Present value index: Present value index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals, and limited fund. The present value index is computed as follows: Present value index = Total present value of net cash flow Amount to be invested To determine: The present value index for each proposal.

Question

Solve all of the following problems: The Smith company has $2,392,500 in current assets and $1,076,625 in current liabilities. Its initial inventory level is $526,350 and it will raise funds as additional notes payable (short-term) and use them to increase inventory. How much can its short-term debt (notes payable) increase so that the company can maintain a current ratio of 2.0? Assume the following information for Brandon Corporation: Sales/Total assets = 1.3 Return on assets (ROA) = 4% Return on equity (ROE) = 7% Calculate the firm’s profit margin and debt-to-capital ratio assuming that the firm uses only debt and common equity, so total assets equal total invested capital. Cooper Industries’ net income is $24,000. Its interest expense is $5,000 and its tax rate is 25%. Its notes payables equal $27,000, long-term debt equals $75,000, and common equity equals $250,000. The firm finances with only debt and common equity. Calculate the firm’s ROE and ROIC. Tanaz Inc.…

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Question

Chapter 26, Problem 26.12EX

a.

To determine

Present value index:

Present value index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals, and limited fund.

The present value index is computed as follows:

Present value index =Total present value of net cash flowAmount to be invested

To determine: The present value index for each proposal.

b.

To determine

To analysis: The investment location which is favor to investment.

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Solve all of the following problems: The Smith company has $2,392,500 in current assets and $1,076,625 in current liabilities. Its initial inventory level is $526,350 and it will raise funds as additional notes payable (short-term) and use them to increase inventory. How much can its short-term debt (notes payable) increase so that the company can maintain a current ratio of 2.0? Assume the following information for Brandon Corporation: Sales/Total assets = 1.3 Return on assets (ROA) = 4% Return on equity (ROE) = 7% Calculate the firm’s profit margin and debt-to-capital ratio assuming that the firm uses only debt and common equity, so total assets equal total invested capital. Cooper Industries’ net income is $24,000. Its interest expense is $5,000 and its tax rate is 25%. Its notes payables equal $27,000, long-term debt equals $75,000, and common equity equals $250,000. The firm finances with only debt and common equity. Calculate the firm’s ROE and ROIC. Tanaz Inc.…

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