Question

comparmM abe had a ne+ incomte as a percentage ot sates of What was the pirm's Rov A comupam mar cloes an Po Is executing a Maner the value of any ass is thaPV. EMH Ecicien mavcet hypothesi reou melres wa- gool soci Last year oaco Conp saus Were pev 나car how lakse will Hu b-d, Sekars later. 301.5

Answer 1

Answer 1:

ROE = Net Income as % of sale * Total asset turnover * Equity multiplier

= 5.25% * 1.5 * 2

= 15.75%

ROE = 15.75%

Answer 2:

A company that does an IPO is executing a primary market transaction

Answer 3:

Year 0 1 2 4 5 150 Cash flows 300 -300 150 150 400 PV factor ( 1/(1+8%)/ Year) 1 0.92593 0.857340.793830.73503 0.68058 PV of cash flows (300.00)277.78 342.94 119.07 110.25 102.09 PV of cash flows (Total) 652.13

Answer 4:

EMH efficient market hypothesis theory implies that good stock picking is a myth

Answer 5:

Sales grows at 10%

Sales after 5 years = Last year sales * (1 + growth %) ⁵ = 225 * (1 + 10%) ⁵ = 362.36 million

Sales after 5 years with 10% growth = 362.36 million

Answer 6:

A higher default risk premium indicates investor expect a higher credit risk on the corporate bonds

Year 0 1 2 4 5 150 Cash flows 300 -300 150 150 400 PV factor ( 1/(1+8%)/ Year) 1 0.92593 0.857340.793830.73503 0.68058 PV of cash flows (300.00)277.78 342.94 119.07 110.25 102.09 PV of cash flows (Total) 652.13