Time value of money–present value-which firm is liquid

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Consider the following sets of financial statements and answer the questions that follow: a. Which firm is the most liquid? Why? (Justify your answer with at least two ratios). b. Which firm is the most profitable? Why? (Justify your answer with at least two ratios). c. Construct a Du Pont equation (use the extended, or modified version shown in the Week 1, chapters 2 & 3 lesson notes) for each firm and comment on the sources of each firm’s ROE as revealed by the equation. Question 2: (Time Value of Money – Monthly Loan Payments) Best Buy has a 65” 4K Ultra HD TV on sale for $1,999.99. If you could borrow that amount from First National Bank of St Louis at 4% for 1 year, what would be your monthly loan payments? Question 3: (Time Value of Money – Present Value) You have figured out that you will need $800,000 to finance your child’s college education when she turns 18, which will be 16 years from now, so you decide to invest in zero-coupon bonds, which will mature in 16 years and will pay off $800,000 at maturity. How much would you have to invest in zero-coupon bonds today to reach your goal, assuming the going rate on such bonds is currently 3.5% per year? Question 4: (Risk & Return) You hold a portfolio of stocks consisting of the following: Stock Beta Current Value Caterpillar 0.6 $20,000 CitiCorp 0.8 $21,000 Wendy’s 1.0 $22,000 Boeing… 1.2 $27,000 Total: $90,000 a. What is the beta of the portfolio? b. You have decided to sell Boeing for $27,000 and to use the proceeds to buy $27,000 of Nike stock with a beta of 1.4. After the transaction is complete, what will be the new beta of the portfolio? (Disregard any commissions on the buy and sell transactions.)

Reference no: EM131011236

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