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Fi515 Homework 2

Satisfactory Essays
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Problem 3-1:
Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year.

The Days Sales Outstanding: Receivable / Average sales per day
DSO= 20 days, Average daily sales = $20,000

Receivable
20 days= 20,000 Receivable = 20 x 20,000 = $400,000

Problem 3-2:
Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio?
Debt Ratio: Total liabilities / Total assets

Problem 3-3:
Winston Washers’s stock price is $75 per share. Winston has $10 billion in total as- sets. Its balance sheet shows …show more content…

Ordinary annuity: Annuity due:
N =5 N =5 I = 7% I = 7%
PMT = 300 PMT = 300
PV = 0 PV = 0
FV = 1,725.22 FV = 1845.99

Problem 4-13:
Find the present value of the following ordinary annuities (see the Notes to Problem 4-12).
a. $400 per year for 10 years at 10% N = 10 I= 10% PMT = - 400 FV = 0 PV = 2,457.83

b. $200 per year for 5 years at 5% N = 5 I = 5% PMT = - 200 FV = 0 PV = 865.90

c. $400 per year for 5 years at 0% N= 5 I=0% PMT = - 400 FV= 0 PV = 2,000

d. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due. a. N = 10 b. N =5 c. N= 5 I = 10% I = 5% I= 0% PMT = - 400 PMT = - 200 PMT= -400 FV = 0 FV = 0 FV= 0 PV = 2,703.61 PV = 909.19 PV = 2,000

Problem 4-14:
Find the present values of the following cash flow streams. The appropriate interest rate is 8%.

b. What is the value of each cash flow stream at a 0% interest rate?
A: 100+400+400+400+300 = 1,600
B: 300+400+400+400+100 =

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