Finance Exam 1 (HW Questions)

Your grandmother invested $2,000 for you on the day you were born. This investment has earned an average of 13.5 percent annually. How old are you if the investment is now worth $17,142?

$17,142 = $2,000 × 1.135^t t = 16.97 years

Christina has been saving $7,000 a year ever since she started to work. She has earned an average return of 9.41 percent and now has a total of $197,629 in her savings account. How many years has it been since Christina first started saving money?

$197,629= $ 7,000 × 1.0941^t− 1.0941 $197,629= $⁢ 7,000 × 1.0941^t⁢− 1.0941 t = 14.42 years

You just inherited $14,600 which you are investing at 7 percent interest. How long will you have to wait until your account reaches a value of $27,000?

$27,000 = $14,600 × 1.07^t t = 9.09 years

Your parents purchased a farm 57 years ago at a cost of $4,800. Today, that farm could be sold to a land developer for $3.5 million. What was the annual percentage increase in the value of the farm?

$3,500,000 = $4,800 × (1 + r)^57 r = 12.26 percent

Travis just purchased a new Corvette. To finance this purchase, he paid $36,000 in cash and borrowed $48,000 from his father. Travis has promised to repay his father in 6 equal annual payments at an interest rate of 5.6 percent. What is the amount of each payment?

$48,000 = C ×⎡1−1(1.0566).056⎤⎦ C = $9,639.07

How much more current value does a perpetuity of $150 a year have as compared to an annuity of $150 a year for 50 years given an interest rate of 7.5 percent?

$53.78

Lexair Industrial Supply borrowed $868,400 today to purchase some new equipment. The firm financed this amount for 4 years at 8 percent interest. What is the amount of each quarterly payment?

$63,957.77

Tracie invested $7,000 five years ago in TLK stock. How much is her investment worth today if she has earned a 12.8 percent rate of return?

$7,000 × 1.128^5 = $12,783.32

Rob purchased a rare car for $286,800 ten years ago. Today, that car has a market value of $835,000. What is the rate of appreciation on this car?

$835,000 = $286,800 × (1 + r)10^r = 11.28 percent

Charlie invested $7,800 in a stock last year. Currently, this investment is worth $9,988.38. What is the rate of return on this investment?

$9,988.38 = $7,800 × (1 + r)^1 r = 28.06 percent

Welcome Inn has total equity of $472,000 and a debt-equity ratio of .55. What is the firm's equity multiplier?

1.55

The Apple Tree is a retail store that has $3,600 of net working capital, $10,250 of long-term debt, $3,300 of current liabilities, and $12,400 of owners' equity. What is the book value of the firm's net fixed assets?

10,250+3,300+12,400 - 3,300+3,600 19050

Sunshine Tours had 3,500 shares of stock outstanding at the beginning of the year. On March 31, the firm sold an additional 610 shares at a price per share of $31.5. On June 30, the firm issued an annual dividend of $2.20 per share. What was the cash flow to stockholders for the calendar year?

2.2 (3,500+610) - 610 X 31.5 =. -10,713

You're trying to save to buy a new $207,000 Ferrari. You have $57,000 today that can be invested at your bank. The bank pays 6.5 percent annual interest on its accounts.

207,000/57,000= 3.63157 log (3.63157) / log (1.065)= 20.48

Premier Foods has an operating cash flow for the year of $23,600. At the beginning of the year, the firm had current assets of $5,350, net fixed assets of $41,400, and current liabilities of $5,250. At the end of the year, the firm had current assets of $6,200, net fixed assets of $42,600, and current liabilities of $6,200. What is the amount of the cash flow from assets for the year if the depreciation expense was $2,850?

23600 -4,050 (42600-41400+2850) - (-100) = 19650

Gene wants to have $260,000 in his investment account 20 years from today. Matt also wants $260,000 in his investment account but he is only willing to wait 15 years. How much more would Matt have to deposit today as compared to Gene if they both are to reach their goals and they both earn 13 percent on their investments?

260000 {(1/1.13)^15} -260000 { (1/1.13)^20}

Your credit card charges interest of 2.4 percent per month. What is the annual percentage rate?

APR = 2.4 percent × 12 = 28.80 percent

Gene wants to have $260,000 in his investment account 20 years from today. Matt also wants $260,000 in his investment account but he is only willing to wait 15 years. How much more would Matt have to deposit today as compared to Gene if they both are to reach their goals and they both earn 13 percent on their investments?

Additional deposit = [$260,000 / 1.13^15] - [$260,000 / 1.13^20] = $19,008.2

Sue invested $3,800 at 9 percent interest for 5 years. Phil invested $3,800 at 9 percent interest for 10 years. How much more interest will Phil earn than Sue?

Additional interest = [$3,800 × (1.09)^10] - [$3,800 × 1.09^5] = $3,149.21

You want to invest $4,000 for 5 years. How much additional interest will you earn if you invest at 6 percent compound interest rather than 6 percent simple interest?

Additional interest = [$4,000 × 1.06^5] - [$4,000 + ($4,000 × 0.06 × 5)] = $152.90

Six years ago, you convinced your son to deposit $950 in a savings account at the bank that will pay 5.5 percent interest. Currently, he is itching to spend that money. How much more money will he have if you can convince him to wait another year to withdraw his savings rather than withdrawing the funds today?

Additional savings = ($950 × 1.055^7) - ($950 × 1.055^6) = $72.04

The Bug House purchased some new machinery last year at a total cost of $21,000. The depreciation to date on this machinery is $3,900. Should the firm opt to sell the machinery today, it could probably do so at a price of $15,400. What is the current book value of this machinery?

Book value = $21,000 - $3,900 = $17,100

Bruno's has total sales of $860,000, costs of $618,000, interest paid of $45,700, and depreciation of $89,800. What is the firm's cash coverage ratio?

Cash coverage ratio = (EBIT + Depreciation) / Interest = ($860,000 − 618,000) / $45,700 = 5.30

For the past year, Bloomington Industries had an operating cash flow of $11,400. The firm paid no dividends but did repurchase $8,600 worth of common stock. The net capital spending was $960 and the change in net working capital was $1,800. What was the cash flow to creditors?

Cash flow from assets = $11,400 - 960 - 1,800 = $8,640 Cash flow to creditors = $8,640 - $8,600 = $40

For the past year, Bloomington Industries had an operating cash flow of $11,400. The firm paid no dividends but did repurchase $8,600 worth of common stock. The net capital spending was $960 and the change in net working capital was $1,800. What was the cash flow to creditors?

Cash flow from assets= 11,400-960-1800=8640 Cash flow to creditors= 8640-8600= 40

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $6.3 million, and the 2018 balance sheet showed long-term debt of $6.5 million. The 2018 income statement showed an interest expense of $220,000. During 2018, the company had a cash flow to creditors of $20,000 and the cash flow to stockholders for the year was $75,000. Suppose you also know that the firm's net capital spending for 2018 was $1,480,000, and that the firm reduced its net working capital investment by $91,000. What was the firm's 2018 operating cash flow, or OCF?

Cash flow from assets= Cash flow to creditors + Cash flow to stockholders Cash flow from assets= $20,000 + 75,000 Cash flow from assets= $95,000 Cash flow from assets= $95,000 = OCF - Change in NWC - Net capital spending Cash flow from assets= $95,000 = OCF - (-$91,000) - 1,480,000 Operating cash flow= $95,000 - 91,000 + 1,480,000 Operating cash flow= $1,484,000

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $6.3 million, and the 2018 balance sheet showed long-term debt of $6.5 million. The 2018 income statement showed an interest expense of $220,000. During 2018, the company had a cash flow to creditors of $20,000 and the cash flow to stockholders for the year was $75,000. Suppose you also know that the firm's net capital spending for 2018 was $1,480,000, and that the firm reduced its net working capital investment by $91,000. What was the firm's 2018 operating cash flow, or OCF? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)

Cash flow to creditors = Interest paid - (LTDend - LTDbeg) = $220,000 - ($6,500,000 - $6,300,000) = $220,000 - $200,000 = $20,000 Cash flow from assets = Cash flow to creditors + Cash flow to stockholders = $20,000 + $75,000 = $95,000 Cash flow from assets = $95,000 = OCF - Change in NWC - Net capital spending OCF = $95,000 + (-$91,000) + $1,480,000 = $1,484,000

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $2.5 million, and the 2018 balance sheet showed long-term debt of $2.65 million. The 2018 income statement showed an interest expense of $100,000. What was the firm's cash flow to creditors during 2018?

Cash flow to creditors = Interest paid - Net new borrowing Cash flow to creditors = Interest paid - (LTDend - LTDbeg) Cash flow to creditors = $100,000 - ($2,650,000 - 2,500,000) Cash flow to creditors = -$50,000

Sunshine Tours had 3,500 shares of stock outstanding at the beginning of the year. On March 31, the firm sold an additional 610 shares at a price per share of $31.5. On June 30, the firm issued an annual dividend of $2.20 per share. What was the cash flow to stockholders for the calendar year?

Cash flow to stockholders = $2.20 (3,500 + 610) - (610 × $31.5) = −$10,173

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed $550,000 in the common stock account and $4.7 million in the additional paid-in surplus account. The 2018 balance sheet showed $590,000 and $5.1 million in the same two accounts, respectively. If the company paid out $505,000 in cash dividends during 2018, what was the cash flow to stockholders for the year?

Cash flow to stockholders = Dividends paid - Net new equity Cash flow to stockholders = Dividends paid - [(Commonend + APISend) - (Commonbeg + APISbeg)] Cash flow to stockholders = $505,000 - [($590,000 + 5,100,000) - ($550,000 + 4,700,000)] Cash flow to stockholders = $65,000

The 2017 balance sheet of Dream, Inc., showed current assets of $3,145 and current liabilities of $1,585. The 2018 balance sheet showed current assets of $3,000 and current liabilities of $1,500. What was the company's 2018 change in net working capital, or NWC?

Change in NWC = NWCend - NWCbeg Change in NWC = (CAend - CLend) - (CAbeg - CLbeg) Change in NWC = ($3,000 - 1,500) - ($3,145 - 1,585) Change in NWC = $1,500 - 1,560Change in NWC = -$60

Decrease in inventory$540 Decrease in accounts payable 220 Increase in notes payable 205 Increase in accounts receivable 235

Change in cash = $540 − 220 + 205 − 235 Change in cash = $290

Lexington Motors had current assets of $12,700, net fixed assets of $47,700, and current liabilities of $10,000 at the beginning of the year. At the end of the year, the firm had current assets of $11,500, net fixed assets of $50,100, and current liabilities of $10,550. What is the amount of the change in net working capital for the year?

Change in net working capital = ($11,500 - $10,550) - ($12,700 - $10,000) = $-1,750

Pioneer Aviation has total liabilities of $24,300 and total equity of $47,200. Current assets are $8,700. What is the common-size percentage for the current assets?

Common-size percentage = $8,700 / ($24,300 + 47,200) = 12.17%

Lydia's Market has total assets of $341,000, net fixed assets of $293,000, total equity of $124,000, and current liabilities of $31,900. What is the firm's net working capital turnover rate if annual sales are $380,000?

Current assets = $341,000 - 293,000 = $48,000 Net working capital = $48,000 - 31,900 = $16,100 Net working capital turnover = $380,000 / $16,100 = 23.6

Glenwood Fruit Growers has current assets of $9,400, total assets of $36,600, current liabilities of $8,200, and total liabilities of $36,500. What is the current ratio?

Current ratio = $9,400 / $8,200 = 1.15

SDJ, Inc., has net working capital of $3,810, current liabilities of $5,600, and inventory of $4,840. a.What is the current ratio? b.What is the quick ratio?

Current ratio = CA/CL Current ratio = $9,410/$5,600 Current ratio = 1.68 times Quick ratio = (CA − Inventory)/CL Quick ratio = ($9,410 − 4,840)/$5,600 Quick ratio = .82 times

Queen, Inc., has a total debt ratio of .41.

Debt-equity ratio = TD/TEDebt-equity ratio = .41/.59Debt-equity ratio = .69 Equity multiplier = 1 + D/EEquity multiplier = 1.69

You want to have $7,500 saved 8 years from now. How much less can you deposit today to reach this goal if you can earn 7 percent rather than 5 percent on your savings?

Difference in deposit amount = [$7,500 ÷ 1.05^8] - [$7,500 ÷ 1.07^8] = $711.23

What is the effective annual rate of a loan that charges interest at a rate of 6.3 percent, compounded continuously?

EAR = 2.71828^0.063 - 1 = 6.50 percent

What is the effective annual rate on a loan that charges 7.3 percent, compounded quarterly?

EAR = [1 + (0.073 / 4)]^4 - 1 = 7.50 percent

A firm has sales of $28,000, costs of $9,700, interest expense of $660, depreciation of $2,700, and a tax rate of 34 percent. What is the firm's earnings before interest and taxes (EBIT)?

EBIT = $28,000 - 9,700 - 2,700 = $15,600

SME Company has a debt-equity ratio of .70. Return on assets is 8.6 percent, and total equity is $530,000.

EM = 1.70 ROE = .086(1.70)ROE = .1462, or 14.62% NI = .1462($530,000)NI = $77,486

The debt-equity ratio is equal to which one of the following?

Equity multiplier - 1

Marta deposited $2,800 in a bank account that pays 6.0 percent simple interest. How much will she have in this account after 3 years?

FV = $2,800 + ($2,800 × 0.06 × 3) = $3,304.00

Two years ago, you opened an investment account and deposited $11,000. One year ago, you added another $2,600 to the account. Today, you are making a final deposit of $10,500. How much will you have in this account 3 years from today if you earn a 14.60 percent rate of return?

FV = ($11,000 × 1.146^5) + ($2,600 × 1.146^4) + ($10,500 × 1.146^3) = $42,030.42

You are scheduled to receive $22,000 in two years. When you receive it, you will invest it for eight more years at 9.75 percent per year.

FV = PV(1 + r)^t FV = $22,000(1.0975)^8 FV = $46,308.31

Arlene's Outlet has sales of $344,000. Costs of goods sold equal 63 percent of sales. The store has $35,250 in inventory. On average, how long does inventory set on the shelf before it is sold?

Inventory turnover = (0.63 × $344,000) / $35,250 = 6.148 Days sales in inventory = 365 / 6.148 = 59.37 days

A firm has current assets of $380, stockholders' equity of $2,100, net fixed assets of $5,200, and current liabilities of $280. How much long-term debt does this firm have?

LTD = $380 + 5,200 - 280 - 2,100 = $3,200

Wissler, Inc. owes $268,000 to the bank for some improvements made to its office building. The loan is for 60 months and the monthly payment is $5,795.79 What is the interest rate on the loan?

N = 60, PV = $268,000 PMT = -$5,795.79 and the FV = 0. Interest rate = 10.77 percent, compounded monthly

At the beginning of the year, Marcos Enterprises had net fixed assets of $11,900. At the end of the year, the balance sheet showed net fixed assets of $11,180. Depreciation for the year was $1,500, interest expense was $1,310, and the tax rate was 34 percent. What is the amount of net capital spending for the year?

Net capital spending = $11,180 - 11,900 + 1,500 = $780

Premier Foods has an operating cash flow for the year of $23,600. At the beginning of the year, the firm had current assets of $5,350, net fixed assets of $41,400, and current liabilities of $5,250. At the end of the year, the firm had current assets of $6,200, net fixed assets of $42,600, and current liabilities of $6,200. What is the amount of the cash flow from assets for the year if the depreciation expense was $2,850?

Net capital spending = $42,600 - 41,400 + 2,850 = $4,050 Change in net working capital = ($6,200 - 6,200) - ($5,350 - 5,250) = -$100 Cash flow from assets = $23,600 - 4,050 - (-$100) = $19,650

Logano Driving School's 2017 balance sheet showed net fixed assets of $3.6 million, and the 2018 balance sheet showed net fixed assets of $4 million. The company's 2018 income statement showed a depreciation expense of $400,000. What was net capital spending for 2018?

Net capital spending = NFAend - NFAbeg + Depreciation Net capital spending = $4,000,000 - 3,600,000 + 400,000 Net capital spending = $800,000

Leslie's Cycle Shop has annual sales of $19,700 and costs of $11,000. The depreciation expense is $960 and the tax rate is 32 percent. What is the amount of the earnings per share if the firm has 1,600 shares of stock outstanding?

Net income = ($19,700 - 11,000 - 960) (1 - .32) = $5,263.20 EPS = $5,263.20 / 1,600 = $3.29

DTO, Inc., has sales of $20 million, total assets of $18.2 million, and total debt of $9.1 million. Assume the profit margin is 9 percent.

Net income$1,800,000 ROA 9.89% ROE 19.78

Pompeii, Inc., has sales of $53,000, costs of $24,200, depreciation expense of $2,550, and interest expense of $2,300. If the tax rate is 24 percent, what is the operating cash flow, or OCF?

OCF = EBIT + Depreciation - Taxes OCF = $26,250 + 2,550 - 5,748 OCF = $23,052

Russell owns a preferred stock that pays a constant annual dividend of $14 a share. What is this stock worth to him today if he requires a 14.8 percent rate of return?

PV = $14 / 0.148 = $94.59

What is the present value of $16,000 discounted at 10 percent for 11 years?

PV = $16,000 / 1.1^11 = $5,607.90

You would like to have $2.5 million when you retire 40 years from today. You can earn 7 percent on your investments. How much would you need to invest today to accomplish this goal?

PV = $2,500,000 / 1.07^40 = $166,950.95

Nan needs to save $32,000 to finance her wedding two years from today. How much does she need to deposit into her savings account today to fully fund her wedding if she can earn 5.5 percent interest?

PV = $32,000 / (1.0550)^2 = $28,750.48

You have decided to spend $5,400 on a vacation 3 years from now, $11,000 on a vacation 5 years from now, and $8,000 on a vacation 7 years from now. You want to deposit sufficient funds today to cover these future expenditures. How much do you need to deposit today if you can earn 7.9 percent on your savings?

PV = ($5,400 / 1.079^3) + ($11,000 / 1.079^5) + ($8,000 / 1.079^7) = $16,518.09

You have just received notification that you have won the $3 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you're around to collect), 75 years from now.

PV = FV/(1 + r)^t PV = $3,000,000/(1.10)^75 PV = $2,358.68

What is the present value of an annuity due if the payments are $78 a month for 60 months at a monthly interest rate of 2 percent?

Present value of annuity due. P+P×[1-(1÷(1+r))^(n-1)]÷r Here,1Interest rate per annum 24.00%2 Number of years 53 Number of compoundings per per annum 124 = 1÷3 Interest rate per period ( r)2.00%5 = 2×3 Number of periods (n)60 Payment per period (P)$ 78 Present value of annuity due$ 2,765.58 78+78*(1-(1/(1+2%))^(60-1))/2%

Glotfelty & Sons has sales of $451,000, a profit margin of 4.2 percent, and 31,000 shares of stock outstanding. What is the price-earnings ratio if the stock sells for $11.00 a share?

Price-earnings ratio = $11.00 / [(.042 × $451,000) / 31,000] = 18.00

Jack Corp. has a profit margin of 6.5 percent, total asset turnover of 1.9, and ROE of 18.64 percent. What is this firm's debt-equity ratio?

ROE = (PM)(TAT)(EM) ROE = .1864 = (.065)(1.90)(EM) EM = .1864/(.065)(1.90)EM = 1.51 D/E = EM - 1D/E = 1.51 - 1D/E = .51

Twist Corp. has a current accounts receivable balance of $348,800. Credit sales for the year just ended were $4,482,080.

Receivables turnover = 4,482,080/$348,800 Receivables turnover = 12.85 times Days' sales in receivables = 365/12.85 Days' sales in receivables = 28.40 days

Which one of the following is a correct formula for computing the return on equity?

Return on assets × (1 + Debt-equity ratio)

Trail's End has sales of $449,000, a tax rate of 33 percent, and a profit margin of 5.3 percent. What is the return on equity if the firm has total equity of $242,000?

Return on equity = (0.053 × $449,000) / $242,000 = 9.83 percent

Jennings Lumber has total sales of $489,000, total equity of $329,000, and total assets of $515,000. What is the return on equity if the firm's profit margin is 5.4 percent?

Return on equity = (0.054 × $489,000) / $329,000 = 8.03 percent

Griffin's Goat Farm, Inc., has sales of $663,000, costs of $325,000, depreciation expense of $69,000, interest expense of $44,500, and a tax rate of 21 percent. What is the net income for this firm?

Sales$663,000 Costs 325,000 Depreciation 69,000 EBIT$269,000 Interest 44,500 EBT$224,500 Taxes (21%) 47,145 Net income$177,355

Griffin's Goat Farm, Inc., has sales of $664,000, costs of $326,000, depreciation expense of $70,000, interest expense of $45,000, a tax rate of 22 percent, and paid out $46,000 in cash dividends. What is the addition to retained earnings?

Sales$664,000 Costs 326,000 Depreciation 70,000 EBIT$268,000 Interest 45,000 EBT$223,000 Taxes (22%) 49,060 Net income$173,940 Addition to retained earnings = Net income - DividendsAddition to retained earnings = $173,940 - 46,000Addition to retained earnings = $127,940

Wims, Inc., has current assets of $7,000, net fixed assets of $25,900, current liabilities of $5,450, and long-term debt of $13,000. a.What is the value of the shareholders' equity account for this firm? (Do not round intermediate calculations.)b.How much is net working capital? (Do not round intermediate calculations.)

Shareholders' equity $14,450 NWC $1,550

Given the following tax table, what is the amount of tax due if the taxable income is $280,000?

Tax due = ($50,000 × 0.15) + ($25,000 × 0.25) + ($25,000 × 0.34) + [($280,000 - $100,000) × 0.39] = $92,450

Black River Adventures has net income of $718, interest expense of $315, sales of $17,450, and costs of $11,580. What is the amount of the depreciation expense if the firm's tax rate is 36 percent?

Taxable income = $718 / (1 - .36) = $1,121.88 EBIT = $1,121.88 + 315 = $1,436.88 Depreciation = $17,450 - 11,580 - 1,436.88 = $4,433.12

Griffins Goat Farm, Inc., has sales of $663,000, costs of $325,000, depreciation expense of $69,000, interest expense of $44,500, a tax rate of 21 percent, and paid out $45,000 in cash dividends. The firm has 26,400 shares of common stock outstanding. a. What are the earnings per share figure? b.What are the dividends per share figure?

The earnings per share (EPS) are: EPS = Net income /Shares EPS = $177,355/26,400 EPS = $6.72 per share DPS = Dividends/SharesDPS = $45,000/26,400DPS = $1.70 per share

First City Bank pays 8 percent simple interest on its savings account balances, whereas Second City Bank pays 8 percent interest compounded annually. If you made a $58,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 8 years?

The simple interest per year is: $58,000 × .08 = $4,640 So after 8 years you will have: $4,640 × 8 = $37,120 in interest. FV = $58,000(1.08)8 = $107,353.95 Answer is $12,233.95

Tina saved $50 at the beginning of each month for 25 months. Ted saved $50 at the end of each month for 25 months. Assume Tina and Ted starting saving in the same month and both earned the same rate of return. What do you know for certain about the balances in their accounts at the end of the 25 months?

Tina will have more money than Ted.

The Apple Tree is a retail store that has $3,600 of net working capital, $10,250 of long-term debt, $3,300 of current liabilities, and $12,400 of owners' equity. What is the book value of the firm's net fixed assets?

Total assets = Total liabilities plus owners' equity = $3,300 + 10,250 + 12,400 = $25,950. Current assets = Current liabilities + Net working capital = $3,300 + 3,600 = $6,900. Net fixed assets = Total assets - Current assets = $25,950 - 6,900 = $19,050.

Which one of the following accounts is included in net working capital?

accounts receivable

Which one of the following accounts is the most liquid?

accounts receivable

A stream of equal payments that occur at the beginning of each month for one year is called a(n):

annuity due.

The marginal tax rate is the tax rate which:

applies to the next dollar of taxable income.

Interest expense is treated as which one of the following types of cash flows?

cash flow to creditors

Which one of the following is a non-cash expense?

depreciation

Which one of the following is a long-term solvency ratio?

equity multiplier

Katie invested $500 last year. Today, her investment is worth $621. If you were inputting this information into a financial calculator to solve for the rate of return, you would input the $621 as the:

future value.

Which one of the following is a source of cash?

increase in common stock

Which one of the following will increase the current ratio but not the quick ratio?

increase in inventory

Which one of the following is classified as an investment activity on the statement of cash flows?

purchase of equipment

Assume the total cost of a college education will be $200,000 when your child enters college in 16 years. You presently have $64,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's college education?

r = ($200,000/$64,000)^1/16 - 1 r = .0738, or 7.38%