Other

Question 1

Residual Income

Answer 1

Operating income x (Percentage cost of capital x average op assets)

Question 2

Return on ivnestment

Answer 2

sales value - initial cost / initial cost

Question 3

Economic value added

Answer 3

Net op profit after tax - (WACC x Capital invested)

Question 4

Cash conversion cycle

Answer 4

Inv holding period + AR collection period - AP payable

Question 5

Operating cycle

Answer 5

Inv holding period + customer collection

Question 6

CM ratio

Answer 6

CM / Sales Value

Question 7

Break-even dollars

Answer 7

Fixed / CM ratio

Question 8

WACM per unit

Answer 8

Total CM/ Total Units

Question 9

WACM ratio

Answer 9

Total CM / Total SALes

Question 10

Interest Coverage Ratio

Answer 10

EBIT/Interest Expense

How easily a company can pay off interest on its outstanding debt

Question 11

Net profit margin

Answer 11

Sales - COGS / Sales

Question 12

ROA

Answer 12

Net Incoime / Total Assets

Question 13

ROE

Answer 13

Net Income/ Total Equity

Question 14

AR Turnover

Answer 14

Note: 365 / Credit Terms = how many times turnover will change

Question 15

Cost of Equity - Common Equity

Answer 15

Risk Free return + (Beta x Market Risk Premium)

Question 16

Cost of Equity - Preferred Shares

Answer 16

Annual PS Dividends paid / Total Market value of PS outstanding

Question 17

WACC

Answer 17

(D/V)(Rd)(1-T) + (P/V)(Rp)+(E/V)(Re)

Question 18

EAR

Answer 18

(1+i/n)^n-1

Question 19

Accelerated investment incentive of Tax Shield

Answer 19

(Investment x CCA rate x Corporate tax rate)/(CCA rate + Discount rate) x (1+1.5x Discount/1 + Discount)

Question 20

Temporary 100% deduction for eligible property and manu, processing and clean equipment

Answer 20

Investment x corporate tax rate / 1 + discount rate

Question 21

PV of Lost Tax Shield on Salvage

Answer 21

Salvage proceeds x CCA rate x corporate tax rate / CCA rate + discount rate

Question 22

Nominal Rate of Return

Answer 22

(1 + Nominal) = (1 + Real rate of return) x (1 + Inflation)

Rate of returns quoted on market = nominal rate