2-4) Talbot Enterprises recently reported an EBITDA of $8 million and net income of $2.4 million. It had $ 2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization? 3-11) Complete the balance sheet and sales information in the table that follows for J. White Industries using the following financial data: Total assets turnover: 1.5 Gross profit margin on sales: (sales Cost of goods sold) / Sales = 25% Total liabilities-to-assets ratio: 40% Quick ratio: 0.80 Days sales outstanding (based on 365-day year): 36.5 days Inventory turnover ratio: 3.75 Partial Income Statement information Sales ? Cost of goods Sold ? Balance Income Cash ? Accounts Payable ? Accounts receivable ? Long-term debt $50,000 Inventories ? Common Stock ? Fixed assets ? Retained earnings ? Total assets $400,000 Total Liabilities and equity ??? 4-8) You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 12%, with interest paid monthly. What is the monthly loan payment? What is the loans EFF%? 5-9) The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1000 at maturity. Bond 1, has a maturity of 15 years, and Bond S has a maturity of 1 year. a) What will the value be of each of these bonds when the going rate of interest is (1) 5%, (2) 8%, (3) 12%? Assume that there is only one more interest payment to be made on Bond S. b) Why does the longer-term (15 year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)? 6-6) The market and Stock J have the following probability distributions: Probability Rm Rj 0.3 15% 20% 0.4 9 5 0.3 18 12 a) Calculate the expected rates of return for the market and Stock J. b) Calculate the standard deviations for the market and Stock J. 6-8) As an equity analyst you are concerned with what will happen to the required return to Universal Toddle Industriess stock as market conditions change. Suppose rrf = 5%, rm = 12 % and B UTI = 1.4 a. Under current conditions, what is r uti, the required rate of return on UTI stock? b. Now suppose rrf (1) increases to 6% or (2) decreases to 4%. The slope of the SML remains constant. How would this affect rm and r uti? c. Now assume rrf remains at 5% but rm (1) increases to 14% or (2) falls to 11%. The slope of the SML does not remain constant. How would these changes affect R uti? 7-17) Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 8%. The companys weighted average cost of capital is 12%. a. What is the terminal, or horizon, value of operations? (Hint: find the value of all free cash flows beyond year 2 discounted back to year 2). b. Calculate the value of Kendras operations. 8-3) Assume that you have been given the following information on Purcell Industries: Current stock price = $ 15 Strike price of option = $15 Time to maturity of option = 6 months Risk-free rate = 6% Variance of stock return = 0.12 d1 = 0.24495 N(d1) = 0.59675 d2 = 0.00000 N(d2) = 0.50000 According to the Black-Scholes option pricing model, what is the options values? 9-7) Shi Importerss balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shis tax rate is 40%, rd = 6%, rps = 5.8%, and rs = 12%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? 9-11) RadonHomess current EPS is $6.50. It was $4.42, 5 years ago. The company pays out 40% of its earnings as dividends, and the stock sells for $36.00. a) Calculate the historical growth rate in earnings. (hint: this is a 5-year growth period). b) Calculate the next expected dividend per share, D1. (hint: D0 = 0.4($6.50 = $2.60). Assume that the…
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