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22. What is the expected return on the following portfolio?

STOCK SHARES PRICE EXPECTED RETURN
ART 1,500 $40 22%
BAC 2,000 31 19
DUD 500 85 29

Use the following data for questions 23 & 24.

Cost of Goods Sold $22mm

Inventory $4mm

Credit Sales $26mm

Accounts Receivable $3mm

Purchases on Credit $26mm

Accounts Payable $6mm

23, Calculate the Operating Cycle in days for the company.

24. Calculate the Cash Cycle in days for the company.

25.Your firm has Day Sales Outstanding of Receivables equal to 31 days. Sales are $11mm. What is value of Accounts Receivable?

The following information is given.

Total Asset Turnover = 1.5

Return on Assets = 3%

Return on Equity = 15%

26. Calculate the Net Profit Margin.

27.Calculate the Total Debt Ratio.

28. Last year your ROE was 11%. Net Income was $11mm and sales were $100mm. The Total Debt Ratio was 40%. What was the value of Shareholder's Equity.?

29.If the company, in question #28, had generated another $1mm of net income and $8mm of sales, what would have been ROE?

31.Your firm would like to achieve a 20% Sustainable Growth Rate. Your return on equity is 30%. How would you achieve this goal?

32.What is the Sustainable Growth Rate for the following company?

Net Income $41mm
Equity $123mm
Dividend $41mm

33. Calculate the change in Gross Fixed Assets for 2004, given the data below.

2003 Net Fixed Assets $4,000

2004 Depreciation $800

2004 Net Fixed Assets $4,500

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Solution Summary

Guidance on how to solve and computations for you. The return on a portfolio is determined.

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22. What is the expected return on the following portfolio?

STOCK SHARES PRICE EXPECTED RETURN
ART 1,500 $40 22%
BAC 2,000 31 19
DUD 500 85 29

Please refer to EXCEL for calculation:
STOCK SHARES PRICE Stock Value EXPECTED RETURN Return
ART 1,500 $40 $60,000 22% $13,200
BAC 2,000 31 $62,000 19% $11,780
DUD 500 85 $42,500 29% $12,325
Total value $164,500 $37,305
Return on the portfolio = Total return / total value = 37305 / 164500 = 22.7%

Use the following data for questions 23 & 24.
Cost of Goods Sold $22mm
Inventory $4mm
Credit Sales $26mm
Accounts Receivable $3mm
Purchases on Credit $26mm
Accounts Payable $6mm

23, Calculate the Operating Cycle in days for the company.

Operating cycle is the average time between the acquisition of materials or services and the final cash realization from that acquisition.
Operating cycle = inventory period + accounts receivable period

where
Inventory Period = 365 / Inventory Turnover
= 365 / (COGS / Average ...

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