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(16 pts) 7. Given the information below, address the requirements following the information. Net Sales Less: Cost of goods sold Less: Depreciation Eamings before interest and taxes Less: Interest expense Taxable income Less: Taxes (30%) Net Income Addition to retained earnings Dividends paid 2020 Dodson Inc. Income Statement (S in millions) S1,384 605 180 599 80 519 156 5363 S254 S109 Dodson, Inc. 2019 and 2020 Balance Sheets (Sin millions) 2019 2020 2019 2020 Cash Accounts rec. Inventory Total CA PPE S100 350 440 $890 1.556 $121 425 410 $956 1,704 Accounts payable $400 Notes payable 390 Total CD $790 Long-Term debt 500 ommon stock 600 Retained earnings 556 Total Debt & Equity S2.446 S350 370 $720 550 580 810 S2.660 Total assets $2.446 S2.660 Total CA - Total Current Assets PPE = Property, Plant and Equipment Total CD - Total Current Debt Required: a) Calculate the extended DuPont identity for 2020, including all of its components. Explain the purpose of calculating the DuPont Identity. b) Calculate the Current Ratio and the Quick Ratio for 2020. What is the difference in the two ratios? c) Calculate the Inventory Holding Period for 2020. What is the significance of this ratio? d) Calculate the free cash flow for 2020. What is the significance of free cash flow? FOR ALL PROBLEMS SHOW COMPUTATIONS (15 pts) 5. The Cable Chemical Corporation is considering the purchase of a chemical analysis machine. Although the machine being considered will result in an increase in revenue of $150,000 and cash expenses of $65,000 per year, it has a purchase price of $450,000, and it would cost an additional $50,000 to correctly install this machine. In addition, to properly operate this machine, inventory must be increased by $30,000. This machine has an expected life of 10 years, after which it can be sold for $50,000. This machine is being depreciated down to zero. There is a 30% tax rate, and a required rate of return of 15%. Required: Determine whether or not Cable Chemical should purchase the machine. (8 pts) 6. Assume that you are considering the purchase of a 20-year, bond with an annual coupon rate of 10%. The bond has a par value of $1,000, and it makes annual interest payments. If you require an 8% yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? Explain why the price is differ from the par value