Problem1(2 points) Chiellini Company has a current ratio 1.6, and a quick ratio

Question

Problem1(2 points) Chiellini Company has a current ratio 1.6, and a quick ratio equal to 1.2. The company has $3 million in sales and its current liabilities are $990,000. The company has $10,000,000 of retained eamings. What is the company's inventory turnover ratio? Problem 2 (2 points) A real estate investment has the expected end-of-year cash flows given in the table below: Cash Flow in $ 14.000 28,000 52,000 39,000 Year 35.000 The discount rate is 10 percent a) What is the investment's present value? b) What is the investment s future value

Explanation / Answer

Solution to Problem 1:

Current Ratio = Current Assets/ Current liabilities                                   

1.6 = Current Assets/ $99000

Current Assets =$1584000

Quick Ratio = Current Assets- Inventories/ Current liabilities

1.2 = $1584000- Inventories/ $99000

$118800 = $1584000- Inventories

Inventories = $1584000- $118800

Inventories = $1465200

Inventory Turnover Ratio = Sales / Inventory

Inventory Turnover Ratio = $3000000/ $1465200

Inventory Turnover Ratio = 2.0475

Solution to Problem 2 :

FV = $(14000+28000+52000+39000-35000)

FV = $98000

PV =

Year CF in $ DF @10% Discounted Value in $ 1 14000 0.909 12726 2 28000 0.826 23128 3 52000 0.751 39052 4 39000 0.683 26637 5 -35000 0..621 21735 Total 79808

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