Dupont roe formula-considered utilization ratio

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Reference no: EM131944541

1. In the 5-Stage DuPont ROE formula, which of the following is considered a utilization ratio:

a. NI / EBT or the tax burden ratio

b. EBT / EBIT or the interest burden ratio

c. EBIT / Sales or the operating margin

d. Sales / TA or total asset turnover ratio

e. TA / SE or the leverage ratio

2. You owe your credit company $25,000 and plan to make no payments on your credit card for 1.0 year.

Due to your current credit score, your credit card company charges you an APR of 30.0%. If, however, you took measures to increase your credit score by 100points, your credit card company would instantaneously adjust your APR by 5.0%. How much would you save over 1.0 year if you took actions to increase your credit score?

a. $1,525

b. $1,603

c. $1,677

d. $8,622

e. $8,717

3. You are the beneficiary of a trust set up by your grandparents. You will receive a total of 60 after tax cash flows ($1,000 each) beginning six years from now (T=6) when you turn age 25. These payments are intended to help cover your living expenses over the course of your expected lifetime. Assume the appropriate discount rate is 6.0% per annum. What is the present value of the 60 payments?

a. $11,372

b. $11,393

c. $12,077

d. $12,098

e. $16,667

4. You have $1000 in a savings account today (T=0). Approximately how much longer would it take for your investment to double (i.e. to become worth $2000) if you earned 4.0% on your savings as opposed to 12.0% at the end of every calendar year? Hint: Think Rule of 72.

a. 6 years

b. 8 years

c. 12 years

d. 16 years

e. 18 years

5. Today is January 1st, 2018 (T=0). You take out a 30 year fully amortizing mortgage of $300,000. Payments are made at the end of each calendar month. The loan has a fixed annual rate of 5.0% (or 5.0%/12 per month). Approximately how much is each payment?

a. $833

b. $875

c. $1,610

d. $1,626

e. $1,729

6. Today is January 1st, 2018 (T=0). You take out a 30 year fully amortizing mortgage of $300,000. Payments are made at the end of each calendar month. The loan has a fixed annual rate of 5.0% (or 5.0%/12 per month). Ignore your answer to the previous question and assume you try to pay off the mortgage early by making payments of $2,000 instead. Approximately how long will it take before you have accumulated at least $200,000 of equity in your home?

a. 8 years and 4 months

b. 9 years and 0 months

c. 9 years and 1 month

d. 15 years and 1 month

e. 15 years and 2 months

Reference no: EM131944541

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