) If nominal interest rate is 9% and inflation rate is 6%, then compute the real interest rate? FinanceCorp has fixed costs of= $15 million and profits of= $10 million. Find out its degree of operating leverage (DOL)?

2) Deployment Specialist pays the present (annual) dividend of= $1 and is expected to grow at= 18% for 2 years and then at= 5% thereafter. If required return for Deployment Specialist is= 8%, determine the intrinsic value of Deployment Specialist stock?

3) Jand, Inc., presently pays the dividend of= $1.42, which is expected to increase at= 5%. If present value of Jand’s shares based on constant-growth dividend discount model is= $36.91, determine the required rate of return?

4) Use DuPont system and data given below to determine return on equity.

i) Leverage ratio 3.1

ii) Total asset turnover 2.8

iii) Net profit margin 5.6%

iv) Dividend payout ratio 35.8%

5) Company has ROE of= 2%, a debt/equity ratio of= 0.4, a tax rate of= 40%, and pays the interest rate of= 7% on its debt. Compute it’s operating ROA.

6) A firm has a leverage ratio of= 1.75, tax burden ratio of= .7, an interest burden of= .9, and return on sales of 8%. Firm generates= $2.00 in sales per dollar of assets. Determine the firm’s ROE?

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