Question 1. 1.(tcos 1, 8, 9) using the security market line formula

Question 3. 3.(TCO 6) Calculate the five ratios for the following company info.

Income Statement Balance Sheet

Revenue 10,000 Assets Liab. + OE

EBIT $2,000 cash $10,000 a/p $2,000

Interest $500 A/R $1,000 Bonds payable $50,000

Earnings B4 Tax $1,500 Equip $25,000 equity $84,000

EAT (at 40%) $900 Bldg $100,000

Total $136,000 $136,000

– return on sales
– ROA
– ROE
– fixed asset turnover
– times interest earned

(Points : 20)

Return on sales = 900/10000 = 9% ROA = (900*(1-.4))/136000 = .40% ROE = 900/84000 = 1.07% Fixed asset turnover = 10000/125000 = .08 Times interest earned = 2000/500 = 4

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