Financial Management 1. On December 5, 2007, the common stock of Google, Inc. (GOOG) was trading at $698.51. One year later, the shares sold for $283.99. Google has never paid a common stock dividend. What rate of return would you have earned on your investment had you purchased the shares on December 5, 2007? The rate of return you would have earned is what percent? 2. The common stock of Plaxo Enterprises had a market price of $10.44 on the day you purchased it just one year ago. During the past year, the stock paid a dividend of $1.43 and closed at a price of $11.66. What rate of return did you earn on your investment in Plaxo's stock? The rate of return you earned on Plaxo's stock is what percent? 3. Caswell Enterprises had the following end-of-year stock prices over the last five years and paid no dividends. Time:Caswell: 1 $9 2 14 3 10 4 7 5 9 a. Calculate the average rate of return for each year from the above information. b. What is the arithmetic average rate of return earned by investing in Caswell's stock over this period? c. What is the geometric average rate of return earned by investing in Caswell's stock over this period? d. Considering the beginning and ending stock prices for the five-year period are the same, which type of average rate of return best describes the annual rate of return earned over the period (arithmetic or geometric)? e. The annual rate of return at the end of year 2 is what percent? 4. Syntex is considering an investment in one of two stocks. Given the information that follows, which investment is better, based on the risk (the standard deviation) and return? Stock A Stock B Probability Return Probability Return 0.20 10% 0.10 -7% 0.60 16% 0.40 5% 0.20 21% 0.40 13% 0.10 20% Given the information in the table, what percent is the rate of return for Stock A? BBA 3301 Unit V Assignment Instructions: Enter all answers directly in this worksheet. When you are finished, select Save As, and save this document using your last name and student ID as the file name. Upload the data sheet to Blackboard as a .doc, .docx or .rtf file when you are finished. Question 1. (30 points total) Use this balance sheet and income statement from Carver Enterprises to complete parts a and b: a. (15 points) Prepare a common size balance sheet for Carver Enterprises. Complete the common-size balance sheet: (Round to one decimal place.) Common−Size Balance Sheet 2013 Cash and marketable securities $ 490 % Accounts receivable 5,990 Inventories 9,550 Current assets $ 16,030 % Net property plant and equipment 17,030 Total assets $ 33,060 % Accounts payable $ 7,220 % Short−term debt 6,800 Current liabilities $ 14,020 % Long−term liabilities 7,010 Total liabilities $ 21,030 % Total owners’ equity 12,030 Total liabilities and owners’ equity $ 33,060 % b. (15 points) Prepare a common-size income statement for Carver Enterprises. Com ...

1. Financial Management
1. On December 5, 2007, the common stock of Google, Inc.
(GOOG) was trading at $698.51. One year later, the shares sold
for $283.99. Google has never paid a common stock dividend.
What rate of return would you have earned on your investment
had you purchased the shares on December 5, 2007? The rate of
return you would have earned is what percent?
2.
The common stock of Plaxo Enterprises had a market price of
$10.44 on the day you purchased it just one year ago. During
the past year, the stock paid a dividend of $1.43 and closed at a
price of $11.66. What rate of return did you earn on your
investment in Plaxo's stock? The rate of return you earned on
Plaxo's stock is what percent?
3. Caswell Enterprises had the following end-of-year stock
prices over the last five years and paid no dividends.
Time:Caswell:
1 $9
2 14
3 10
4 7
5 9
a. Calculate the average rate of return for each year from the
above information.
b. What is the arithmetic average rate of return earned by
investing in Caswell's stock over this period?
c. What is the geometric average rate of return earned by
investing in Caswell's stock over this period?
d. Considering the beginning and ending stock prices for the
five-year period are the same, which type of average rate of

2. return best describes the annual rate of return earned over the
period (arithmetic or geometric)?
e. The annual rate of return at the end of year 2 is what percent?
4. Syntex is considering an investment in one of two stocks.
Given the information that follows, which investment is better,
based on the risk (the standard deviation) and return?
Stock A Stock B
Probability Return Probability Return
0.20 10% 0.10 -7%
0.60 16% 0.40 5%
0.20 21% 0.40 13%
0.10 20%
Given the information in the table, what percent is the rate of
return for Stock A?
BBA 3301 Unit V Assignment
Instructions: Enter all answers directly in this worksheet. When
you are finished, select Save As, and save this document using
your last name and student ID as the file name. Upload the data
sheet to Blackboard as a .doc, .docx or .rtf file when you are
finished.
Question 1. (30 points total) Use this balance sheet and income
statement from Carver Enterprises to complete parts a and b:
a. (15 points) Prepare a common size balance sheet for Carver
Enterprises. Complete the common-size balance sheet: (Round
to one decimal place.)
Common−Size Balance Sheet
2013

3. Cash and marketable securities
$
490
%
Accounts receivable
5,990
Inventories
9,550
Current assets
$
16,030
%
Net property plant and equipment
17,030
Total assets
$
33,060
%
Accounts payable
$
7,220

4. %
Short−term debt
6,800
Current liabilities
$
14,020
%
Long−term liabilities
7,010
Total liabilities
$
21,030
%
Total owners’ equity
12,030
Total liabilities and owners’ equity
$
33,060
%
b. (15 points) Prepare a common-size income statement for
Carver Enterprises. Complete the common-size income
statement: (Round to one decimal place.)

5. Common−Size Income Statement
2013
Revenues
$
30,020
%
Cost of goods sold
(19,950)
Gross profit
$
10,070
%
Operating expenses
(7,960)
Net operating income
$
2,110
%
Interest expense
(940)
Earnings before taxes

6. $
1,170
%
Taxes
(425)
Net income
$
745
%
Question 2. (10 points total) Use this data table of Campbell
Industries liabilities and owners' equity to complete parts a and
b.
a. (5 points) What percentage of the firm's assets does the firm
finance using debt (liabilities)? (Round to one decimal place.)
b. (5 points) If Campbell were to purchase a new warehouse for
$1.3 million and finance it entirely with long-term debt, what
would be the firm's new debt ratio? (Round to one decimal
place.)
Question 3. (10 points total) (Liquidity analysis)Airspot Motors,
Inc. has $2,433,200 in current assets and $869,000 in current
liabilities. The company's managers want to increase the firm's

7. inventory, which will be financed using short-term debt. How
much can the firm increase its inventory without its current
ratio falling below 2.1 (assuming all other assets and current
liabilities remain constant)? (Round to one decimal place.)
Question 4. (10 points total) (Efficiency analysis)Baryla Inc.
manufactures high quality decorator lamps in a plant located in
eastern Tennessee. Last year the firm had sales of $93 million
and a gross profit margin of 45 percent.
a. (5 points) How much inventory can Baryla hold and still
maintain an inventory turnover ratio of at least 6.3 times?
(Round to one decimal place.)
b. (5 points) Currently, some of Baryla's inventory includes
$2.3 million of outdated and damaged goods that simply remain
in inventory and are not salable. What inventory ratio must the
good inventory maintain in order to achieve an overall turnover
ratio of at least 6.3 (including the unsalable items)? (Round to
one decimal place.)
Question 5. (15 points total) (Profitability and capital structure
analysis)In the year that just ended, Callaway Lighting had

8. sales of $5,470,000 and incurred cost of goods sold equal to
$4,460,000. The firm's operating expenses were $128,000 and
its increase in retained earnings was $42,000 for the year. There
are currently 99,000 common stock shares outstanding and the
firm pays a $4.770 dividend per share. The firm has $1,180,000
in interest-bearing debt on which it pays 7.7 percent interest.
a. (5 points) Assuming the firm's earnings are taxed at 35%,
construct the firm's income statement.
Income Statement
Revenues
$
Cost of Goods Sold
Gross Profit
$
Operating Expenses
Net Operating Income
$
Interest Expense
Earnings before Taxes
$
Income Taxes

9. Net Income
$
b. (5 points) Calculate the firm's operating profit margin and net
profit margin. (Round to one decimal place.)
The operating profit margin is
%
The net income margin is
%
c. (5 points) Compute the times interest earned ratio.
The times interest earned ratio is
%
What does this tell you about Callaway's ability to pay its
interest expense? (Fill in the blank with the times interest
earned ratio from above and select the best choice.)
1) Callaway's operating income can fall as much as ______
times the interest expense and the company would still be able
to service its debt.
2) Callaway's interest expense is _______ times higher than its
competitors.
3) Callaway's gross profit can fall as much as ______ times and
still be able to service its debt.
4) Callaway's operating income can fall as much as ______
times and still be able to repay its debt.
Answer:

10. What is the firm's return on equity? (Select the best choice.)
1) The firm's return on equity is the same as the net profit
margin, 9.4%.
2) The firm's return on equity is the sum of the operating profit
margin and the net profit margin, 25.5%.
3) There is not enough information to answer this question.
4) The firm's return on equity is the same as the operating profit
margin, 16.1%.
Answer:
Question 6. (5 points total) (Market value analysis) Lei
Materials' balance sheet lists total assets of $1.16 billion, $132
million in current liabilities, $415 million in long-term debt,
$613 million in common equity, and 58 million shares of
common stock. If Lei's current stock price is $52.08, what is the
firm's market-to-book ratio? (Round to one decimal place.)
Question 7. (5 points total) (DuPont analysis)Bryley, Inc.
earned a net profit margin of 5.1 percent last year and had an
equity multiplier of 3.49. If its total assets are $109 million and
its sales are $157 million, what is the firm's return on equity?
(Round to one decimal place.)

11. Question 8. (15 points total) (Calculating financial ratios) Use
the balance sheet and income statement for the J. P. Robard
Mfg. Company to calculate the following ratios:
Current ratio (Round to two decimal places.)
Times interest earned (Round to two decimal places.)
times
Inventory turnover (Round to two decimal places.)
times
Total asset turnover (Round to two decimal places.)
Operating profit margin (Round to one decimal places.)
%
Operating return on assets (Round to one decimal places.)
%
Debt ratio (Round to one decimal places.)
%
Average collection period (Round to one decimal places.)
days
Fixed asset turnover (Round to two decimal places.)

12. Return on equity (Round to one decimal places.)
%