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Neiger Flours owes $16,929 in taxes on taxable income of $61,509. If the firm earns $100 more in income, it will owe an additional $48 in taxes. What is the average tax rate on income of $61,609?

Average tax rate = ($16,929 + 48)/$61,609 = .2756, or 27.56 percent

High Road Transport has a current stock price of $5.60. For the past year, the company had net income of $287,400, total equity of $992,300, sales of $1,511,000, and 750,000 shares outstanding. What is the market-to-book ratio?

Market-to-book = $5.60 /($992,300 / 750,000) = 4.23

ANC Plastics has net working capital of $15,400, current assets of $39,200, equity of $46,600, and long-term debt of $22,100. What is the amount of the net fixed assets?

Net fixed assets = $22,100 + 46,600- 15,400 = $53,300

Holly Farms has sales of $509,600, costs of $448,150, depreciation expense of $36,100, and interest paid of $12,400. The tax rate is 28 percent. How much net income did the firm earn for the period?

Net income = ($509,600 -448,150 -36,100 -12,400)(1 -.28) = $9,324

he App Store needs to raise $2.8 million for expansion. The firm wants to raise this money by selling 20-year, zero-coupon bonds with a par value of $1,000. The market yield on similar bonds is 6.49 percent. How many bonds must the company sell to raise the money it needs? Assume semiannual compounding.

Number of bonds = $2,800,000/{$1,000 / [1 + (.0649 / 2)]40} Number of bonds = 10,044 bonds

Gino's Winery has net working capital of $29,800, net fixed assets of $64,800, current liabilities of $34,700, and long-term debt of $23,000. What is the value of the owners' equity

Owners' equity = $29,800 + 64,800 -23,000 = $71,600

The $1,000 face value bonds of Galaxies International have coupon of 6.45 percent and pay interest semiannually. Currently, the bonds are quoted at 103.4 and mature in 4 years. What is the yield to maturity?

PV = $1,034 = [(.0645 × $1,000) / 2] ×{(1 - {1 / [1 + (r / 2)]8}) / (r / 2)} + $1,000 / [1 + (r/ 2)]8 r = .0549, or 5.49 percent

Charlene can afford car payments of $185 a month for 48 months. If the interest rate is 5.65 percent, how much money can she afford to borrow?

PV = $185 × (1 - {1 / [1 + (.0565 / 12)]48}) / (.0565 / 12) = $7,931.44

Good Guys will pay you $3,800 a year for 10 years in exchange for $31,300 today. What interest rate will you earn on this annuity?

PV = $31,300 = $3,800 × {1 - [1 / (1 + r)10]} / r r = 3.69 percent

How much money does Suzie need to have in her retirement savings account today if she wishes to withdraw $42,000 a year for 25 years? She expects to earn an average rate of return of 9.75 percent.

PV = $42,000 ×{1 - [1 / (1 + .0975)25]} / .0975 = $388,683.83

Which one of the following is the correct formula for the current value of $600 invested today at 5 percent interest for 6 years?

PV = $600 / (1 + .05)6

A firm has net income of $197,400, a return on assets of 8.4 percent, and a debt-equity ratio of .72. What is the return on equity?

Return on equity = .084 ×(1 + .72) = .1445, or 14.45 percent

World Exports has total assets of $938,280, a total asset turnover rate of 1.18, a debt-equity ratio of .47, and a return on equity of 18.7 percent. What is the firm's net income?

Return on equity = .187 = (Net income/$938,280) ×(1 + .47) Net income = $119,359.43

Capital budgeting includes the evaluation of which of the following?

Size, timing, and risk of future cash flows

Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Margie own if she is personally liable for all the store's debts?

Sole Propietorship

A corporation

is a legal entity separate from its owners

What is the effective annual rate of 9.6 percent compounded semiannually?

EAR = [1 + (.096 /2)]2- 1 = .0983, or 9.83 percent

Kristina started setting aside funds three years ago to save for a down payment on a house. She has saved $900 each quarter and earned an average rate of return of 4.8 percent. How much money does she currently have saved?

FV = $900 × {[1 + (.048 / 4)]12 - 1} / (.048 / 4) = $11,542.10

Your coin collection contains ten 1949 silver dollars. If your grandparents purchased the coins for their face value when they were new, how much will your collection be worth when you retire in 2065, assuming the coins appreciate at an annual rate of 5.1 percent?

Future value = $10 ×(1 + .051)(2065-1949) = $3,205.64

Travis invests $5,500 today into a retirement account. He expects to earn 9.2 percent, compounded annually, on his money for the next 13 years. After that, he wants to be more conservative, so only expects to earn 6 percent, compounded annually. How much money will he have in his account when he retires 25 years from now, assuming this is the only deposit he makes into the account?

Future value = $5,500 ×(1 + .092)13 ×(1 + .06)(25-13) = $34,747.80

Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the business profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?

General Partnership

Stephen claims that he invested $6,000 six years ago and that this investment is worth $28,700 today. For this to be true, what annual rate of return did he have to earn? Assume the interest compounded annually.

$28,700 = $6,000 ×(1 + r)6 r = 29.80 percent

When you were born, your parents opened an investment account in your name and deposited $1,500 into the account. The account has earned an average annual rate of return of 5.3percent. Today, the account is valued at $42,856. How old are you?

$42,856 = $1,500 ×(1 + .053)t t = 64.91 years

You want to invest an amount of money today and receive back twice that amount in the future. You expect to earn 6 percent interest. Approximately how long must you wait for your investment to double in value?

12 years 72/6

Which one of the following statements is true?

A discount bond has a coupon rate that is less than the bond's yield to maturity

annuity

A level stream of cash flows for a fixed period of time

Which one of the following parties can sell shares of ABC stock in the primary market?

ABC. company

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Agency

The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:

An agency conflict

Which one of the following statements concerning annuities is correct?

An annuity due has payments that occur at the beginning of each time period.

ordinary annuity

An annuity that pays at the end of each period.

Apr

Annual percentage rate; the annual rate of interest that is charged for using credit

The 6.5 percent bond of ABCO has a yield to maturity of 6.82 percent. The bond matures in seven years, has a face value of $1,000, and pays semiannual interest payments. What is the amount of each coupon payment?

Coupon payment = ($1,000 ×.065)/2 = $32.50

Dockside Warehouse has net working capital of $42,400, total assets of $519,300, and net fixed assets of $380,200. What is the value of the current liabilities?

Current liabilities = $519,300 -380,200 -42,400 = $96,700

A firm has net working capital of $6,800 and current assets of $21,800. What is the current ratio?

Current ratio = $21,800 / ($21,800 - 6,800) = 1.45

The 6.3 percent, semi-annual coupon bonds of PE Engineers mature in 13 years and have a price quote of 99.2. These bonds have a current yield of _____ percent, a yield to maturity of _____ percent, and an effective annual yield of _____ percent.

Current yield = (.063 ×$1,000)/ (.992 ×$1,000) Current yield = .0635, or 6.35 percent PV = $992 = (.063× $1,000 / 2) ×{(1 - {1 / [1 + (r / 2)]26}) / (r/ 2)} + $1,000 / [1 + (r / 2)]26 r = .0639, or 6.39 percent EAR = [1 + .0639 / 2)]2 - 1 EAR = .0649, or 6.49 percent

Leisure Products has sales of $738,800, cost of goods sold of $598,200, and accounts receivable of $86,700. How long on average does it take the firm's customers to pay for their purchases? Assume a 365-day year.

Days' sales in receivables = 365 / ($738,800 / $86,700) = 42.83 days

The Gift Shoppe has total assets of $487,920 and an equity multiplier of 1.47. What is the debt-equity ratio?

Debt-equity ratio = 1.47 - 1 = .47

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the

Income statement

simple interest

Interest earned only on the original principal amount invested

UXZ has sales of $683,200, cost of goods sold of $512,900, and inventory of $74,315. What is the inventory turnover rate?

Inventory turnover = $512,900 / $74,315 = 6.90 times

perpetuity

Level cash flow stream that continues forever

The primary goal of financial management is most associated with increasing the:

Market value of the firm

The Egg House just borrowed $660,000 to build a new restaurant. The loan terms call for equal annual payments at the end of each year. The loan is for 15 years at an APR of 8.35 percent. How much of the first annual payment will be used to reduce the principal balance?

PV = $660,000 = C × ({1 - [1 / (1 + .0835)15]} / .0835) C = $78,763.18 Principal payment = $78,763.18- ($660,000 ×.0835) = $23,653.18

Today, you are borrowing $7,800 to purchase a car. What will be your monthly payment if the loan is for four years at 6.45 percent interes

PV = $7,800 = C ×[(1 - {1 / [1 + (.0645 / 12)]48}) / (.0645 / 12)] C = $184.80

GN Supply wants to issue new 10-year, $1,000 face value bonds at par. The company currently has 6.35 percent coupon bonds on the market that sell for $983.20, make semiannual interest payments, and mature in 10 years. What coupon rate should the company set on its new bonds?

PV = $983.20 = [(.0635 × $1,000) / 2] ×{(1 - {1 / [1 + (r / 2)]20}) / (r / 2)} + $1,000 / [1 + (r / 2)]20 r = .0658, or 6.58 percent The coupon rate must equal the current market rate of 6.58percent if the bonds are to be sold at par.

A $1,000 face value bond currently has a yield to maturity of 8.22 percent. The bond matures in five years and pays interest semiannually. The coupon rate is7.5 percent. What is the current price of this bond?

PV = [(.075 × $1,000)/ 2] ×{(1 - {1 / [1 + (.0822/ 2)]10}) / (.0822 / 2)} + $1,000 / [1 + ( .0822/ 2)]10 PV= $970.96

One year ago, you purchased a $1,000 face value bond for a clean price of $980. The bond currently has seven years remaining until maturity, pays a coupon payment of $45 every six months, and has a yield to maturity of 6.87 percent. What is the percentage change in the bond price over the past year?

PV =$45.00 ×{(1 - {1 / [1 + (.0687 / 2)]14}) / (.0687/ 2)} + $1,000 / [1 + (.0687 / 2)]14 PV = $1,116.81 Percentage price change = ($1,116.81-980)/$980 Percentage price change =.1396, or 13.96 percent

You want to have $40,000 for a down payment on a house 4 years from now. If you can earn 5.6 percent, compounded annually on your savings, how much do you need to deposit today to reach your goal?

Present value = $40,000/(1 + .056)4 = $32,166.54

Bed Bug Inn has annual sales of $137,000. Earnings before interest and taxes is equal to 5.8 percent of sales. For the period, the firm paid $4,700 in interest. What is the profit margin if the tax rate is 34 percent?

Profit margin = {[(.058 × $137,000) - $4,700] × (1 - .34)} / $137,000 = .0156, or 1.56 percent

Tessler Farms has a return on equity of 11.28 percent, a debt-equity ratio of 1.03, and a total asset turnover of .87. What is the return on assets?

Return on assets = .1128 /(1 + 1.03) = .0556, or 5.56 percent

Whitts BBQ would like to issue some 10-year, semiannual coupon bonds at par. Comparable bonds have a current yield of 9.16 percent, an effective annual yield of 9.68 percent, and a yield to maturity of 9.50 percent. What coupon rate should Whitts BBQ set on its bonds?

To sell bonds at par, the coupon rate must be set equal to the yield to maturity on comparable bonds, which in this case is 9.50 percent.

Bill just financed a used car through his credit union. His loan requires payments of $275 a month for five years. Assuming that all payments are paid on time, his last payment will pay off the loan in full. What type of loan does Bill have?

ammortized

annuity due

an annuity for which the cash flows occur at the beginning of the period

Net working capital is defined as:

current assets minus current liabilities.

Which one of the following qualifies as an annuity payment?

auto loan payment

Which one of the following will increase the present value of a lump sum future amount to be received in 15 years?

decrease in the interest rate

The interest rate used to compute the present value of a future cash flow is called the:

discount rate

ear

effective annual rate..interest rate expressed as if it were compounded once a year

compound interest

interest earned on both the principal amount and any interest already earned

interest on interest

interest earned on the reinvestment of previous interest payments

Given a profitable firm, depreciation:

lowers taxes

The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the:

marginal tax rate

Katlyn needs to invest $5,318 today in order for her savings account to be worth $8,000 six years from now. Which one of the following terms refers to the $5,318?

present value

The primary purpose of bond covenants is to:

protect the bondholders

net income increases when

revenue increases

One example of a primary market transaction would be the:

sale of 1,000 shares of newly issued stock by Alt Company to Miquel.

In a general partnership, each partner is personally liable for

the total debts of the partnership, even if he or she was unaware of those debts

Common-size financial statements present all balance sheet account values as a percentage of:

total assets