Grove Corp. has revenues of $1,532,000 resulting in an operating income of $182,000. Average invested assets total $818,000. If sales increase by 10% and the investment level remains constant, what is the investment turnover? (Round your intermediate calculations and final answers to 2 decimal places.) Multiple Choice 1.87 2.06 11.88% 12.58%

Grove Corp. has revenues of $1,532,000 resulting in an operating income of $182,000. Average invested assets total $818,000. If sales increase by 10% and the investment level remains constant, what is the investment turnover? (Round your intermediate calculations and final answers to 2 decimal places.) Multiple Choice 1.87 2.06 11.88% 12.58%

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Description: Subject: Grove Corp. has revenues of $1,532,000 resulting in anoperating income of $182,000. Average invested assetstotal $818,000. If sales increase by 10% and the investmentlevel remains constant, what is the investment turnover?(Round your interme

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter12: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 2STP

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Payne Products had $1.6 million in sales revenues in the most recent year and expects sales growth to be 25% this year. Payne would like to determine the effect of various current assets policies on its financial performance. Payne has $1 million of fixed assets and intends to keep its debt ratio at its historical level of 60%. Payne’s debt interest rate is currently 8%. You are to evaluate three different current asset policies: (1) a restricted policy in which current assets are 45% of projected sales, (2) a moderate policy with 50% of sales tied up in current assets, and (3) a relaxed policy requiring current assets of 60% of sales. Earnings before interest and taxes are expected to be 12% of sales. Payne’s tax rate is 40%. What is the expected return on equity under each current asset level? In this problem, we have assumed that the level of expected sales is independent of current asset policy. Is this a valid assumption? Why or why not? How would the overall risk of the firm vary under each policy?
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Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Stricklers sales last year were 3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the year, and its DSO was 41 days. Its annual cost of goods sold was 1,800,000. The firm had fixed assets totaling 535,000. Stricklers payables deferral period is 45 days. a. Calculate Stricklers cash conversion cycle. b. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. c. Suppose Stricklers managers believe the annual inventory turnover can be raised to 9 times without affecting sale or profit margins. What would Stricklers cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9 for the year?
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