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Financial Management

Assignment One

Due Time: 11am, July 3, 2025 (Thursday)

Q1. 20 points in total

Sasker Corporation reports the following balance sheet information for 2019 and 2020. Use this information to answer parts (a) through (e) below. [20 points]

SASKER CORPORATION

Balance Sheets as of December 31, 2019 and 2020

Based on the balance sheets given for Sasker Corp., calculate the following ratios for each year: (3 decimal places)

i. Current ratio [2 points]

ii. Quick ratio [2 points]

iii. Cash ratio [4 points]

iv. NWC/TA ratio [4 points]

v. Debt/equity ratio, and equity multiplier [4 points]

vi. Total debt ratio and long-term debt ratio [4 points]

Q2. 10 points in total

Teulon Inc. has sales of $18 million, total assets of $15.6 million, and total debt of $6.3 million. Assume the profit margin is 8%. [10 points]

a) What is net income? (Enter the answer in dollars.) [3 points]

b) What is ROA? (Round the final answer to 2 decimal places.) [2 point]

c) What is ROE? (Round the final answer to 2 decimal places.) [5 points]

Q3. 10 points in total

If we divide users of ratios into short-term lenders, long-term lenders, and stockholders, in which ratios would each group be most interested, and for what reasons? [10 points]

Q4. 20 points in total

a. If the discount rate is 6%, find the present values of the following cash flow streams.

[10 points]

b. What are the present values of Stream A and B at a 0% discount rate? [10 points]

Q5. 20 points in total

Benjamin is now planning a savings plan to put his son through university. His son is 13 years old, plans to enroll at the university in 5 years, and should graduate 4 years later. Currently, the annual cost (for everything—food, clothing, tuition, books, transportation, and so forth) is $15,000, but these costs are expected to increase by 5% annually. The college requires total payment at the start of the year. His son now has $7,500 in a college savings account that pays 6% annually. Benjamin will make six equal annual deposits into his account. The first deposit today and the sixth on the day she starts college. How large must each of the six payments be? [20 points]

Q6.  20 points in total

After graduation, you plan to work for Dynamo Corporation for 12 years and then start your own business. You expect to save and deposit $7,500 a year for the first 6 years (t = 1 through t = 6) and $15,000 annually for the following 6 years (t = 7 through t = 12). The first deposit will be made a year from today. In addition, your grandfather just gave you a $25,000 graduation gift which you will deposit immediately (t = 0). If the account earns 9% compounded annually, how much will you have when you start your business 12 years from now? [20 points]