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Homework answers / question archive / 1)Compute the monthly payment for a $82,510 home loan
1)Compute the monthly payment for a $82,510 home loan. The interest of the loan is 5% with monthly payments. The loan amortization is over 25 years.
Can you show how to enter into excel?
2)DuPont Analysis You are considering investing in Nuran Security Services. You have been able to locate the following information on the firm: Total assets are $24 million, accounts receivable are $3.3 million, ACP is 25 days, net income is $3.5 million, and debt-to-equity is 1.2 times. Calculate the ROE for the firm.
3)Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2018, is shown here (millions of dollars):
| Cash | $ 3.5 | Accounts payable | $ 9.0 | |
| Receivables | 26.0 | Notes payable | 18.0 | |
| Inventories | 58.0 | Line of credit | 0 | |
| Total current assets | $ 87.5 | Accruals | 8.5 | |
| Net fixed assets | 35.0 | Total current liabilities | $ 35.5 | |
| Mortgage loan | 6.0 | |||
| Common stock | 15.0 | |||
| Retained earnings | 66.0 | |||
| Total assets | $122.5 | Total liabilities and equity | $122.5 |
Sales for 2018 were $475 million and net income for the year was $14.25 million, so the firm's profit margin was 3.0%. Upton paid dividends of $5.7 million to common stockholders, so its payout ratio was 40%. Its tax rate was 40%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous liabilities)/sales ratios, the profit margin, and the payout ratio remain constant in 2019. Do not round intermediate calculations.
a. If sales are projected to increase by $90 million, or 18.947368%, during 2019, use the AFN equation to determine Upton's projected external capital requirements. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places.
$ ______ million
b. Using the AFN equation, determine Upton's self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? Round your answer to two decimal places.
______ %
c .Use the forecasted financial statement method to forecast Upton's balance sheet for December 31, 2019. Assume that all additional external capital is raised as a line of credit at the end of the year and is reflected (because the debt is added at the end of the year, there will be no additional interest expense due to the new debt).
Assume Upton's profit margin and dividend payout ratio will be the same in 2019 as they were in 2018. What is the amount of the line of credit reported on the 2019 forecasted balance sheets? (Hint: You don't need to forecast the income statements because the line of credit is taken out on last day of the year and you are given the projected sales, profit margin, and dividend payout ratio; these figures allow you to calculate the 2019 addition to retained earnings for the balance sheet without actually constructing a full income statement.) Round your answers to two decimal places.
| Upton Computers Pro Forma Balance Sheet December 31, 2019 (Millions of Dollars) |
||
| Cash | $ | |
| Receivables | $ | |
| Inventories | $ | |
| Total current assets | $ | |
| Net fixed assets | $ | |
| Total assets | $ | |
| Accounts payable | $ | |
| Notes payable | $ | |
| Line of credit | $ | |
| Accruals | $ | |
| Total current liabilities | $ | |
| Mortgage loan | $ | |
| Common stock | $ | |
| Retained earnings | $ | |
| Total liabilities and equity | $ | |
1)
| Loan amount | 82510 |
| Term in year | 25 |
| Rate | 5% |
| Monthly payment amount | $482.35 |
The monthly payment amount is derived using PMT function in excel with rate as the monthly rate, Nper as number of months and PV as the Loan amount.
please see the attached file.
2)
ACP= Accounts receivable*365/Sales
25= 3300000*365/Sales
Sales = 3300000*365/ 25 = 48180000
Net Margin= Net Income/Sales
= 3500000/48180000
= 0.072644
Total assets turnover= Sales/Total assets
= 48180000/24000000
= 2.0075
Total assets= Debt+ Equity
Let Equity be x, Debt=1.2x
24000000=1.2x+x
X= 2400000/2.2 = 1090909.09
Equity=1090909.09
Equity Multiplier= Total assets/Equity
= 24000000/ 10909090.91
= 2.2
DuPont Equation
ROE= Net Margin*TAT*EM
= 0.0726443*2.0075*2.2
= 0.3208336
=32.08%
3)
A0 = 122.5; L0 = Accounts payable + accruals = 9 + 8.5 = 17.5; S0 = 475; S1 = S0 + 90 = 475 + 90 = 565; g = 18.947368%; PM = 3%; RR = 1 - DPR = 1 - 40% = 60%
Part (a)
External capital required = A0 x g - L0 x g - S1 x PM x RR = 122.5 x 18.947368% - 17.5 x 18.947368% - 565 x 3% x 60% = $ 9.72 million
Part (b)
AFN = A0 x g* - L0 x g* - S1 x PM x RR
We need to find g at which AFN = 0
Hence, A0 x g* - L0 x g* - S1 x PM x RR = 0
Hence, the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds = g* = S1 x PM x RR / (A0 - L0) = 565 x 3% x 60% / (122.5 - 17.5) = 9.69%
Part (c)
Please see the last column to understand how each term has been calculated.
the amount of the line of credit reported on the 2019 forecasted balance sheets = $ 9.72 million
| $ million | How it has been calculated? | |
| Cash | 4.16 | 3.5 x (1 + 18.947368%) |
| Receivables | 30.93 | 26 x (1 + 18.947368%) |
| Inventories | 68.99 | 58 x (1 + 18.947368%) |
| Total current assets | 104.08 | Sum of above items |
| Net fixed assets | 41.63 | 35 x (1 + 18.947368%) |
| Total assets | 145.71 | Sum of last two items |
| Accounts payable | 10.71 | 9 x (1 + 18.947368%) |
| Notes payable | 18.00 | Same as last year figure |
| Line of credit | 9.72 | Calculated in part (a) |
| Accruals | 10.11 | 8.5 x (1 + 18.947368%) |
| Total current liabilities | 48.54 | Sum of above items |
| Mortgage loan | 6.00 | Same as last year figure |
| Common stock | 15.00 | Same as last year figure |
| Retained earnings | 76.17 | 66 + 565 x 3% x 60% |
| Total liabilities and equity | 145.71 | Sum of last four items above |
