Appendix A Solutions to Self-Test Questions and Problems A-3(1) New equity! Old equity " Stock bought back
! $416.7 " $27.8
! $388.9 million
Thus,
New ROE! Net incNew equit__________omey! ______$50
$388.9
! 12.86% (versus old ROE of 12.0%)(2) New ROA! (^) Total assets ____Net inc (^) " Reducometion in A/R
! ____$50
$600 " $27.8
! 8.74% (versus old ROA of 8.33%)
(3) The old debt is the same as the new debt:
Debt! Total claims " Equity
! $600 " $416.7! $183.3 million
New total assets! Old total assets " Reduction in A/R
! $600 " $27.8
! $572.2 million
Therefore,
(^) Old t__otal assetsDebt! $183.3__
$600
! 30.6%
while
(^) New t___New debtotal assets! $183.3__
$572.2
! 32.0%
Chapter 5
a.
$1,000 is being compounded for 3 years; so your balance on January 1, 2012,
is $1,259.71:
FVN! PV(1 # I)N! $1,000(1 # 0.08)^3! $1,259.71
Alternatively, using a! nancial calculator, input N! 3, I/YR! 8, PV! "1000,
PMT! 0, and FV!? Solve for FV! $1,259.71.
b.
FVN! PV! 1 #
I NOM
____M (^) "
NM
! FV 12! $1,000(1.02)^12! $1,268.24
Alternatively, using a! nancial calculator, input N! 12, I/YR! 2, PV! "1000,
PMT! 0, and FV!? Solve for FV! $1,268.24.
ST-2ST-2
8%
FV =?1/1/09 1/1/12
!1,000
1/1/10 1/1/11
8%
FV =?1/1/09 1/1/12
!1,000
1/1/10 1/1/11
2%FV =?1/1/09 1/1/10 1/1/11 1/1/12
!1,000
2%FV =?