EXAM 1 - FIN OF FIRM - Real EXAM FSU

41. You borrow $165,000 to buy a house. The mortgage rate is 7.5 percent and the loan period is 30 years. Payments are made monthly. If you pay the mortgage according to the loan agreement, how much total interest will you pay? A. $206,408 B. $229,079 C. $250,332 D. $264,319 E. $291,406

Answer Of Finding PMT PMT = 1,153,704 (PMT * (RATE/12)) - PV

14. Your grandmother has promised to give you $5,000 when you graduate from college. She is expecting you to graduate two years from now. What happens to the present value of this gift if you delay your graduation by one year and graduate three years from now? A. remains constant B. increases C. decreases D. becomes negative E. cannot be determined from the information provided

C. decreases

A firm has net working capital of $640. Long-term debt is $4,180, total assets are $6,230, and fixed assets are $3,910. What is the amount of the total liabilities? A. $2,050 B. $2,690 C. $4,130 D. $5,590 E. $5,860

Current assets = $6,230 - $3,910 = $2,320 Current liabilities = $2,320 - $640 = $1,680 Total liabilities = $1,680 + $4,180 = $5,860

Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital? A. -$100 B. $300 C. $600 D. $1,700 E. $1,800

Net working capital = $4,900 - $3,200 - $1,400 = $300

36. You would like to give your daughter $75,000 towards her college education 17 years from now. How much money must you set aside today for this purpose if you can earn 8 percent on your investments? A. $18,388.19 B. $20,270.17 C. $28,417.67 D. $29,311.13 E. $32,488.37

B. $20,270.17

54. Andre's Bakery has sales of $687,000 with costs of $492,000. Interest expense is $26,000 and depreciation is $42,000. The tax rate is 35 percent. What is the net income? A. $42,750 B. $44,450 C. $82,550 D. $86,450 E. $124,550

C. $82,550

68. You expect to receive $9,000 at graduation in 2 years. You plan on investing this money at 10 percent until you have $60,000. How many years will it be until this occurs? A. 18.78 years B. 19.96 years C. 21.90 years D. 23.08 years E. 25.00 years

21.90 Find N = 19.90 +2

You have just received notification that you have won the $1.4 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday, 70 years from now. The appropriate discount rate is 8 percent. What is the present value of your winnings? A. $4,288.16 B. $6,404.20 C. $15,309.91 D. $23,333.33 E. $25,000.00

70= N , FV=1.4 , I/Y = 8 , CMT FV =B. $6,404.20

103. John's Auto Repair just took out an $89,000, 10-year, 8 percent, interest-only loan from the bank. Payments are made annually. What is the amount of the loan payment in year 10? A. $7,120 B. $8,850 C. $13,264 D. $89,000 E. $96,120

E. $96,120

. You just received $225,000 from an insurance settlement. You have decided to set this money aside and invest it for your retirement. Currently, your goal is to retire 25 years from today. How much more will you have in your account on the day you retire if you can earn an average return of 10.5 percent rather than just 8 percent? A. $417,137 B. $689,509 C. $1,050,423 D. $1,189,576 E. $1,818,342

if interest rate is 10.5% FV= 225000x1.105^25= $2730482.948 if interest rate is 8%, FV= 225000x1.08^25= $1540906.919 difference between the two, 2730482.948-1540906.919= D. $1,189,576

98. Suppose you are given the following information for Bayside Bakery: sales = $30,000; costs = $15,000; addition to retained earnings = $4,221; dividends paid = $469; interest expense = $1,300; tax rate = 30 percent. What is the amount of the depreciation expense? A. $4,820 B. $5,500 C. $7,000 D. $8,180 E. $9,500

Depreciation = Sales - Costs - EBIT net income = dividends paid + addition to Retained earnings 469+ 4,221 = 4,690 EBT= net income/ taxes 4,690/(1-.30)= 6,700 EBIT = EBT + interest expense 6,700+ 1,300 = 8,000 Depreciation = 30,000 - 15,000 - 8,000 = 7,000