P/E and Stock Price

Fontaine Inc. recently reported net income of $5 million. It has 450,000 shares of common stock, which currently trades at $25 a share. Fontaine continues to expand and anticipates that 1 year from now, its net income will be $6.75 million. Over the next year it also anticipates issuing an additional 45,000 shares of stock so that 1 year from now it will have 495,000 shares of common stock. Assuming Fontaine's price/earnings ratio remains at its current level, what will be its stock price 1 year from now? Round your answer to the nearest cent.

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DSO and Accounts Receivable

Harrelson Inc. currently has $950,000 in accounts receivable, and its days sales outstanding (DSO) is 72 days. It wants to reduce its DSO to 25 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average sales will fall by 20%. What will be the level of accounts receivable following the change? Assume a 365-day year. Round your answer to the nearest cent.

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Return on Equity

Midwest Packaging's ROE last year was only 3%; but its management has developed a new operating plan that calls for a debt-to-assets ratio of 55%, which will result in annual interest charges of $480,000. The firm has no plans to use preferred stock. Management projects an EBIT of $1,110,000 on sales of $15,000,000, and it expects to have a total assets turnover ratio of 2.6. Under these conditions, the tax rate will be 35%. If the changes are made, what will be the company's return on equity? Round your answer to two decimal places.

%

Tie and Roic Ratios

The H.R. Pickett Corp. has $500,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 10%. In addition, it has $700,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $3 million, its average tax rate is 35%, and its profit margin is 8%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places.

TIE x

ROIC %