# Investment Calculation

## Sheet2

What is the Sharpe ratio, Treynor ratio, and Jensen’s alpha for each portfolio? (Negative values should be indicated by a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Do not round intermediate calculations. Round your Sharpe ratio answers and Treynor ratio answers to 5 decimal places and Jensen’s alpha answers to 2 decimal places. Omit the “%” sign in your response.) | |||||||||

Portfolio | RP | σP | βP | Portfolio | Sharpe Ratio | Treynor Ratio | Jensen’s Alpha | Cannot figure out the Treynor Jensen’s or Market | |

X | 16.5 | % | 37 | % | 1.40 | X | % | ||

Y | 15.5 | 32 | 1.15 | Y | % | ||||

Z | 7.4 | 22 | .70 | Z | % | ||||

Market | 11.8 | 27 | 1.00 | Market | % | ||||

Risk-free | 5.2 | 0 | 0 |

## Sheet3

A stock has an annual return of 13 percent and a standard deviation of 61 percent. What is the smallest expected loss over the next year with a probability of 5 percent? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.) | |

Smallest expected loss | % |

## Sheet4

A stock has an annual return of 10.4 percent and a standard deviation of 41 percent. What is the smallest expected gain over the next year with a probability of 1 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.) | |

Smallest expected gain | % |

## Sheet5

Problem 13-19 | ||||||

Consider the following information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .97. | ||||||

Year | Fund | Market | Risk-Free | |||

2008 | –20.60 | % | –39.5 | % | 1 | % |

2009 | 25.1 | 21 | 3 | |||

2010 | 13.9 | 13.9 | 2 | |||

2011 | 7.6 | 8.8 | 4 | |||

2012 | –2.10 | –5.2 | 2 | |||

What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.) | ||||||

Sharpe ratio | Need answer | |||||

Treynor ratio | Need answer |

## Sheet6

Problem 13-20 | ||||||

Consider the following information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .95. | ||||||

Year | Fund | Market | Risk-Free | |||

2008 | –19.40 | % | –37.5 | % | 1 | % |

2009 | 25.1 | 20.8 | 4 | |||

2010 | 13.7 | 13.3 | 2 | |||

2011 | 7.2 | 8.4 | 6 | |||

2012 | –1.98 | –4.2 | 2 | |||

Calculate Jensen’s alpha for the fund, as well as its information ratio. (Do not round intermediate calculations. Round your Jensen’s alpha answer to 2 decimal places and Information ratio answer to 4 decimal places. Omit the “%” sign in your response.) | ||||||

Jensen’s alpha | % | Need Answer | ||||

Information ratio | Need Answer |

## Sheet7

Problem 17-3 | ||

You are given the following information for Smashville, Inc. | ||

Cost of goods sold: | $ | 234,000 |

Investment income: | $ | 2,600 |

Net sales: | $ | 397,000 |

Operating expense: | $ | 92,000 |

Interest expense: | $ | 7,400 |

Dividends: | $ | 12,000 |

Tax rate: | 40 | % |

Current liabilities: | $ | 20,000 |

Cash: | $ | 21,000 |

Long-term debt: | $ | 22,000 |

Other assets: | $ | 42,000 |

Fixed assets: | $ | 131,000 |

Other liabilities: | $ | 5,000 |

Investments: | $ | 46,000 |

Operating assets: | $ | 47,000 |

Calculate the gross margin, the operating margin, return on assets, and return on equity. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the “%” sign in your response.) | ||

Gross margin | % | |

Operating margin | % | |

Return on assets | % | Cannot figure this one out? |

Return on equity | % | Cannot figure this one out? |

## Sheet8

Problem 17-6 | |||||

The most recent financial statements for Bradley, Inc., are shown here (assuming no income taxes): | |||||

Income Statement | |||||

Sales | $ | 6,400 | |||

Costs | (4,480 | ) | |||

Net income | $ | 1,920 | |||

Balance Sheet | |||||

Assets | $ | 19,200 | Debt | $ | 9,900 |

Equity | 9,300 | ||||

Total | $ | 19,200 | Total | $ | 19,200 |

Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s sales are projected to be $7,808. What is the external financing needed? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole dollar. Omit the “$” sign in your response.) | |||||

EFN | $ | ||||

Cannot figure out EFN? |

## Sheet9

Problem 17-11 | |||||

The most recent financial statements for Martin, Inc., are shown here: | |||||

Income Statement | |||||

Sales | $ | 29,500 | |||

Costs | -18,000 | ||||

Taxable income | $ | 11,500 | |||

Taxes (34%) | -3,910 | ||||

Net income | $ | 7,590 | |||

Balance Sheet | |||||

Assets | $ | 82,600 | Debt | $ | 30,000 |

Equity | 52,600 | ||||

Total | $ | 82,600 | Total | $82,600 | |

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,165 was paid, and Martin wishes to maintain a constant payout ratio. Next year’s sales are projected to be $33,630. What is the external financing needed? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the “$” sign in your response.) | |||||

EFN | $ | ||||

Cannot figure out EFN? |

## Sheet10

Problem 17-14 | |||

Amounts are in thousands of dollars (except number of shares and price per share): | |||

Kiwi Fruit Company Balance Sheet | |||

Cash and equivalents | $ | 480 | |

Operating assets | 760 | ||

Property, plant, and equipment | 3,000 | ||

Other assets | 165 | ||

Total assets | $ | 4,405 | |

Current liabilities | $ | 980 | |

Long-term debt | 1,375 | ||

Other liabilities | 175 | ||

Total liabilities | $ | 2,530 | |

Paid in capital | $ | 395 | |

Retained earnings | 1,480 | ||

Total equity | $ | 1,875 | |

Total liabilities and equity | $ | 4,405 | |

Kiwi Fruit Company Income Statement | |||

Net sales | $ | 6,700 | |

Cost of goods sold | (4,900 | ) | |

Gross profit | $ | 1,800 | |

Operating expense | (530 | ) | |

Operating income | $ | 1,270 | |

Other income | 160 | ||

Net interest expense | (200 | ) | |

Pretax income | $ | 1,230 | |

Income tax | (250 | ) | |

Net income | $ | 980 | |

Earnings per share | $ | 1 | |

Shares outstanding | 980,000 | ||

Recent price | $ | 43.5 | |

Kiwi Fruit Company Cash Flow Statement | |||

Net income | $ | 980 | |

Depreciation and amortization | 220 | ||

Increase in operating assets | (100 | ) | |

Decrease in current liabilities | (112 | ) | |

Operating cash flow | $ | 988 | |

Net (purchase) sale of property | $ | 200 | |

Increase in other assets | (73 | ) | |

Investing cash flow | $ | 127 | |

Net (redemption) issuance of LTD | $ | (168 | ) |

Dividends paid | (182 | ) | |

Financing cash flow | $ | (350 | ) |

Net cash increase | $ | 765 | |

Calculate the price-book, price-earnings, and price-cash flow ratios for Kiwi Fruit. (Do not round intermediate calculations. Round your answers to 2 decimal places.) | |||

Price-book ratio | Need Answer | ||

Price-earnings ratio | Need Answer | ||

Price-cash flow ratio | Need Answer |

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