1. Getrag expects its sales to increase 20 percent next year from its current level of $4.7 million. Getrag has current assets of $660,000, net fixed assets of 1.5 million dollar, and current liabilities of $462,000. All assets are expected to grow proportionately with sales. If Getrag has a net profit margin of 10%, what additional financing will be needed to support the increase in sales? Getrag does not pay dividends.
a. $283,200
b. No financing needed, surplus of $224,400
c. No financing needed, surplus of $524,400
d. $339,600
2. Last year Curative Technologies Inc. reported earnings after-tax of $23 million. Included in the expenses were depreciation of $3.7 million and interest expenses of $2.9 million. The year-end balance sheets shows an increase in deferred taxes of $2.6 million to a total of $14.2 million. What is Curative Technologies' after-tax cash flow for last year? Assume a marginal tax rate of 40%.
a. $32.2 million
b. $20.1 million
c. $26.4 million
d. $29.3 million
3. Greg is interested in investing in a small company, and he thinks Good Buy Co. might be a good investment. He has been given the following information and would like to know the return on stockholder's equity. Assume Good Buy's marginal tax rate is 40%.
Earning before taxes$3 million
Net profit margin3.6%
Total liabilities$15.0 million
Total stockholder's equity$10.0 million
a. 20%
b. 12%
c. 18%
d. 15%
4. ECG Monitors is forecasting that sales next year will be $8,640,000, a 20 percent increase over current sales. ECG has total assets of $3,840,000 and all assets will increase proportionately with sales. Of the current liabilities, only accounts payable (now $740,000) will increase with sales. What total financing will be needed by ECG to support the expected sales increase?
a. $465,600
b. $620,000
c. $840,400
d. $317,600
5.What is the return on investment for a firm that has a debt ratio of 0.65, a net profit margin of 6.5%, sales of $740,000, and a total asset turnover of 4?
a. 4.6%
b. 16.9%
c. 26.0%
d. 6.5%
6. Flash In The Pan Cooking School is considering the issuance of additional long-term debt to finance expansion. At the present time the company has $160 million of 10% debentures outstanding. Its after-tax net income is $48 million, and the company's (marginal) income tax rate is 40%. The company is required by the debenture holders to maintain its coverage ratio at 4.0 or greater. Determine Flash's present coverage ratio.
a. 5.00
b. 6.00
c. 2.78
d. 3.33
7.If the spot rate for Swiss francs is $0.6658/franc and the 180-day forward rate is $0.6637, the market is indicating that the Swiss franc is expected to
a. weaken relative to the ECU
b. lose value relative to the dollar over the next 6 months
c. strengthen relative to the dollar
d. gain value relative to the dollar over the next 6 months