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  • Problem Set 8 Advanced Engineering Economics Fall 2013

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    Each question is worth 5 points. If the 2009 managerial balance sheet instead had $10 million in cash and $66 million in WCR instead of $12 million and $63 million, would the calculated return on invested capital change? Which firm is financed the least by debt? Which firm has the highest ROE? What does the EAT for firm 2 have to be so that its ROE is the same as that of firm 3?

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    Each question is worth 5 points. If the 2009 managerial balance sheet instead had $10 million in cash and $66 million in WCR instead of $12 million and $63 million, would the calculated return on invested capital change? Which firm is financed the least by debt? Which firm has the highest ROE? What does the EAT for firm 2 have to be so that its ROE is the same as that of firm 3?

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    24 views1 page

    Problem Set 8 Advanced Engineering Economics Fall 2013

    Uploaded by

    suhayb_1988
    Each question is worth 5 points. If the 2009 managerial balance sheet instead had $10 million in cash and $66 million in WCR instead of $12 million and $63 million, would the calculated return on invested capital change? Which firm is financed the least by debt? Which firm has the highest ROE? What does the EAT for firm 2 have to be so that its ROE is the same as that of firm 3?

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    Attribution Non-Commercial (BY-NC)
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    Problem Set 8 Advanced Engineering Economics Fall 2013

    Instructions: Credit is given only for correct answers (there will be no partial credit). Each question is worth 5 points.

    Problem 1 Use Exhibit 5.1-5.3 and calculate the following for the year 2009: (A) The return on invested capital using earnings before interest and taxes. (B) The return on capital employed using earnings before interest and taxes. (C) If the 2009 managerial balance sheet instead had $10 million in cash and $66 million in WCR instead of $12 million and $63 million, respectively, would the calculated return on invested capital change ? (D) Calculate the ROE using EBIT. (E) For the changes in (C) would your answer in (D) for ROE be different ?

    Problem 2 Do Problem 7/Chapter 5 and then answer the following questions: (A) (B) (C) (D) (E) (F) (G) (H) (I) (J) Which firm has a negative working capital ? Is it bad to have a negative working capital ? What is the capital employed for each of firms 1-3 ? Which firm is financed the least by debt ? Which firm has the highest ROE ? Which firm has the highest financial multiplier ? Which firm has the highest operating margin ? Which firm has the highest turnover on invested capital ? Is it bad to have a high turnover on invested capital ? What does the EAT for firm 2 have to be so that its ROE is the same as that of firm 3 ?

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