Question

1. Tantrix confectioners have total assets of $1,922,129 and net sales of $4,195,719. What is the capital intensity ratio (round to 1 decimal places)
2. Given the following quotes calculate the €/£ cross rate

Bank of America $1.700/£

Chase $1.3855/€

3. Nova Scotia offers quotes on the on the Canadian dollars as shown below. What is the bid-ask spread based on these quotes? (Round answers to two decimal places e.g., 27.22)
   

Bid	Ask
C $0.7249/$	C $0.9605/$

4. You want to estimate the total intrinsic value of a large electric utility company. This company has publicly traded stock and has been paying a regular dividend for many years. You decide that due to the predictability of the dividend that this company pays, you can use the dividend discount valuation approach. The company is expected to pay a dividend of $1.97 per share next year and the dividend is expected to grow at a rate of 4% per year thereafter. You estimate that the appropriate rate for discounting future dividend is 12% . In addition you know the company has 48 million shares outstanding and that the market value of its debt is $324 million. What is the total enterprise value of the company? (round to 2 decimal places).
5. Walkabout Kangaroo shoe stores forecast that it will sell 8,184 pairs of shoes next year, the firm buys its shoes for $50 per pair and sells them for $75 per pair. The firm will incur fixed cost plus depreciation and amortization of $100,000, then what is the percent increase in EBIT if the actual sales next year equal 10,814 pair of shoes instead of 8,184.
6. Your brother has asked you for a loan and has promised to pay back $8,750 at the end of three years. If you normally invest to earn 6% per year how much will you be willing to lend to your brother?

Answer 1

1)Capital intensity ratio=total assets/sales
=4195719/1922129=2.2
2)The cross rate of euro to dollar is
1 pound=1.7dollar and 1euro=1.3855 dollar
so 1 pound=(1.7/1.3855)euro
=1.23
1 euro=0.82pound
3)Bid ask spread is = ask rate-bid rate
=0.9605-0.7249=0.2356
4)Let us find the stock price= next year dividend/*return on stock-growth)
=1.97/(12%-4%)
=24.625
Total market value equity=shares outstanding*stock price=48*24.625=1182mn
total enterprise value=market value of equity+debt
=
1182+324=1506mn