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RD
RD, Certified Public Accountant (CPA)
Category: Finance
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Experience:  MBA, CPA
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1. Jakes Inc. recently reported net income of $4,750 and depreci

Resolved Question:

1. Jake’s Inc. recently reported net income of $4,750 and depreciation of $885. How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets.

2. Jakes’s Inc. stock has a 50% chance of producing a 35% return, a 30% chance of producing a 10% return, and a 20% chance of producing a -28% return. What is Jake's expected return?


2. XXXXX XXXXX has $100,000 invested in a 2-stock portfolio. $30,000 is invested in textile Manufacturing and the remainder is invested in Jakes Corporation. Potts' beta is 1.60 and Stohs’ beta is 0.60. What is the portfolio's beta?

3. A stock has an expected return of 12.60%. Its beta is 1.49 and the risk-free rate is 5.00%. What is the market risk premium?

4. Jakes Company's stock has a beta of 1.40, the risk-free rate is 4.25%, and the market risk premium is 5.50%. What is Jake’s required rate of return?

5. Firms generate income from their "regular" operations and from other sources like interest earned on the securities they hold, which is called non-operating income. Jakes textiles recently reported $12,500 of sales, $7,250 of operating costs other than depreciation, and $1,000 of depreciation. The company had no amortization charges and no non-operating income. It had $8,000 of bonds outstanding that carry a 7.5% interest rate, and its federal-plus-state income tax rate was 40%. How much was Jakes's operating income, or EBIT?

a. Jake’s textile firm's balance sheet showed total current assets of $2,250, all of which were required in operations. Its current liabilities consisted of $575 of accounts payable, $300 of 6% short-term notes payable to the bank, and $145 of accrued wages and taxes. What was its net operating working capital that was financed by investors?

7 Over the years, Jake’s Corporation's stockholders have provided $15,250 of capital, part when they purchased new issues of stock and part when they allowed management to retain some of the firm's earnings. The firm now has 1,000 shares of common stock outstanding, and it sells at a price of $42.00 per share. How much value has Jake's management added to stockholder wealth over the years, i.e., what is Jake’s MVA?
Submitted: 9 years ago.
Category: Finance
Expert:  RD replied 9 years ago.

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