1. Danielle's Sushi Shop experienced a unique financial situation last year, marked by (1) a negative net cash flow from operations, (2) a negative free cash flow, and (3) an increase in cash as reported on its balance sheet. Describe a potential action that the company might have taken to contribute to this unusual scenario?

2. Edwards Electronics recently reported $11,250 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had no amortization charges, it had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 25%. How much was its net operating profit after taxes (NOPAT)?

3. Rao Corporation has the following balance sheet. does the firm have?

Cash Short-term investments Accounts receivable Inventory 40

How much net operating working capital

Accounts payable $ 20 Accruals 20

Current assets Net fixed assets

Total assets

$ 10

50

$130 100

$230

Notes payable Current liabilities

Long-term debt Common equity

Retained earnings Total liab. & equity

50

$ 90

0

30

50 $230

4. Determine whether the statement below is true or false. Explain the reasoning that supports your conclusion.

The inventory turnover and current ratio are related. The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above- average inventory level and/or that part of the inventory is obsolete or damaged.

5. Bostian, Inc. has total assets of $625,000. Its total debt outstanding is $185,000. The Board of Directors has directed the CFO to move towards a debt-to-assets ratio of 55%. How much debt must the company add or subtract to achieve the target debt ratio?

6. Last year Altman Corp. had $205,000 of assets, $303,500 of sales, $18,250 of net income, and a debt-to-total-assets ratio of 41%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets to $152,500. Sales, costs, and net income would not be affected, and the firm would maintain the 41% debt ratio. By how much would the reduction in assets improve the ROE?

7. Stewart Inc.'s latest EPS was $3.50, its book value per share was $22.75, it had 215,000 shares outstanding, and its debt-to-assets ratio was 46%. How much debt was outstanding?

8. Southwestern Bank offers to lend you $50,000 at a nominal rate of 6.5%, compounded monthly. The loan (principal plus interest) must be repaid at the end of the year. Woodburn Bank also offers to lend you the $50,000, but it will charge an annual rate of 7.0%, with no interest due until the end of the year. How much higher or lower is the effective annual rate charged by Woodburn versus the rate charged by Southwestern?

9. Geraldine was injured in a car accident, and the insurance company has offered her the choice of $25,000 per year for 15 years, with the first payment being made today, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave her as well off financially as with the annuity?

10. Determine whether the statement below is true or false. Explain the reasoning that supports your conclusion.

The greater the number of compounding periods within a year, the greater the present value of a given lump sum to be received at some future date.