Finance exams 1-3

Various items from the Perril Company's Income statement for the year ending December 31, 2005 are listed below: Interest expense = 39 Depreciation = 81 Taxes = 49 Dividends paid = 15 Beginning inventory = 129 Gross sales = 917 Materials purchases = 600 Operating expenses (excluding depreciation) = 246 Returns and allowances = 57 Ending inventory = 149 Compute Net income (Record your answer without a dollar sign, without commas, without spaces and if your answer is negative, put a minus sign (i.e., -) before your answer with no spaces between the minus sign and the number). Answer:

-135 work(excel)

If net fixed assets in 2011 = $ 19,155 , if net fixed assets in 2012 = $26,910 , if depreciation on the 2011 income statement is $703 and if depreciation on the 2012 income statement is $978 , what would be Net Cash Flow from Investing Activities on the 2012 statement of cash flows (if these were the only long term account changes for the company)? Enter your answer without a dollar sign and without commas. Also, since NCF from Investing Activities is ALWAYS (in FI 3300) as cash outflow, be sure to put a negative sign before your answer with no space between the sign and the number. Answer: -8,733

-8733

Balance sheet On its 2011 income statement, Richardson Inc. reported net income of $1,150 and on its 2012 income statement, the company reported net income of $1,620. Based on this information (and given the company's balance sheets for 2011 and 2012 in the chart above), compute Net Cash Flows from Investing Activities for Richardson in 2012.

-9000

For each of the following, determine whether the account would appear on an income statement or a balance sheet: (note that this is an all or nothing question - you must answer items correctly to receive credit) __1__Marketable securities __1__Accumulated depreciation__ 2__Taxes paid__ 1__Cash__ 1__Additional paid in capital__ 2__Cost of goods sold__ 2_Net revenueterm-17 1__Miscellaneous accruals __1__Retained earnings 1.Balance Sheet2.Income Statement

.

Suppose that D + E = A, that N/A = 0.19 and that D/A = 0.23 . Solve for N/E. (Round your answer to two decimal places. For example, record 0.8373 as .84). Answer:

.25

If a firm has a debt ratio (i.e., D/A) of 40%, what is the firm's debt to equity (i.e., D/E) ratio? Record your answer as a ratio rounded to 2 decimal places. For example, record D/E = 100/180 = 0.56 or D/E = 300/125 = 2.40. Answer:

0.67 Solve:

Pharsalus Inc. just paid a dividend (i.e., D0) of $ 1.42 per share. This dividend is expected to grow at a rate of 2.2 percent per year forever. The appropriate discount rate for Pharsalus's stock is 15.8 percent. What is the price of the stock? (Round your answer to 2 decimal places and record your answer without dollar sign or commas). Answer: 10.67

10.67 Solve

Given the following information for the Duke Tire Company, find ROA (Return on Assets): Debt ratio (D/A) = 0.27 (expressed as a decimal) Total asset turnover ratio (S/A) = 1.79 Sales (S) = $10,000 Net profit margin = 0.06 (expressed as a decimal) Record your answer as a percent rounded to one decimal place, but do not include a percent sign in your answer. For example, record .347924 = 34.7924% as 34.8. Answer:

10.7 Solve

Given the following information for the Duke Tire Company, find the firm's debt ratio (i.e., total liabilities / total assets): ROE (N/E) = 0.27 (expressed as a decimal) Total asset turnover ratio (S/A) = 3.4 Net profit margin (N/S) = 0.07 (expressed as a decimal) Record your answer as a percent rounded to one decimal place, but do not include a percent sign in your answer. For example, record .347924 = 34.7924% as 34.8. Answer: incorrect answer on exam(rX83.7X

11.9 correct answer

If the returns on Stock A are as follows: Year 1 return = 5 %, Year 2 return = 40 %, Year 3 return = -1 %, Year 4 return = 17 %, and Year 5 return = 0 %, what is the average return for Stock A over this 5 year period? (Record your answer as a percent rounded to 1 decimal place. If your answer is negative, place a minus sign before your number with no space between the sign and the number. For example, record negative 14.284% as -14.3). Answer:

12.2 Solve add/#periods

Given the financial data and ratios listed below for the Atlanta Company, determine what Atlanta Company recorded as Net Fixed Assets on its 2012 balance sheet. (Record your answer without a dollar sign, without commas, and if the answer is a negative number, use the minus sign followed by the number with no spaces between the minus sign and the number - thus record $3,443 as 3443 or negative 18 as -18). . Sales $10,000 Gross profit margin 40% Inventory turnover ratio 4 times Net profit margin 8% Average collection period 45 days Return on equity (ROE) 50% Return on assets (ROA) 20% Cash $250 Current ratio 2.5 Accounts payable days 30 days Notes: Of total sales, 80 percent are on credit; 20% are cash sales. Use COGS for inventory turnover ratio. Assume a 360 day year. Atlanta Company Balance Sheet for Year Ending December 31, 2012 Cash _________ Accounts receivable _________ Inventory _________ Net fixed assets _________ Total assets _________ Notes payable _________ Accounts payable _________ Long-term debt _________ Equity _________ Total liab. & equity _________ Answer:

1250 solve:

Thompson, Inc. has Return on Equity (ROE) = 22 percent and an equity multiplier = 1.6 . Compute Thompson's Return on Assets (ROA). (Record your answer as a percent rounded to one decimal place but do not include the percent sign in your answer. Thus, record .32184 =32.1% as 32.1). Answer:

13.8 22/1.6 Solve:

The stock of Supergro Inc. is expected to grow at an annual rate of 28% for the next 2 years, after which growth will return to the normal constant growth rate of 8%. If the last dividend paid (that is, D0) was $2.00 and the required rate of return on stocks of this risk class is 16%, what is the price of the stock today? $32.88 $44.25 $79.79 $43.11 $37.52

37.52 solve

A firm is evaluating a project with an initial cost of $ 625,208 and annual cash inflows of $ 278,326 per year (first cash flow to be received exactly one year from today) for each of the next 5 years. If the cost of capital for this project is 12 %, what is this project's NPV? Round your answer to 2 decimal places and record without a dollar sign and without any commas. If your answer is a negative value, enter a minus sign before your number with no space between the sign and the number. Answer:

378,094.94 pmt278326 n=5 i=12 cpt pv =answer -625208=378094.94

Rippard's has a debt ratio of 28 percent, a total asset turnover ratio of 1.3 and a return on equity (ROE) of 71 percent. Compute Rippard's net profit margin. (Record your answer as a percent rounded to one decimal place but do not include the percent sign in your answer. Thus, record .32184 =32.1% as 32.1). Answer:

39.3

If net income in 2012 = $661 , and if the following changes occur between 2011 and 2012, compute Net Cash Flow from Operating Activities for 2012: Accounts receivable change from $127 to $365 Gross fixed assets change from $1324 to $1651 Accruals change from $387 to $115 Inventory changes from $367 to $317 Retained earnings changes from $8243 to $8321 Accounts payable change from $215 to $307 Accumulated depreciation changes from ($400) to ($500)

393

Given that x + 2y = 4 and x - 4y = 4 , solve for x. (Round your answer to one decimal place - that is, record 3.48 as 3.5 - and if your answer is a negative number, place a minus sign before the number iwth no space between the minus sign and the number. That is, record negative 1.38 as -1.4). Answer:

4 Solve:

Cold Boxes Ltd. has 100 bonds outstanding (maturity value = $1,000). The nominal required rate of return on these bonds is currently 10 percent (Kd), and interest is paid semiannually. The bonds mature in 5 years, and their current market value is $768 per bond. What is the annual coupon interest rate? 8% 6% 4% 2% 0%

4% Solve:

Progress corp has a return on assets of 12% when the firm has total assets if 3500000 the companies debt ratio is 30% progress corps Net income is $

420,000 Solve For calculation of Progress Corp's net income, we need to use the formula of return on assets, return on assets = net income / total assets 30% = net income / $3,500,000 net income = 3,500,000*30% = $420,000

BS19 On its 2011 income statement, Richardson Inc. reported net income of $1,150 and on its 2012 income statement, the company reported net income of $2,220. Based on this information (and given the company's balance sheets for 2011 and 2012 in the chart above), compute Net Cash Flows from Financing Activities for Richardson in 2012.

4680

Mitchel, Inc. has a debt ratio of 13 percent and ROA = 42 percent. Compute Mitchel's Return on Equity (ROE). (Record your answer as a percent rounded to one decimal place but do not include the percent sign in your answer. Thus, record .32184 =32.1% as 32.1). Answer:

48.3 42/.87 work:

Three years ago, Jameson and Co. issued 20-year coupon bonds. The yield to maturity at the time of issuance was 5 percent and the bonds sold at par. The bonds are currently selling at 90 percent of par value. What is the current yield to maturity for these bonds? [Assume that the coupon is paid annually]. (Round your answer to 2 decimal places and record as a percent but without a percent sign. For example, record 18.3893 5.54 % as 18.39).

5.95 Solve FV 1000 pv 900 pmt 50 N=17(20-3) cpt I selling at par ytm =coupon rate

If a firm's net profit margin is 5% and its total asset turnover is 1.2 times, its return on assets is: 3.0% 4.8% 5.4% 6.0% 8.0%

6 1.2*.06

Jennings inc reported net income of $9,412,600 for the fiscal year ending December 31 year 2. if Jennings reported retained earnings of $43,886,600 for year 1 and retained earnings of $46,920,100 for year 2, what total amount of dividends did Jennings pay out to its stockholders in year 2.

6,379,100 a. $6,379,100: $9,412,600- ($46,920,100- $43,886,600)

USE THE DATA BELOW TO ANSWER QUESTIONS 29, 30 AND 31 - THE DATA WILL BE REPEATED FOR EACH OF THE QUESTIONS, BUT IT IS IDENTICAL FOR EACH. Given the financial data and ratios listed below for the Atlanta Company, determine what Atlanta Company recorded as Notes payable on its 2012 balance sheet. (Record your answer without a dollar sign, without commas, and if the answer is a negative number, use the minus sign followed by the number with no spaces between the minus sign and the number - thus record $3,843 as 3843 or negative 18 as -18). . Sales $10,000 Gross profit margin 40% Inventory turnover ratio 4 times Net profit margin 8% Average collection period 45 days Return on equity (ROE) 50% Return on assets (ROA) 20% Cash $250 Current ratio 2.5 Accounts payable days 30 days Notes: Of total sales, 80 percent are on credit; 20% are cash sales. Use COGS for inventory turnover ratio. Assume a 360 day year. Atlanta Company Balance Sheet for Year Ending December 31, 2012 Cash _________ Accounts receivable _________ Inventory _________ Net fixed assets _________ Total assets _________ Notes payable _________ Accounts payable _________ Long-term debt _________ Equity _________ Total liab. & equity _________ Answer:

600 SOLVE!!!

Quigley, Inc. purchased a machine 2 years ago for $800,000. The machine is being depreciated on a straight-line basis to a salvage value of $100,000 over its estimated useful life of 7 years. What is the current book value of this machine? $600,000 $500,000 $400,000 $200,000 $100,000

600,000

Compute the price of a $1,000 par value, 11 percent (semi-annual payment) coupon bond with 25 years remaining until maturity assuming that the bond's yield to maturity is 17 percent? (Round your answer to 2 decimal places and record your answer without dollar sign or commas). Answer: 653.03

653.03 Solve

Calculate the current price of a $5,000 par value bond that has a coupon rate of 13 percent, pays coupon interest quarterly (i.e., 4 times per year), has 16 years remaining to maturity, and has a current yield to maturity (discount rate) of 8 percent. (Round your answer to 2 decimal places and record without dollar sign or commas). Answer:

7,245.09

If 21 + 9y - 4 = 4 + 14y - 24, what is y? (Solve for y as a decimal and record your answer rounded to 1 decimal place. Also, if y is a negative value, put a negative sign before your number with no space between the sign and the number). Answer:

7.4 :

According to Martin's balance sheet, the company's assets total $26.5 million. The company has $8 million cash and is owed $5 million by its customers. It also has $3 million of goods on hand. Martin's net plant and equipment is worth $10 million and has $500,000 worth of intangibles. The company's current liabilities are $2 million. What is Martin's current ratio? 5.25 8.00 9.25 13.25 There is not enough information given to answer this question.

8 16/2 Current Asset/CL

Calculate the current price of a $1,000 par value bond that has a coupon rate of 8 percent, pays coupon interest annually, has 23 years remaining to maturity, and has a current yield to maturity (discount rate) of 10 percent. (Round your answer to 2 decimal places and record without dollar sign or commas). Answer:

822.34 Solve:

Calculate the current price of a $1,000 par value bond that has a coupon rate of 12 percent, pays coupon interest semi-annually, has 19 years remaining to maturity, and has a current yield to maturity (discount rate) of 14 percent. (Round your answer to 2 decimal places and record without dollar sign or commas). Answer:

868.07

A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The equilibrium price of the bond today will be __________ if the coupon rate is 8%. $922.78 $924.16 $1,075.80 $1,077.20 none of the above

922.78 Solve:

If interest rates fall from 8 percent to 7 percent, which of the following bonds will have the largest percentage increase in its value? A 10-year zero-coupon bond. A 10-year bond with a 10 percent semiannual coupon. A 10-year bond with a 10 percent annual coupon. A 5-year zero-coupon bond. A 5-year bond with a 12 percent annual coupon.

A 10 yeaar zero coupon bond Why:

In the Statement of Cash Flows, a decrease in accounts payable would be recorded as: A cash flow from operating activities. A cash flow from investing activities. A cash flow from financing activities. This item is not a cash flow. This item would not be recorded on the statement of cash flows.

A cash flow from operating activities

For a retailer, items that have been purchased from a supplier on credit (that is, purchased but not yet paid for) are called: Inventory Accounts receivable Accruals Accounts payable Cost of goods sold

Accounts payable

Which of the following statements is most correct? All else equal, if a bond's yield to maturity increases, its price will fall. All else equal, if a bond's yield to maturity increases, its current yield will fall. (Note, a bond's current yieldequals coupon payment divided by current price). If a bond's yield to maturity exceeds the coupon rate, the bond will sell at a premium over par. All of the answers above are correct. None of the answers above is correct.

All else equal if a bonds YTM increases, it's price will fall.

For each of the following, determine whether that change in the account represents an operating cash inflow or an operating cash outflow: (note that this is an all or nothing question - you must answer items correctly to receive credit) Increase in accounts payable Increase in inventory Decrease in accounts receivable Decrease in accruals 1. operating cash inflows 2. operating cash outflow

An increase in accounts payable is an operating cash inflow An increase in inventory is an operating cash outflow A decrease in accounts recievable is a operating cash inflow Decrease in accruals- operating cash outflow

Smythe Company is considering the following 5 capital budgeting projects. The cost of capital for all projects is 14%. Project Initial Cost NPV IRR PI A $1,000,000 ($650,000) 10% 0.96 B $400,000 $113,000 18% 1.33 C $10,000 $2,500 21% 1.52 D $2,500,000 $20 15% 1.01 E $8,350,000 $515,000 17% 1.44 If the projects are INDEPENDENT, which project(s) should Smythe accept? (Note: it is possible that more than one project should be accepted. You must check all that apply to receive credit - this is an all or nothing question. That is, if they should accept projects A and B and you check only A or only B or if you also check C, your answer will be marked wrong). Project A Project B Project C Project D Project E

BCED

Assume that a constant growth stock is currently selling at its equilibrium price of $52.50 per share. All else constant, if the required rate of return of the stock increases, the price of the stock will: increase decrease remain unchanged either increase or decrease depending on the dividend paid in year 0. either increase or decrease depending on the stock's required rate of return.

Decrease

If an analyst uses the constant dividend growth model to value a stock, which of the following is certain to cause the analyst to increase her estimate of the current value of the stock (assuming, of course, that all other factors are held constant)? Decreasing the required rate of return for the stock. Decreasing the estimate of the amount of next year's dividend. Decreasing the expected dividend growth rate. Decreasing the price earnings multiple. An announcement that the President of the firm had be

Decreasing the required rate of return why

1. According to the Capital Asset Pricing Model (i.e., CAPM), if Rf = risk free interest rate, Rm = Expected return on the market portfolio, b = beta, and E(Ra) = expected return on stock a: E(Ra) = Rf + (Rm - Rf) E(Ra) = Rf - b(Rm - Rf) E(Ra) = bRf + (Rm - Rf) E(Ra) = Rf + b(Rm - Rf) None of the above is a correct specification of the CAPM.

E(Ra) = Rf + b(Rm - Rf)

If the projects are MUTUALLY EXCLUSIVE, which project(s) should Smythe accept? (Note: it is possible that more than one project should be accepted. You must check all that apply to receive credit - this is an all or nothing question. That is, if they should accept projects A and B and you check only A or only B or if you also check C, your answer will be marked wrong). Project A Project B Project C Project D Project E

E- Highest npv

Nico just deposited $20,440 into an account that pays interest of 18.8% p.a How many years wil it take the amount of money in Nico's account to triple

FV=20,440*3=-61320 PV=20440 I=18.8 pmt=0 CPT N=6.70629---> 6.71

If two firms have the same current dividend and the same expected growth rate, their stocks must sell at the same current price or else the market will not be in equilibrium. True False

False Reason:

The central themes that integrates the three subject areas of finance are: Identifying, managing and valuing profitable investment opportunities. Identifying, managing and valuing different business mechanisms. Identifying, managing and valuing various risk measurements. Identifying, managing and valuing risky cash flows. None of the above.

Identifying, managing and valuing risky cash flows.

Assuming a specific single project with normal cash flows and a cost of capital of 10%, which of the following statements will ALWAYS be true: (Note: more than one of the following statements may be true; you must record ALL of the statements that are true to receive any credit. That is, if statements a, b and c are ALWAYS true, you must record, A, B, C as the correct answers to this problem to receive any credit. Any other letter or combination of letters will be marked wrong). If NPV > 0, then Profitability Index > 0. If NPV > 0, then Payback Period > 0. If NPV > 0, then IRR > 0. If NPV > 0, then a simple sum of the cash inflows of the project will always be greater than the cost of the project (i.e, the year 0 cash flow). If NPV > 0 at the stated cost of capital (i.e., 10%), then NPV will also be > 0 at a cost of capital of 12%.

If NPV > 0, then Profitability Index > 0. If NPV > 0, then Payback Period > 0. If NPV > 0, then IRR > 0. If NPV > 0, then a simple sum of the cash inflows of the project will always be greater than the cost of the project (i.e, the year 0 cash flow).

The terms and conditions to which a bond is subject are set forth in its Debenture. Underwriting agreement. Indenture. Restrictive covenants. Call provision.

Indenture

Which two of the following are drawbacks to the sole proprietorship form of business organization? (You must select two answers for this question). It is very difficult for such companies to raise large amounts of capital. A sole proprietorship is expensive to establish. Sole proprietorships are subject to much government regulation. A sole proprietorship has unlimited personal liability to the debt of the business. Transfer of ownership of a sole proprietorship is often difficult due to the multiple ownership structure of the business.

It is very difficult for such companies to raise large amounts of capital. A sole proprietorship has unlimited personal liability to the debt of the business.

The primary goal of a publicly-owned firm interested in serving its stockholders should be to

Maximize the stock price per share

Exactly 20 years from today, indira wants to have $1,000,000 in her ret account. if it pays interest of 14.6% per year with monthly compounding, how much must she deposit today in order to achieve her goal blank

N=20*12=240 I=14.6/12=1.2166666667 FV=$1000000 CPT PV=54892.45 54892.45

Elanti is 30 years old today and wants to retire in thirty years if elanti saves monthly in account that pays a stated annual rate of 3%, then he should save $______ per month to accumilate $1000000 in thirty years. the first payment will be next month

N=30*12=360 I=3/12 PV=0 FV=1,000,000 CPT PMT= 1716.04

Assume that the current price of a loaf of bread is 1.99. if the price of bread is expected to increase at an annual rate of 3.5% per year, what will a loaf of bread cost exactly 31 years from today?

N=31 PV=1.99 I=3.5 CPT FV= 5.78

Taya is considering buying a new car for which she will need to borrow 34900 for. She wants to know how much she will have to pay per month on the dealership loan. the lain that taya is being offered has a five year term, requires monthly payments, and has an interest rate of 5.5%p.a

N=5*12=60 I=5.5/12=.4583333333 PV=34900 FV=0 CPT PMT=666.63

Consider three investment alternatives: perpetuity, an ordinary annuity, and annuity due. All three have the SAME payment amount. the annuity due and ordinary annuity has the same number of payments (e.g., 6 payments). The interest rate is positive and the same for all three investments. Given this information, which of the following statements is correct

The future value of the ordinary annuity is less than future value of annuity due

The constant dividend growth model may be used to find the price of a stock in all of the following situations except: when the expected dividend growth rate is less than the discount rate. when the expected dividend growth rate is negative. when the expected dividend growth rate is zero. when the expected dividend growth rate is more than the expected return. the constant growth model works in all known circumstances, it never fails.

When the expected dividend growth rate is more than the expected return reason:

You wish to earn a return of 13% on each of two stocks, X and Y. Stock X is expected to pay a dividend of $3 in the upcoming year while Stock Y is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividends for both stocks is 7%. The intrinsic value of stock X ______. cannot be calculated without knowing the market rate of return will be greater than the intrinsic value of stock Y will be the same as the intrinsic value of stock Y will be less than the intrinsic value of stock Y none of the above is a correct answer.

Will be less than the intrinsic value of stock y

TRUE or FALSEWhen using the indirect approach to constructing a Statement of Cash Flows (this is the only approach taught in FI 3300), an increase in Accounts payable from one accounting period to the next should be added. True False

true

Solve -36x - 4y - 24 = 0 for y. y = 9x - 9 y = -5x + 8 y = 4x + 6 y = -7x - 8 None of the above.

none of the above

On the income statement, gross profit minus operating expenses (including depreciation) is called: Cost of goods sold Operating profit Earnings before taxes Net income Net sales

operating profit

Which of the following statements is most correct? The constant growth model takes into consideration the capital gains earned on a stock. It is appropriate to use the constant growth model to estimate stock value even if the growth rate never becomes constant. Two firms with the same dividend and growth rate must also have the same stock price. Statements a and c are correct. All of the statements above are correct.

the constant growth model takes into consideration the capital gains earned on a stock

USE THE DATA BELOW TO ANSWER QUESTIONS 29, 30 AND 31 - THE DATA WILL BE REPEATED FOR EACH OF THE QUESTIONS, BUT IT IS IDENTICAL FOR EACH. Given the financial data and ratios listed below for the Atlanta Company, determine what Atlanta Company recorded as Long Term Debt on its 2012 balance sheet. (Record your answer without a dollar sign, without commas, and if the answer is a negative number, use the minus sign followed by the number with no spaces between the minus sign and the number - thus record $3,643 as 3643 or negative 18 as -18). . Sales $10,000 Gross profit margin 40% Inventory turnover ratio 4 times Net profit margin 8% Average collection period 45 days Return on equity (ROE) 50% Return on assets (ROA) 20% Cash $250 Current ratio 2.5 Accounts payable days 30 days Notes: Of total sales, 80 percent are on credit; 20% are cash sales. Use COGS for inventory turnover ratio. Assume a 360 day year. Atlanta Company Balance Sheet for Year Ending December 31, 2012 Cash _________ Accounts receivable _________ Inventory _________ Net fixed assets _________ Total assets _________ Notes payable _________ Accounts payable _________ Long-term debt _________ Equity _________ Total liab. & equity _________ Answer:

1300

Old Quartz Gold Mining Company is expected to pay a dividend of $8 in the coming year. Dividends are expected to decline at the rate of 2% per year. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%. The stock of Old Quartz Gold Mining Company has a beta of -0.25. The intrinsic value of the stock is ______. $80.00 133.33 $200.00 $400.00 none of the above

133.33 Solve:

40 e2 In an account with an interest rate of 8.6%, but with daily compounding(assume 365 days ), what is the pv of the following cash flow stream. year 1-9 cash flow =2100 in years 1-9

14700.50 pmt -2100 i= 8.6/365 n=9

income statement........see in exam In its 2011 income statement, Thompson Inc. reported net income of $1,190 and depreciation expense of $160. On its 2012 income statement, the company reported net income of $2,390 and depreciation expense of $660. Based on this information (and given the company's balance sheets for 2011 and 2012 in the chart above), compute Net Cash Flows from Operating Activities for Thompson in 2012.

1850

The information below is from GDT's financial statement: gross fixed assets year 1= 3000 gross fixed assets year 2=3500 net fixed assets year 1 =2600 net fixed assets in year 2= 2900 500 100 200

200 Gross fixed assets 3000 y1 3500 y2 Less: Accumulated depreciation 400(3000-2600) 600(3500-2900) Net fixed assets 2600 2900 So depreciation is difference in accumulated depreciation from year 1 to Year 2 =600-400 =200 y1-y1 change =3500-2900=600 y2-y2 change 3500-2900=400 600-400 =200

Today the max amount of money that tom is willing to pay for a perpetuity is $2000 after 2 years what is the max amount of money is tom willing to pay for the same perp. assuming I and pmts remain the same

2000 because this is a perpetuity payments based , so it will not change unless there is change in variables value

The 2011 and 2012 Balance Sheets for Jacob, Inc. contained the following entries: 12/31/2011 12/31/2012 Accountsreceivable$473 $688 Inventories $515 $838 Net fixed assets $408 $394 Accounts payable $405 $480 Jacob had materials purchases in 2011 of $1,658 and materials purchases in 2012 of $2,676 . What did Jacob record as Cost of Goods Sold (COGS) on its 2012 income statement? (Record your answer without a dollar sign and without co

2353 How? Work.

Random items from the Smyth Company Balance Sheet for December 31, 2005 are given below. Use these items to reconstruct the balance sheet and solve for the amount of CASH shown on the Smyth Balance Sheet. Long-term debt (excluding current portion) = 507 Current portion of long-term debt = 43 Net fixed assets = 794 Inventories = 283 Retained earnings = 234 Accruals = 104 Accumulated depreciation = 83 Common stock ($0.02 par value) = 256 Additional paid in capital = 113 Accounts receivable = 286 Notes payable = 200 Accounts payable = 175 CASH = ???

269

Robotic Atlanta Inc. just paid a dividend of $4.00 per share (that is, D0 = 4.00). The dividends of Robotic Atlanta are expected to grow at a rate of 20 percent next year (that is, g1 = .20) and at a rate of 10 percent the following year (that is, g2 = .10). Thereafter (i.e., from year 3 to infinity) the growth rate in dividends is expected to be 5 percent per year. Assuming the required rate of return on Robotic Atlanta stock is 22 percent, compute the current price of the stock. (Round your answer to 2 decimal places and record your answer without dollar sign or commas). Answer: 29.39

29.39

The Johnson Company has just paid a dividend of $8.00 per share (i.e. D0 = $8.00) on its common stock, and it expects this dividend to grow by 13 percent per year, indefinitely. The required rate of return on the Jackson Company stock is 16%. How much should an investor be willing to pay for this stock today? $ 56.50 $266.67 $301.33 $ 69.54 $148.25

301.33

Rasmus borrowed $50,000 at 5% annum to buy a car. He will make monthly payments for 5 years, the first payment will be exactly one month from today. What is the remaining balance on his car loan immediately after he makes his 19th payment?(assume that all required payments to that point were made on time)

N=5x12=60 I=5/12=.41666 PV=50000 CPT PMT=943.56168 Computation of monthly payment: =1-(1+r)−nr×PV​ =1-(1+0.004167)−600.004167×50,000​ = $943.5617 P×[r1-(1+r)−n​] 943.5617×[0.0041671-(1+0.004167)−41​] = $35,494.23 Where, Present value of loan (PV) = $50,000 Monthly rate (r) = Annual rate / Number of months per year = 0.05 / 12 = 0.004167 Total number of months (n) = Number of years x Number of months per year = 5 x 12 = 60 Computation of loan outstanding immediately after 19th payment: = P×[r1-(1+r)−n​] = 943.5617×[0.0041671-(1+0.004167)−41​] = $35,494.23 Where, Number of months outstanding after first 19 payments (n) = Total number of months - Total number of months expired = 60 - 19 = 41 Monthly rate (r) = Annual rate/ Number of months per year = 0.05/ 12 = 0.004167 Monthly payment (P) = $943.5617

When comparing two mutually exclusive projects of equal life, the capital budgeting evaluation technique that ALWAYS identifies the BEST project is: NPV IRR Profitability Index All three of the techniques listed above will always give the same answer, therefore no one technique is better than any of the others for mutually exclusive projects. None of the answers listed above is correct.

NPV

A company is trying to decide between two independent projects. Each project has a cost of capital of 12%. Project A has an IRR of 11.4%. Project B has an IRR of 11.1%. Which project should the company choose if the goal of the firm is to maximize shareholder wealth? Project A Project B Both projects should be chosen Neither project should be chosen This question cannot be answered unless we know the NPV of each project.

Neither product should be chosen

The XYZ Company has sales of $500,000, a gross profit margin of 40%, operating expenses (excluding depreciation) of $70,000, depreciation expense of $30,000, interest expense of $40,000, taxes of $10,000 and dividends paid of $5,000. What is XYZ's earnings before taxes (EBT)? $40,000 $45,000 $50,000 $55,000(x) None of the answers listed above are within $1000 of the correct answer

None of the answers listed above are within $1000 of the correct answer Earnings before taxes = Gross profit - Operating expenses - Depreciation expense - Interest expense EBT = ($500,000*40%) - $70,000 - $30,000 - $40,000 = $200,000 - $140,000 = $60,000 Hence, correct answer is "None of the answers listed above are within $1,00 of the correct answer"

Five years ago Tosev Inc. issued 30-year, $1,000 par value, semi-annual coupon bonds with a coupon rate of 9.10 percent. The bonds originally sold at a price of $1,010.32 per bond. Currently, those bonds have a market price of $1,118.15 per bond. The Chief Financial Officer of Tosev is currently considering issuing new bonds. These bonds will have a par value of $1,000, semi-annual coupon payments, a term of 25 years and a coupon rate of 8 percent. Due to differences in the legal provisions of the bonds, the Chief Financial Officer estimates that the yield to maturity on the new bonds will be one percent higher than the current yield to maturity on the old bonds. Based on the Chief Financial Officer's estimate, what would be the price per bond of the new bonds today? $ 817.44 $ 896.67 $ 901.19 $1,000.00 $1,118.15

PV 1118.15 PMT1000*(.0910/2) FV 1000 cpt I=== 4(semi annual interest) annual 8 N 50 YTM 8+1=9% new bond ytm N=50 pmt=40 i=9/2 FV=1000 cpt pv=901.19

McIntire Corp. is considering the issue of $1,000 face value, 20 year, 9 percent coupon bonds. The bonds will make coupon payments on a semi-annual basis. It observes that bonds of Barrett Company are trading at $1079.31, have the same maturity date and pay an annual coupon of 10 percent. If the two bonds are expected to be similar in risk, what price will a bond of McIntire Corp. sell for? $1,000.00 $ 988.73 $1,079.31 $1,503.63 $ 908.01

PV = -1079.31 FV = 1000 PMT = 100 N = 20 YTM = 0.091235259 You can either use financial calculator or Excel to tackle this question. Financial calculator: FV = -1000 PMT = -90/2 = -45 N = 20*2 = 40 Rate = 0.091235259/2 PV = $988.7341461

Tom wants to buy a $30,000 car. he can pay cash now or choose between two payment plans: payment plan A. $550 per month for 5 years, the first payment starts exactly one month from today. Assuming an interest rate of 6% p.a., all else constant, which of the following options should tom choose? not enough info all three are same pay 30k now plan A Pb

Payment plan A PV = PMT/Rate * ((1- (1/(1+r)^n 550/.005(1-1/(1+.005)^60 =28449--lowest option

A company is trying to decide between two mutually exclusive projects. Each project has a cost of capital of 18%. Project A has an NPV of $215,000 and an IRR of 28.4%. Project B has an NPV of $154,000 and an IRR of $36.8%. Which project should the company choose if the goal of the firm is to maximize shareholder wealth? Project A Project B Both projects should be chosen Neither project should be chosen

Project A Because NPV>>

A young graduate has been offered a time-share on a condo in Steamboat Springs, Colorado. To be a part-owner, the graduate must pay 1621 at the end of each year for the next 19.00 years. If the graduate's discount rate is 7.40%, what is the cost of this opportunity in today's dollars? In other words, what is the most the graduate should be willing to pay today instead of making payments?

P×[1-(1÷(1+r)^n)]÷r 1621*[1-(1/(1+7.40%)^19]/7.40% N=19 I/y=7.4 PMT=-1621 FV=0 cpt pv=16262.92643

What impact (increase, decrease or no change) would each of the following activities have on a firm's debt ratio (assuming the debt ratio of the firm is currently 40%)? For each activity, assume that the activity has no effect on sales or costs. (This is an all or nothing question - you must answer all parts correctly to receive any credit). 1.Increase 2.Decrease 3.No change Sell additional common stock and use the proceeds from the sale to buy additional new gross fixed assets. = Use excess cash held by the firm to buy additional inventory (the reduction in cash will be exactly matched by an increase in inventory). = Borrow money from a bank on a short-term basis (i.e., notes payable) and deposit the proceeds from the loan into the company's checking account. =

Sell additional common stock and use the proceeds from the sale to buy additional new gross fixed assets. = 2. Decrease Use excess cash held by the firm to buy additional inventory (the reduction in cash will be exactly matched by an increase in inventory). =3. No change Borrow money from a bank on a short term basis (i.e., notes payable) and deposit the proceeds from the loan into the company's checking account. =1. Increase

The government of Mont-Ecar-Low issued a $1,000 par value bond with a coupon rate of $150 per year, but this bond would not mature for 1,000,000,000,000 years. If investor's required rate of return on this bond is 15 percent, can you calculate the expected market price of this bond and if yes, what is the expected market price? - Yes, an expected market price can be calculated, but the only way is to use a large computer that can add up the present value of 1,000,000,000,000 coupon payments of $150 each and the present value of the par value of the bond. - No, because all of today's investors will be dead before the bond matures. - Yes, the current value of the bond is within rounding error of zero because using 15% to discount for 1,000,000,000,000 years reduces almost any dollar amount to zero. - No, because a calculator will not accept 1,000,000,000,000 for the number of compounding periods and 1,000,000,000,000 years is not on any chart of discounting factors. - Yes, because the coupon rate of 15% is equal to the discount rate of 15%, the bond will trade at par value of $1,000.

Yes, because the coupon rate of 15% is equal to the discount rate of 15%, the bond will trade at par value of $1,000.

All else constant, if the yield to maturity decreases, the price of fixed coupon bond will: increase decrease remain unchanged either increase or decrease depending on the par value of the bond either increase or decrease depending on the coupon rate of the bond

increase