problem 1: Swann Systems has forecast this income statement for the forthcoming year:
- Sales $5,000,000
- Operating costs (excluding depr and amort) 3,000,000
- EBITDA $2,000,000
- Depreciation and amortization 500,000
- EBIT $1,500,000
- Interest 500,000
- EBT $1,000,000
- Taxes (40%) 400,000
- Net income $ 600,000
The company's president is not satisfied with the forecast and wants to see higher sales and a forecasted total income of $2,000,000.
Suppose that operating costs are always 60% of sales and that depreciation and amortization, interest expense and the company's tax rate (40%) will remain similar even if sales change. How many in sales would Swann have to obtain to produce $2,000,000 in net income?
a) $ 5,800,000
b) $ 6,000,000
c) $ 7,200,000
d) $ 8,300,000
e) $10,833,333
problem 2: A real estate investment has the given expected cash flows:
Year Cash Flows
1 $10,000
2 25,000
3 50,000
4 35,000
If the discount rate is 8%, determine the investment's present value?
a) $103,799
b) $ 96,110
c) $ 95,353
d) $120,000
e) $ 77,592
problem 3: An investment pays $100 every six months (semi-annually) over the next 2.5 years. Interest, though, is compounded quarterly, at a nominal rate of 8%. Determine the future value of the investment after 2.5 years?
a) $520.61
b) $541.63
c) $542.07
d) $543.98
e) $547.49
problem 4: The Wilson Corporation has the given results:
- Sales/Total assets 2.0×
- Return on assets (ROA) 4.0%
- Return on equity (ROE) 6.0%
Determine the Wilson's profit margin and debt ratio?
a) 2%; 0.33
b) 4%; 0.33
c) 4%; 0.67
d) 2%; 0.67
e) 4%; 0.50
problem 5: Cleveland Corporation consists of 100,000 shares of common stock outstanding, its total income is $750,000, and its P/E is 8. Determine the company's stock price?
a) $20.00
b) $30.00
c) $40.00
d) $50.00
e) $60.00