PMF Problem Solver

PRINCIPLES OF MANAGERIAL FINANCE BRIEF EDITION PMF PROBLEM SOLVER Index By Category
Bond and Stock Valuation Basic Bond Valuation Book Value Liquidation Value P/E Multiplier Constant Growth Financial Statements All Ratios Liquidity Activity Debt Profitability Time Value of Money PV - Single Amount PV - Mixed Stream PV - Annuity FV - Single Amount FV - Annuity Deposits to a Sum Cost of Capital After Tax Cost of Debt Cost of Common Stock Cost of Preferred Stock Weighted Avg. Cost of Capital Weighted Mrg Cost of Capital Capital Budgeting Net Present Value Internal Rate of Return Payback Period Annualized Net Present Value Initial Investment General Budgeting Cash Budget
Alphabetical Index
Activity After Tax Cost of Debt All Ratios Annualized Net Present Value Basic Bond Valuation Book Value Cash Budget Constant Growth Cost of Common Stock Cost of Preferred Stock Debt Deposits to a Sum FV - Annuity FV - Single Amount Initial Investment Internal Rate of Return Liquidation Value Liquidity Net Present Value P/E Multiplier Payback Period Profitability PV - Annuity PV - Mixed Stream PV - Single Amount Weighted Avg. Cost of Capital Weighted Mrg Cost of Capital
2003 by Addison Wesley Longman. Copyright 2003 KMT Software, Inc. All Rights Reserved.
2003 by Addison Wesley Longman
Printed: 9/10/2013
Basic Bond Valuation

Par Value of the Bond Years to Maturity Required Rate of Return Coupon Rate of Bond Payment of interest: Annual Semi-annual Value of the bond is: $1,000 10 12.000% 10.000%
$887.00
File: 171158922.xls.ms_office
Printed: 9/10/2013
Book Value
Total Assets Total Liabilities Number of Common Shares Outstanding The book value per share is: $6,000,000 $4,500,000 100,000 $15.00
Printed: 9/10/2013
Price/Earnings (P/E) Multiple

Average P/E Ratio for Firms in the Industry Earnings per Share The value per share is: 7.0 $2.60 $18.20
Printed: 9/10/2013
Liquidation Value
Liquidation Value of Assets Total Liabilities Book Value of Preferred Stock Number of Common Shares Outstanding The liquidation value per share is: $5,250,000 $4,500,000 0 100,000 $7.50
Printed: 9/10/2013
Constant Growth
Estimated Dividend per Share Expected Annual Growth Rate of Dividends Investor's Required Rate of Return The value per share is: $1.50 7.00% 15.00% $18.75
Printed: 9/10/2013
Financial Ratios (All)

Income Statement
Revenue (Sales) Less: Cost of goods sold Gross profits Less: Operating Expenses Selling expense General and administrative Lease expenses Depreciation expense Other Total operating expenses Operating profits Less: Interest expense Net profits before taxes Less: Taxes Net profits after taxes Less: Preferred stock dividends Earnings available for common stockholders $3,074 2,088 $986 $100 194 35 239 $568 $418 93 $325 94 $231 10 $221
Balance Sheet
Assets Current assets Cash Marketable securities Accounts receivable Inventories Other Total current assets Gross Fixed assets (at cost) Land and buildings Machinery and equipment Furniture and fixtures Vehicles Other Total gross fixed assets Less: Accumulated depreciation Net fixed assets Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable Notes payable Accruals Other Total current liabilities Long-term debts Total liabilities Stockholders' equity Preferred stock Common stock Paid-in capital Retained earnings Total stockholders' equity
File: 171158922.xls.ms_office 2003 by Addison Wesley Longman
$363 68 503 289 $1,223 $2,072 1,866 358 275 98 $4,669 2,295 $2,374 $3,597
$382 79 159 $620 $1,023 $1,643 $200 191 428 $1,135 $1,954
Printed: 9/10/2013
Total liabilities and stockholders' equity Additional Data Needed for Ratios Principal Payments made during period Lease Payments made during period Tax Rate Common Shares Outstanding (in 000s) Market Price per Share of Common Stock
$3,597
$71 $35 29% 76 $32.25
Liquidity Analysis and Ratios

Net Working Capital Current Ratio Quick Ratio $603 1.97 1.51
Activity Ratios
Inventory Turnover Average Collection Period Fixed Asset Turnover Total Asset Turnover 7.22 58.91 1.29 0.85
Debt Ratios
Debt Ratio Debt-equity Ratio Times Interest Earned Fixed-payment Coverage Ratio 45.7% 52.4% 4.5 1.9
Profitability Ratios
Gross Profit Margin Operating Profit Margin Net Profit Margin Return on Assets (ROA) Return on Equity (ROE) Earnings Per Share (EPS) Price/Earnings (P/E) Ratio 32.1% 13.6% 7.5% 6.4% 11.8% $2.90 11.1
Printed: 9/10/2013
Liquidity Analysis and Ratios

Net Working Capital Current Assets Current Liabilities The net working capital is: Current Ratio Current Assets Current Liabilities The current ratio is: Quick Ratio Current Assets Inventory Current Liabilities The quick ratio is: $ $1,223,000 $620,000 603,000
$1,223,000 $620,000 1.97
$1,223,000 $289,000 $620,000 1.51
Printed: 9/10/2013
Activity Ratios
Inventory Turnover Cost of Goods Sold Inventory The inventory turnover is: Average Collection Period Accounts Receivable Annual Sales The average collection period is: Average Payment Period Accounts Payable Annual Purchases Days in year The average payment period is: Total Asset Turnover Sales Total Assets The total asset turnover is: $2,088,000 $289,000 7.22
$503,000 $3,074,000 58.91
$382,000 $1,461,600 360 94.09
$3,074,000 $3,597,000 0.85
Printed: 9/10/2013
Debt Ratios
Debt Ratio Total Liabilities Total Assets The debt ratio is: Debt-equity Ratio Long-term debt Stockholders' Equity The debt-equity ratio is: Times Interest Earned Earnings Before Interest and Taxes Interest Expense The times interest earned ratio is: Fixed-payment Coverage Ratio Earnings Before Interest and Taxes Interest Expense Principal Payments Lease Payments Total Preferred Dividends Tax Rate The fixed-payment coverage ratio is: $1,643,000 $3,597,000 45.7%
$1,023,000 $1,954,000 52.4%
$418,000 $93,000 4.5
$418,000 $93,000 $71,000 $35,000 $10,000 29% 1.87
Printed: 9/10/2013
Profitability Ratios
Gross Profit Margin Sales Cost of Goods Sold The gross profit margin is: Operating Profit Margin Operating profit Sales The operating profit margin is: Net Profit Margin Net Profits After Taxes Sales The net profit margin is: Return on Assets (ROA) Net Profits After Taxes Total Assets The return on assets is: Return on Equity (ROE) Net Profits After Taxes Stockholders' Equity The return on equity is: Earnings Per Share (EPS) Earnings Available to Common Stockholders' Common Shares Outstanding The earnings per share are: Price/Earnings (P/E) Ratio Market Price per Share of Common Stock Earnings Per Share The price/earnings ratio is: $3,074,000 $2,088,000 32.1%
$418,000 $3,074,000 13.6%
$231,000 $3,074,000 7.5%
$231,000 $3,597,000 6.4%
$231,000 $1,954,000 11.8%
$221,000 76,262 $2.90
$32.25 $2.90 11.1
Printed: 9/10/2013
Present Value - Single Amount

Future Amount (at the end of n periods) Number of Periods (n) Interest Rate Per Period (per n periods) The present value is: $1,700.00 8 8.00% $918.46
Calculating an Interest Rate

Future Amount (at the end of n periods) Present Value Number of Periods (n) The interest rate per period is: $1,700.00 $918.46 8 8.00%
Calculating the Number of Periods

Future Amount (at the end of n periods) Present Value Interest Rate Per Period (per n periods) The number of periods are: $1,700.00 $918.46 8.00% 8
Printed: 9/10/2013
Present Value of a Mixed Stream

Periodic Discount Rate Cash Flow 400 800 500 400 300 9.00%
Period (n) 1 2 3 4 5 6 7 8 9 10
The present value is:
$1,904.76
Printed: 9/10/2013
Present Value of an Annuity

Choose one of the following options: Ordinary Annuity Annuity Due Payment Per Period Number of Periods Interest Rate Per Period (per n periods) The present value of the annuity is: $700.00 5 8.00% $2,794.90

Payment Per Period Present Value Number of Periods (n) The interest rate per period is: $700.00 $2,794.90 5 8.00%

Payment Per Period Present Value Interest Rate Per Period (per n periods) The number of periods is: $700.00 $2,794.90 8.00% 5
Printed: 9/10/2013
Future Value - Single Amount

Compounding Choices (select one):
Present Value Number of Periods (n) Interest Rate Per Period (per n periods) The future value is:
$100.00 2 8.00% $116.64
Calculating an Effective Interest Rate

Compounding Frequency (select one):
Nominal Interest Rate Number of Years The effective rate per period (per n periods) is:
8.00% 2 8.16%

Present Value Future Value Interest Rate Per Period (per n periods) The number of periods is: $100.00 $116.64 8.00% 2
Printed: 9/10/2013
Future Value of an Annuity

Choose one of the following options: Ordinary Annuity Annuity Due Payment Per Period Number of Periods Interest Rate Per Period (per n periods) The future value of the annuity is: $1,000.00 5 7.00% $5,750.74

Payment Per Period Future Value Number of Periods (n) The interest rate per period is: $1,000.00 $5,750.74 5 7.00%

Payment Per Period Future Value Interest Rate Per Period (per n periods) The number of periods is: $1,000.00 $5,750.74 7.00% 5.00
Printed: 9/10/2013
Deposits to a Sum
Select the type of annuity: Ordinary Annuity Annuity Due Amount to be Accumulated Number of years Annual Interest Rate The periodic deposit is: $100,000 10 9.00% $6,582.01
Printed: 9/10/2013
After Tax Cost of Debt

Par value of bond Cash inflow from sale (per bond) Coupon rate Number of periods to maturity Tax rate The approximate cost is: The after tax cost is: $1,000 $960 9.00% 20 40.0% 9.39% 5.63%
Printed: 9/10/2013
Cost of Common
Constant Growth Model
Current per Share Market Value of Stock Dividend per Share Projected Growth Rate of Dividends The cost of common stock is: $50.00 4 5.00% 13.00%
Capital Asset Pricing Model

Risk Free Rate of Return Market Rate of Return Beta The cost of common stock is: 7.00% 11.00% 1.50 13.00%
Cost of New Issue

Current per Share Market Value of Stock Dividend per Share Growth Rate of Dividends Flotation Cost per Share The cost of common stock is: $50.00 $4.00 5.00% $5.50 13.99%
Printed: 9/10/2013
Cost of Preferred Stock

Annual Preferred Stock Dividend Net Proceeds from Sale of Preferred Stock The cost of preferred stock is: $8.70 $82.00 10.61%
Printed: 9/10/2013
Weighted Average Cost of Capital

Long-term debt proportion Preferred stock proportion Common stock/Equity proportion Cost of debt Cost of preferred stock Cost of equity/stock The weighted average cost of capital is: 40.00% 10.00% 50.00% 5.60% 10.60% 13.00% 9.80%
Printed: 9/10/2013
Weighted Marginal Cost of Capital

Long-term debt proportion Preferred stock proportion Common stock/Equity proportion Range of New Financing Lower Upper Bound Bound $0 $600,000 40.00% 10.00% 50.00%
Source of Capital Cost Debt 5.60% Preferred 10.60% Common 13.00% Weighted average cost of capital Source of Capital Cost Debt 5.60% Preferred 10.60% Common 14.00% Weighted average cost of capital Source of Capital Cost Debt 8.40% Preferred 10.60% Common 14.00% Weighted average cost of capital Upper Bound and beyond
Weighted Cost 2.24% 1.06% 6.50% 9.80% Weighted Cost 2.24% 1.06% 7.00% 10.30% Weighted Cost 3.36% 1.06% 7.00% 11.42%
Lower Upper Bound Bound $600,000 $1,000,000
Lower Bound $1,000,000
Printed: 9/10/2013
Net Present Value

Initial Investment (enter as positive number) Discount Rate Years 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Cash Flows 28,000 12,000 10,000 10,000 10,000 $45,000 10%
The net present value is:
$10,924
Printed: 9/10/2013
Internal Rate of Return

Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Initial Investment --> Cash Flows ($45,000) 28,000 12,000 10,000 10,000 10,000
The internal rate of return is:
21.65%
Printed: 9/10/2013
Payback Period
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 The payback period is: Initial Investment --> Cash Flows ($45,000) 1,000 1,000 1,000 1,000 1,000 1,000 40,000 6,000
6.975
Printed: 9/10/2013
Annualized Net Present Value

Discount Rate Number of years Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 10.00% 6 Cash Flows ($85,000) 35,000 30,000 25,000 20,000 15,000 10,000
Initial Investment enter as negative -->
The net present value is: The annualized NPV is:
$17,285 $3,969
Printed: 9/10/2013
Initial Investment
Cost of new asset Installation costs After-tax proceeds from sale of old asset Tax on sale of present machine Change in net working The initial investment is: $380,000 20,000 280,000 84,160 17,000 $221,160
Printed: 9/10/2013
Cash Budget
(all numbers in $000) Oct $210 213 ($3) $50 $47 25 $0 $22 Nov $320 418 ($98) $47 ($51) 25 $76 Dec $340 305 $35 ($51) ($16) 25 $41 Jan Feb Mar
Total cash receipts Less: Total cash disbursements Net cash flow Add: beginning cash Ending cash Less: Minimum cash balance Required total financing Excess cash balance
Printed: 9/10/2013

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PRINCIPLES OF MANAGERIAL FINANCE BRIEF EDITION PMF PROBLEM SOLVER Index By Category

2003 by Addison Wesley Longman

Basic Bond Valuation

2003 by Addison Wesley Longman

2003 by Addison Wesley Longman

Price/Earnings (P/E) Multiple

2003 by Addison Wesley Longman

2003 by Addison Wesley Longman

2003 by Addison Wesley Longman

Financial Ratios (All)

$71 $35 29% 76 $32.25

Liquidity Analysis and Ratios

2003 by Addison Wesley Longman

Liquidity Analysis and Ratios

$1,223,000 $620,000 1.97

$1,223,000 $289,000 $620,000 1.51

2003 by Addison Wesley Longman

$503,000 $3,074,000 58.91

$382,000 $1,461,600 360 94.09

$3,074,000 $3,597,000 0.85

2003 by Addison Wesley Longman

$1,023,000 $1,954,000 52.4%

$418,000 $93,000 4.5

$418,000 $93,000 $71,000 $35,000 $10,000 29% 1.87

2003 by Addison Wesley Longman

$418,000 $3,074,000 13.6%

$231,000 $3,074,000 7.5%

$231,000 $3,597,000 6.4%

$231,000 $1,954,000 11.8%

$221,000 76,262 $2.90

$32.25 $2.90 11.1

2003 by Addison Wesley Longman

Present Value - Single Amount

Calculating an Interest Rate

Calculating the Number of Periods

2003 by Addison Wesley Longman

Present Value of a Mixed Stream

The present value is:

2003 by Addison Wesley Longman

Present Value of an Annuity

Calculating an Interest Rate

Calculating the Number of Periods

2003 by Addison Wesley Longman

Future Value - Single Amount

$100.00 2 8.00% $116.64

Calculating an Effective Interest Rate

Calculating the Number of Periods

2003 by Addison Wesley Longman

Future Value of an Annuity

Calculating an Interest Rate

Calculating the Number of Periods

2003 by Addison Wesley Longman

2003 by Addison Wesley Longman

After Tax Cost of Debt

2003 by Addison Wesley Longman

Capital Asset Pricing Model

Cost of New Issue

2003 by Addison Wesley Longman

Cost of Preferred Stock

2003 by Addison Wesley Longman

Weighted Average Cost of Capital

2003 by Addison Wesley Longman

Weighted Marginal Cost of Capital

Lower Upper Bound Bound $600,000 $1,000,000