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. Additional Information: Interest rate is 10% in year 2009. Tax rate is 40%. Operating Profit Margin in year 2008 is 24%. Current Ratio is year 2008 is 5x. Dividend to preferred stocks is 15% in year 2008 and 2009. Dividend payout policy to common stock is 20% in year 2008 and 2009. Number of shares outstanding = 90,000 shares. In 2009. Market price is $15 per share. | In 2009 Selected industry average ratios: Year 2008 Year 2009 ROA6% ROA = 8% ROE = 7.5% Net Profit Margin = 12% Current ratio = 1.5x FATO = 0.9 Operating Profit Margin=22% P/E = 12x ROE = 7% . . J.B. Chavez Corporation, Balance Sheet at 12/31/08 and 12/31/09 (5000) 12/31/08 Assets 12/31/09 Cash Accounts receivable Inventory Current assets Plant and equipment Less: Accumulated depreciation Net plant and equipment Total assets $225 450 ? 575 $1.250 $2,200 (1,000) $1,200 $2.450 175? 430 625 $1.230 $2,500 (1.200 $1,300 $2.530- 150 ? 115? Liabilities and Owners' Equity Accounts payable Notes payable-current Current-liabilities L-T Debts Total Liabilities 100 $ 250 $600 $850 115 $230 ? $830 ? Owners' equity Preferred stock Common stock Paid-in capital Retained earnings Total owners' equity Total liabilities and owners' equity 12/31/08 $150 1502 600 700 1,600 24302 12/31/09 ? 156 150 600 800 1,700 25392 J.B. Chavez Corporation, Income Statement for the year ending 12/31/08 and 12/31/09 (5000) Sales Less: Cost of goods sold Gross profit Less: Operating expenses Net operating income Less: Interest expense Net income before taxes Taxes Net income Less : Dividend to P/S (152 * 150 ) Net Income to C/S Less : Dividend to C/S Retain earnings 2008 $1,250 700 $550 250 300 50 250 100 $150 22.$?? 175 $?? 2009 $1,450 875 $575 245 $330 60 270 108 $160 24 ?? IS (20%,*: 150) so ?? */36?? 32 ?? 104 ?? 97.5 ?? 1. Answer the following questions (Apply the appropriate ratio(s), use 2 decimal points) How much debt did the company employ in year 2008 and equity employed in year 2009 to finance its assets? (2 marks) debt CTULIA), 450 2450. 34.69% 2. Find debt to equity ratio in year 2008. (1 mark) Explain its financial leverage in year 2008. (1 mark) 57.12% 3. Find return on assets (ROA) and return on equity (ROE) in year 2009. (2 marks) ROE Hus CE 4. Did the firm have better ability to pay back its short-term liabilities without relying on selling its inventories in year 2009 as compared to year 2008? Show calculation in both years. (2 marks) Should you buy this company's common stock in year 2009? Explain by using P/E ratio. (2 marks) ROA.. CASTA 3% 5