Problem 1

Hologram Corporation is a holding company with four main subsidiaries. The percentage of its business coming from each of the subsidiaries, and their respective betas, are as follows:

Subsidiary	Percentage of Business	Beta
Water Company	60%	.70
Cable Company	25%	.90
Real estate	10%	1.30
Technology companies	5%	1.50

What is the companys beta?

Assume that the risk-free rate is 6% and that the market risk premium is 5%. What is the holding companys required rate of return?

Problem 2

Surf Bicycles Inc. Will manufacture and sell 200,000 units next year. Fixed costs will total $500,000, and variable costs will be 60% of sales. The bicycles will sell for $200 each.

The firm wants to achieve a level of earnings before interest and taxes of $250,000. How many units must they sell to achieve that result?

Problem 3

Alpha Electronics has the following income statement:

Sales	400,000
Total variable costs	240,000
Contribution margin	160,000
Fixed costs	140,000
EBIT	20,000

Calculate the new EBIT and percent change, assuming:

Sales increase by 20%

Sales decrease by 20%

Problem 4

Given the following information:

Total asset turnover	2.0 times
Accounts receivable turnover	25 times
Fixed asset turnover	5 times
Inventory turnover (based on cost of goods sold)	5 times
Current ratio	2
Sales (all on credit)	$5,000,000
Cost of goods sold	70% of sales
Debt ratio	60%

Calculate:

Cash
Accounts receivable
Inventories
Net fixed assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Common equity
Total liabilities and common equity

Problem 5

Given the following information:

Sales Growth Rate	25%
COGS / Sales	65%
Operating Expense / Sales	20%
Depreciation Expense (000)	$40
Interest Expense (000)	$10
Tax Rate	40%
Dividends (000)	$20

Calculate the following information for 20X1:

Income Statement (000)
	20X0		20X1
Sales	1500
Cost of goods sold	975
Gross profit	525
Operating costs	300
Depreciation expense	40
Net Operating Profit	185
Interest Expense	10
Earnings Before Taxes	175
Taxes	70
Net Income	105
Dividends	$20
Addition to Retained Earnings	$85

Option #2: Mastery Finance Calculations

Problem 1

Hologram Corporation is a holding company with four main subsidiaries. The percentage of its business coming from each of the subsidiaries, and their respective betas, are as follows:

Subsidiary	Percentage of Business	Beta
Water Company	45%	.70
Cable Company	20%	.90
Real estate	15%	1.30
Technology companies	20%	1.50

What is the companys beta?

Assume that the risk-free rate is 6% and that the market risk premium is 5%. What is the holding companys required rate of return?

Problem 2

Surf Bicycles Inc. will manufacture and sell 250,000 units next year. Fixed costs will total $600,000, and variable costs will be 60% of sales. The bicycles will sell for $200 each.

The firm wants to achieve a level of earnings before interest and taxes of $250,000. How many units must they sell to achieve that result?

Problem 3

Alpha Electronics has the following income statement:

Sales	500,000
Total variable costs	300,000
Contribution margin	200,000
Fixed costs	170,000
EBIT	30,000

Calculate the new EBIT and percent change, assuming:

Sales increase by 20%

Sales decrease by 20%

Problem 4

Given the following information:

Total asset turnover	2.5 times
Accounts receivable turnover	25 times
Fixed asset turnover	5 times
Inventory turnover (based on cost of goods sold)	5 times
Current ratio	2
Sales (all on credit)	$6,000,000
Cost of goods sold	60% of sales
Debt ratio	50%

Calculate the following:

Cash
Accounts receivable
Inventories
Net fixed assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Common equity
Total liabilities and common equity

Problem 5

Given the following information:

Given:
Sales Growth Rate	25%
COGS / Sales	70%
Operating Expense / Sales	20%
Depreciation Expense (000)	$40
Interest Expense (000)	$20
Tax Rate	35%
Dividends (000)	$20

Calculate the following items for 20X1:

Income Statement (000)
	20X0		20X1
Sales	2,000
Cost of goods sold	1,400
Gross profit	600
Operating costs	400
Depreciation expense	60
Net Operating Profit	160
Interest Expense	20
Earnings Before Taxes	140
Taxes	49
Net Income	91
Dividends	$20
Addition to Retained Earnings	$71