Current Ratio = Current Assets / Current LiabilitiesQuick Ra…

Current Ratio = Current Assets / Current LiabilitiesQuick Ratio = (Current Assets – Inventory) / Current LiabilitiesInventory Turnover Ratio = Cost of Revenue / InventoryDays in Inventory = 365 / Inventory Turnover RatioReceivables Turnover Ratio = Revenue / Accounts ReceivableDays Sales Outstanding = 365 / Receivables Turnover RatioPayables Turnover Ratio = Cost of Revenue / Accounts PayableDays Payables Outstanding = 365 / Payables Turnover RatioDebt/Equity = Total Debt / (Shares Outstanding * Price) (Market Value Approach)Debt/Equity = Total Liabilities / Total Equity (Book Value Approach) Interest Coverage = (EBIT + Depreciation) / Interest ExpenseTotal Debt Ratio = Total Liabilities / Total AssetsProfit Margin = Net Income / SalesReturn on Assets = Net Income / Total AssetsReturn on Equity = Net Income / Total EquityEarnings Per Share = Net Income / Shares OutstandingPrice/Earnings = Market Price of Share / Earnings per ShareMarket to Book = (Shares Outstanding x Market Price) / Book Value of EquityEffective Tax Rate = Tax Expense / Earnings before TaxesCash Conversion Cycle = Days Sales Out. + Days in Inventory – Days Payable Out.Total Assets Turnover = Sales / Total AssetsNet Working Capital = Cash + Accounts Receivable + Inventory – Accounts PayableOperating Cash Flow = (Sales – Expenses – Depreciation)(1 – Tax Rate) + DepreciationSustainable Growth Rate = (1 – Payout Ratio) x Return on Equity

You are considering the purchase of a new piece of equipment…

You are considering the purchase of a new piece of equipment, “Model A”, that costs $600,000, and will be depreciated using four-year straight line depreciation over the course of the four year project.  The equipment requires 10,000 in annual maintenance, and will be sold for $80,000 at the end of four years.  If your effective tax rate is 20%, what will be the operating cash flow in year 2?  Your WACC is 10% on equipment purchases.  

As an alternative, you could purchase “Model B” that costs $…

As an alternative, you could purchase “Model B” that costs $500,000, and will be depreciated using four-year, straight-line depreciation.  You will have no maintenance cost, and the equipment will be sold for $60,000 at the end of three years.  If your effective tax rate is 20%, what is the net salvage value of this equipment at the end of three years?  Your WACC is 10% on equipment purchases.