FIN 125 Homework Questions Chapters 1-6
Solve for the unknown number of years in each of the following. Present Value $810 Interest Rate 8% Future Value $1,821 Years - ?
10.53
For each of the following, compute the present value. Years 40 Interest Rate 21% Future Value $550,164 Present Value - ?
$268.58
Griffin's Goat Farm, Inc., has sales of $796,000, costs of $327,000, depreciation expense of $42,000, interest expense of $34,000, a tax rate of 21 percent, and paid out $95,000 in cash dividends. The common stock outstanding is 80,000 shares. What is the dividends per share figure?
$1.19 per share
For each of the following, compute the future value. Present Value $7,513 Years 7 Interest Rate 9% Future Value - ?
$13,734.06
First City Bank pays 9 percent simple interest on its savings account balances, whereas Second City Bank pays 9 percent interest compounded annually. If you made a deposit of $7,500 in each bank, how much more money would you earn from your Second City Bank account at the end of eight years?
$14,944.22
You have just made your first $5,500 contribution to your retirement account. Assume you earn a return of 10 percent per year and make no additional contributions. What if you wait 10 years before contributing? Future value - ?
$154,563.40
Wims, Inc., has current assets of $4,900, net fixed assets of $27,300, current liabilities of $4,100, and long-term debt of $10,200. What is the value of the shareholders' equity account for this firm?
$17,900
You are given the following information for Bowie Pizza Co.: Sales = $64,000; Costs = $30,700; Addition to retained earnings = $5,700; Dividends paid = $1,980; Interest expense = $4,400; Tax rate = 22 percent. Calculate the depreciation expense.
$19,054
Griffin's Goat Farm, Inc., has sales of $796,000, costs of $327,000, depreciation expense of $42,000, interest expense of $34,000, a tax rate of 21 percent, and paid out $95,000 in cash dividends. What is the addition to retained earnings?
$215,470
For each of the following, compute the present value. Years 29 Interest Rate 13% Future Value $886,073 Present Value - ?
$25,597.33
Griffin's Goat Farm, Inc., has sales of $796,000, costs of $327,000, depreciation expense of $42,000, interest expense of $34,000, a tax rate of 21 percent, and paid out $95,000 in cash dividends. The common stock outstanding is 80,000 shares. What is the earnings per share figure?
$3.88 per share
Griffin's Goat Farm, Inc., has sales of $796,000, costs of $327,000, depreciation expense of $42,000, interest expense of $34,000, and a tax rate of 21 percent. What is the net income for this firm?
$310,470
For each of the following, compute the present value. Years 4 Interest Rate 7% Future Value $48,318 Present Value - ?
$36,861.57
For each of the following, compute the future value. Present Value $74,381 Years 14 Interest Rate 12% Future Value - ?
$363,508.30
You have just made your first $5,500 contribution to your retirement account. Assume you earn a return of 10 percent per year and make no additional contributions. What will your account be worth when you retire in 45 years? Future value - ?
$400,897.66
For each of the following, compute the future value. Present Value $192,050 Years 16 Interest Rate 6% Future Value - ?
$487,874.54
For each of the following, compute the present value. Years 13 Interest Rate 9% Future Value $16,832 Present Value - ?
$5,490.24
For each of the following, compute the future value. Present Value $2,328 Years 11 Interest Rate 13% Future Value - ?
$8,929.88
Wims, Inc., has current assets of $4,900, net fixed assets of $27,300, current liabilities of $4,100, and long-term debt of $10,200. How much is net working capital?
$800
Solve for the unknown interest rate in each of the following. Present Value $48,000 Years 13 Future Value $185,382 Interest Rate - ?
10.95%
At 6.1 percent interest, how long does it take to double your money? Length of time - ?
11.71
Solve for the unknown interest rate in each of the following. Present Value $181 Years 5 Future Value $317 Interest Rate - ?
11.86%
Solve for the unknown number of years in each of the following. Present Value $560 Interest Rate 7% Future Value $1,389 Years - ?
13.43
At 6.1 percent interest, how long does it take to quadruple it? Length of time - ?
23.41
Solve for the unknown number of years in each of the following. Present Value $21,500 Interest Rate 11% Future Value $430,258 Years - ?
28.71
Solve for the unknown number of years in each of the following. Present Value $18,400 Interest Rate 9% Future Value $289,715 Years - ?
31.99
Solve for the unknown interest rate in each of the following. Present Value $335 Years 17 Future Value $1,080 Interest Rate - ?
7.13%
Solve for the unknown interest rate in each of the following. Present Value $40,353 Years 30 Future Value $531,618 Interest Rate - ?
8.97%
The Harrisburg Store has net working capital of $2,715, net fixed assets of $22,407, sales of $31,350, and current liabilities of $3,908. How many dollars' worth of sales are generated from every $1 in total assets? a) $1.08 b) $1.14 c) $1.19 d) $84 e) $93
a) $1.08
Marcus is scheduled to receive annual payments of $3,600 for each of the next 12 years. The discount rate is 8 percent. What is the difference in the present value if these payments are paid at the beginning of each year rather than at the end of each year? a) $2,170.39 b) $2,511.07 c) $2,021.18 d) $2,027.94 e) $2,304.96
a) $2,170.39
You would like to provide $125,000 a year forever for your heirs. How much money must you deposit today to fund this goal if you can earn a guaranteed 4.5 percent rate of return? a) $2,777,778 b) $2,521,212 c) $2,666,667 d) $2,858,122 e) $2,850,000
a) $2,777,778
Assume you work for an employer who will contribute $60 a week for the next 20 years into a retirement plan for your benefit. At a discount rate of 9 percent, what is this employee benefit worth to you today? a) $28,927.38 b) $27,618.46 c) $29,211.11 d) $25,306.16 e) $25,987.74
a) $28,927.38
A company has net working capital of $1,888. If all its current assets were liquidated, the company would receive $5,819. What are the company's current liabilities? a) $3,931 b) $7,707 c) $7,362 d) $4,875 e) $3,854
a) $3,931
Ivan's, Inc., paid $500 in dividends and $595 in interest this past year. Common stock increase by $205 and retained earnings decreased by $131. What is the net income for the year? a) $369 b) $500 c) $595 d) $800 e) $964
a) $369
Your grandfather left you an inheritance that will provide an annual income for the next 20 years. You will receive the first payment one year from now in the amount of $2,500. Every year after that, the payment amount will increase by 5 percent. What is your inheritance worth to you today if you can earn 7.5 percent on your investments? a) $37,537.88 b) $28,667.40 c) $23,211.00 d) $35,612.20 e) $30,974.92
a) $37,537.88
You are examining a company's balance sheet and find that it has total assets of $20,572, a cash balance of $2,208, inventory of $4,913, current liabilities of $5,829 and accounts receivable of $2,727. What is the company's net working capital? a) $4,019 b) $894 c) $1,811 d) $5,807 e) $14,743
a) $4,019
Disturbed, Inc., had the following operating results for the past year: sales = $22,561; depreciation = $1,390; interest expense = $1,120; costs = $16,530. The tax rate for the year was 35 percent. What was the company's operating cash flow? a) $4,799 b) $3,014 c) $3,521 d) $7,263 e) $2,289
a) $4,799
Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of $218,000, $224,000, and $238,000 over the next three years, respectively. After that time, they feel the business will be worthless. If the desired rate of return is 14.5 percent, what is the maximum Southern Tours should pay today to acquire Holiday Vacations? a) $519,799.59 b) $538,615.08 c) $545,920.61 d) $595,170.53 e) $538,407.71
a) $519,799.59
A company has $1,315 in inventory, $4,746 in net fixed assets, $610 in accounts receivable, $262 in cash, $554 in accounts payable, $926 in long-term debt, and $5,341 in equity. What are the company's total assets? a) $6,933 b) $12,274 c) $7,922 d) $7,487 e) $10,087
a) $6,933
Your broker is offering 1.2 percent compounded daily on its money market account. If you deposit $7,500 today, how much will you have in your account 15 years from now? a) $8,979.10 b) $9,714.06 c) $8,204.50 d) $9,336.81 e) $9,414.14
a) $8,979.10
Oil Creek Auto has sales of $3,340, net income of $274, net fixed assets of $2,600, and current assets of $920. The firm has $430 in inventory. What is the common-size statement value of inventory? a) 12.22 percent b) 44.16 percent c) 16.54 percent d) 13.36 percent e) 46.74
a) 12.22 percent
You have just deposited $8,500 into an account that promises to pay you an annual interest rate of 6 percent each year for the next 6 years. You will leave the money invested in the account and 10 years from today, you need to have $19,320 in the account. What annual interest rate must you earn over the last 4 years to accomplish this goal? a) 12.51% b) 11.55% c) 11.37% d) 14.07% e) 10.01%
a) 12.51%
JK Motors has sales of $96,400, costs of $53,800, interest paid of $2,800, and depreciation of $7,100. The tax rate is 21 percent. What is the value of the cash coverage ratio? a) 15.21 b) 12.14 c) 17.27 d) 23.41 e) 12.68
a) 15.21
You are paying an EAR of 16.78 percent on your credit card. The interest is compounded monthly. What is the annual percentage rate on this account? a) 15.61 percent b) 13.97 percent c) 14.98 percent d) 15.75 percent e) 16.35 percent
a) 15.61 percent
Bernice's has $823,000 in sales. The profit margin is 4.2 percent and the firm has 7,500 shares of stock outstanding. The market price per share is $16.50. What is the price-earnings ratio? a) 3.58 b) 3.98 c) 4.32 d) 3.51 e) 4.27
a) 3.58
You want to borrow $27,500 and can afford monthly payments of $650 for 48 months, but no more. Assume monthly compounding. What is the highest APR rate you can afford? a) 6.33 percent b) 6.67 percent c) 5.84 percent d) 7.01 percent e) 7.18 percent
a) 6.33 percent
TJ's has annual sales of $813,200, total debt of $171,000, total equity of $396,000, and a profit margin of 5.78 percent. What is the return on assets? a) 8.29 percent b) 6.48 percent c) 9.94 percent d) 7.78 percent e) 8.02 percent
a) 8.29 percent
Which one of the following accurately describes the three parts of the DuPont identity? a) Equity multiplier, profit margin, and total asset turnover b) Debt-equity ratio, capital intensity ratio, and profit margin c) Operating efficiency, equity multiplier, and profitability ratio d) Return on assets, profit margin, and equity multiplier e) Financial leverage, operating efficiency, and profitability ratio
a) Equity multiplier, profit margin, and total asset turnover
You are considering a project with cash flows of $16,500, $25,700, and $18,000 at the end of each year for the next three years, respectively. What is the present value of these cash flows, given a discount rate of 7.9 percent? a) $54,877.02 b) $51,695.15 c) $55,429.08 d) $46,388.78 e) $53,566.67
b) $51,695.15
The Distribution Point plans to save $2,000 a month for the next 3 years for future emergencies. The interest rate is 4.5 percent compounded monthly. The first monthly deposit will be made today. What would today's deposit amount have to be if the firm opted for one lump sum deposit that would yield the same amount of savings as the monthly deposits after 3 years? a) $70,459.07 b) $67,485.97 c) $69,068.18 d) $69,333.33 e) $67,233.84
b) $67,485.97
Your credit card company charges you 1.15 percent interest per month. What is the APR? a) 18.92 percent b) 13.80 percent c) 15.95 percent d) 17.25 percent e) 14.71 percent
b) 13.80 percent
Which one of the following is a source of cash? a) Repurchase of common stock b) Acquisition of debt c) Purchase of inventory d) Payment to a supplier e) Granting credit to a customer
b) Acquisition of debt
Both you and your older brother would like to have $23,000 in 15 in years. Because of your success in this class, you feel that you are a more savvy investor than your brother and will be able to earn an annual return of 11 percent compared to your brother's 9.7 percent. How much less than your brother will you have to deposit today? a) $1,894.99 b) $1,032.39 c) $929.15 d) $836.24 e) $1,161.44
c) $929.15
Which one of the following best states the primary goal of financial management? a) Maximize current dividends per share b) Maximize the current value per share c) Increase cash flow and avoid financial distress d) Minimize operational costs while maximizing firm efficiency e) Maintain steady growth while increasing current profits
b) Maximize the current value per share
Which one of the following is a primary market transaction? a) Sale of currently outstanding stock by a dealer to an individual stock by a dealer to an individual investor b) Sale of a new share of stock to an individual investor c) Stock ownership transfer from one shareholder to another shareholder d) Gift of stock from one shareholder to another shareholder e) Gift of stock by a shareholder to a family member
b) Sale of a new share of stock to an individual investor
Which one of the following is a working capital management decision? a) What type(s) of equipment is (are) needed to complete a current project? b) Should the firm pay cash for a purchase or use the credit offered by the supplier? c) What amount of long-term debt is required to complete a project? d) How many shares of stock should the firm issue to fund an acquisition? e) Should a project be accepted?
b) Should the firm pay cash for a purchase or use the credit offered by the supplier?
RJ's has a fixed asset turnover rate of 1.26 and a total asset turnover rate of .97. Sam's has a fixed asset turnover rate of 1.31 and a total asset turnover rate of .94. Both companies have similar operations. Based on this information, RJ's must be doing which one of the following? a) Utilizing its fixed assets more efficiently than Sam's b) Utilizing its total assets more efficiently than Sam's c) Generating $1 in sales for every $1.26 in net fixed assets d) Generating $1.26 in net income for every $1 in net fixed assets e) Maintaining the same level of current assets as Sam's
b) Utilizing its total assets more efficiently than Sam's
An example of a capital budgeting decisions is deciding: a) how many shares of stock to issue. b) whether or not to purchase a new machine for the production line. c) how to refinance a debt issue that is maturing. d) how much inventory to keep on hand. e) how much money should be kept in the checking account.
b) whether or not to purchase a new machine for the production line.
Troy will receive $7,500 at the end of Year 2. At the end of the following two years, he will receive $9,000 and $12,500, respectively. What is the future value of these cash flows at the end of Year 6 if the interest rate is 8 percent? a) $38,418.80 b) $32,907.67 c) $36,121.08 d) $39,010.77 e) $33,445.44
c) $36,121.08
A preferred stock pays an annual dividend of $5.20. What is one share of this stock worth today if the rate of return is 10.44 percent? a) $51.48 b) $41.18 c) $49.81 d) $39.87 e) $42.90
c) $49.81
A firm has common stock of $94, paid-in surplus of $310, total liabilities of $430, current assets of $430, and net fixed assets of $640. What is the amount of shareholder's equity? a) $834 b) $210 c) $640 d) $1,070 e) $550
c) $640
Lani's generated net income of $911, depreciation expense was $47, and dividends paid were $25. Accounts payables increased by $15, accounts receivables increased by $28, inventory decreased by $14, and net fixed assets decreased by $8. There was no interest expense. What was the net cash flow from operating activity? a) $776 b) $865 c) $959 d) $922 e) $985
c) $959
BL Industries has ending inventory of $302,800, annual sales of $2.33 million, and annual cost of goods sold of $1.41 million. On average, how long did a unit of inventory sit on the shelf before it was sold? a) 47.43 days b) 22.18 days c) 78.38 days d) 61.78 days e) 83.13 days
c) 78.38 days
The DuPont identity can be used to help managers answer which of the following questions related to a company's operations? I. How many sales dollars are being generated per each dollar of assets? II. How many dollars of assets have been acquired per each dollar in shareholders' equity? III. How much net profit is being generating per dollar of sales? IV. Does the company have the ability to meet its debt obligations in a timely manner? a) I and III only b) II and IV only c) I, II, and III only d) II, III, and IV only e) I, II, III, and IV
c) I, II, and III only
The growth of both sole proprietorships and partnerships is frequently limited by the firm's a) double taxation b) bylaws c) inability to raise cash d) limited liability e) agency problems
c) inability to raise cash
Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction a) took place in the primary market b) occurred in a dealer market c) was facilitated in the secondary market d) involved a proxy e) was a private placement
c) was facilitated in the secondary market
Sara wants to establish a trust fund to provide $75,000 in scholarships each year and earn a fixed 6.15 percent rate of return. How much money must she contribute to the fund assuming that only the interest income is distributed? a) $987,450 b) $1,478,023 c) $1,333,333 d) $1,219,512 e) $1,500,000
d) $1,219,512
Green Yard Care has net income of $62,300, a tax rate of 21 percent, and a profit margin of 6.7 percent. Total assets are $1,100,500 and current assets are $328,200. How many dollars of sales are being generated from every dollar of net fixed assets? a) $2.83 b) $1.37 c) $0.84 d) $1.20 e) $1.23
d) $1.20
Duke's Garage has cash of $68, accounts receivable of $142, accounts payable of $235, and inventory of $318. What is the value of the quick ratio? a) 2.25 b) 0.53 c) 0.71 d) 0.89 e) 1.35
d) 0.89
You currently have $5,400. First United Bank will pay you an annual interest rate of 8.9, while Second National Bank will pay you an annual interest rate of 10. How many fewer years must you wait for your account value to grow to $13,900 at Second National Bank? a) 1.06 years b) 1.08 years c) 1.32 years d) 1.17 years e) 1.40 years
d) 1.17 years
Coulter Supply has a total debt ratio of .46. What is the equity multiplier? a) 0.89 b) 1.17 c) 1.47 d) 1.85 e) 2.17
d) 1.85
An annuity that pays $12,500 a year at an annual interest rate of 5.45 percent costs $150,000 today. What is the length of the annuity time period? a) 25 years b) 18 years c) 15 years d) 20 years e) 22 years
d) 20 years
The tax rates for a particular year are shown below: $0 - 50,000 - 15% 50,001 - 75,000 - 25% 75,001 - 100,000 - 34% 100,001 - 335,000 - 39% What is the average tax rate for a firm with taxable income of $129,513? a) 36.97% b) 28.56% c) 39.00% d) 26.07% e) 20.00%
d) 26.07%
Which one of the following ratios is a measure of a firm's liquidity? a) Cash coverage ratio b) Profit margin c) Debt-equity ratio d) Quick ratio e) NWC turnover
d) Quick ratio
Capital structure decisions include determining: a) which one of two projects to accept. b) how to allocate investment funds to multiple projects. c) the amount of funds needed to finance customer purchases of a new product. d) how much debt should be assumed to fund a project. e) how much inventory will be needed to support a project.
d) how much debt should be assumed to fund a project
Financial managers should primarily focus on the interests of a) stakeholders b) the vice president of finance c) their immediate supervisor d) shareholders e) the board of directors
d) shareholders
Waldo expects to save the following amounts: Year 1 = $50,000; Year 2 = $28,000; Year 3 = $12,000. If he can earn an average annual return of 10.5 percent, how much will he have saved in this account exactly 25 years from the time of the first deposit? a) $1,172,373 b) $935,334 c) $806,311 d) $947,509 e) $1,033,545
e) $1,033,545
Canine Supply has sales of $2,800, total assets of $1,900, and a debt-equity ratio of .5. Its return on equity is 15 percent. What is the net income? a) $210 b) $130 c) $240 d) $350 e) $190
e) $190
Sue just purchased an annuity that will pay $24,000 a year for 25 years, starting today. What was the purchase price if the discount rate is 8.5 percent? a) $241,309 b) $245,621 c) $251,409 d) $258,319 e) $266,498
e) $266,498
You just obtained a loan of $16,700 with monthly payments for four years at 6.35 percent interest, compounded monthly. What is the amount of each payment? a) $387.71 b) $391.40 c) $401.12 d) $419.76 e) $394.89
e) $394.89
Frank's Used Cars has sales of $807,200, total assets of $768,100, and a profit margin of 6.68 percent. The firm has a total debt ratio of 54 percent. What is the return on equity? a) 13.09 percent b) 12.04 percent c) 11.03 percent d) 8.56 percent e) 15.26 percent
e) 15.26 percent
What is the EAR of 14.9 percent compounded continuously? a) 15.59 percent b) 15.62 percent c) 15.69 percent d) 15.84 percent e) 16.07 percent
e) 16.07 percent
Hungry Lunch has net income of $73,402, a price-earnings ratio of 13.7, and earnings per share of $.43. How many shares of stock are outstanding? a) 13,520 b) 12,460 c) 165,745 d) 171,308 e) 170,702
e) 170,702
Which one of the following statements is correct? a) If the total debt ratio is greater than .50, then the debt-equity ratio must be less than 1.0. b) Long-term creditors would prefer the times interest earned ratio be 1.4 rather than 1.5. c) The debt-equity ratio can be computed as 1 plus the equity multiplier. d) An equity multiplier of 1.2 means a firm has $1.20 in sales for every $1 in equity. e) An increase in the depreciation expense will not affect the cash coverage ratio.
e) An increase in the depreciation expense will not affect the cash coverage ratio.
Chris has three options for settling an insurance claim. Option A will provide $1,500 a month for 6 years. Option B will pay $1,025 a month for 10 years. Option C offers $85,000 as a lump sum payment today. The applicable discount rate is 6.8 percent, compounded monthly. Which option should Chris select, and why, if he is only concerned with the financial aspects of the offers? a) Option A: It provides the largest monthly payment. b) Option B: It pays the largest total amount. c) Option C: It is all paid today. d) Option B: It pays the greatest number of payments. e) Option B: It has the largest value today.
e) Option B: It has the largest value today.
Which one of the following parties has ultimate control of a corporation? a) Chairman of the board b) Board of directors c) Chief executive officer d) Chief operating officer e) Shareholders
e) Shareholders
The decision to issue additional shares of a stock is an example of: a) working capital management b) a net working capital decision c) capital budgeting d) a controller's duties e) a capital structure decision
e) a capital structure decision
The accounts payable of a company changed from $136,100 to $104,300 over the course of a year. This change represents a a) use of $31,800 of cash as investment activity b) source of $31,800 of cash as an operating activity c) source of $31,800 of cash as a financing activity d) source of $31,800 of cash as an investment activity e) use of $31,800 of cash as an operating activity
e) use of$31,800 of cash as an operating activity