Fin300

he 2014 balance sheet of Steelo, Inc., showed current assets of $3,195 and current liabilitiesof $1,450. The 2015 balance sheet showed current assets of $3,340 and current liabilitiesof $1,740. What was the company's 2015 change in net working capital, or NWC?

-145

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, an auction house sold a sculpture at auction for a priceof $10,221,500. Unfortunately for the previous owner, he had purchased it in 1998 at a price of $12,197,500. What was his annual rate of return on this sculpture?

-3.47%

The 2014 balance sheet of Sugarpova's Tennis Shop, Inc., showed long-term debt of $3.1 million, and the 2015 balance sheet showed long-term debt of $3.3 million. The 2015 income statement showed an interest expense of $105,000. What was the firm's cash flow to creditors during 2015?

-95,000

Tai Credit Corp. wants to earn an effective annual return on its consumer loans of 15.4 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers?

.1433 or 14.33%

You want to buy a new sports car from Muscle Motors for $78,000. The contract is in the form of a 60-month annuity due at a 7.25 percent APR. What will your monthly payment be?

1,544.38

At 6.8 percent interest, how long does it take to double your money? Quadruple?

10.54, 21.07

You have just received notification that you have wont the $3 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100thbirthday (assuming you're around to collect), 78 years from now.What is the present value of your windfall if the appropriate discount rate is 10 percent?

1772.11`

You are scheduled to receive $15,000 in two years. When you receive it, you will invest it for six more years at 7.1 percent per year. How much will you have in eight years? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

22,637.48

The tax rates are as shown. Taxable Income-Tax Rate $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 $128,513?

25.97%

You want to have $69,000 in your savings account 13 years from now, and you're prepared to make equal annual deposits into the account at the end of each year. If the account pays 7.30 percent interest, what amount must you deposit each year?

3,359.85

You are scheduled to receive $19,000 in two years. When you receive it, you will invest it for six more years at 9.5 percent per year. Howmuch will you have in eight years?

32,752.04

Your company will generate $65,000 in annual revenue each year for the next seven years from a new information database. If the appropriate interest rate is 8.25 percent, what is the present value of the savings?

335,539.75

If you put up $50,000 today in exchange for a 6.75 percent, 14-year annuity, what will the annual cash flow be?

5,631.83

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $40,000 per year forever. If the required return on this investment is 6.3 percent, how much will you pay for the policy?

634,920.63

Suppose you are committed to owning a $205,000 Ferrari. If you believe your mutual fund can achieve a 12 percent annual rate of return and you want to buy the car in 9 yearson the day you turn 30, how much must you invest today?

73,925.06

Assume the total cost of a college education will be $300,000 when your child enters college in 18 years. You presently have $57,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's college education?

9.67%

What is the effective annual rate of 11.9 percent compounded continuously? a. 12.72 percent b. 12.64 percent c. 13.43 percent d. 12.89 percent e. 12.68 percent

B

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

You grandfather invested $20,000 years ago to provide annual payments of $750 a year to his heirs forever. What is the rate of return? a. 4.75 percent b. 3.75 percent c. 4.10 percent d. 4.25 percent e. 4.33 percent

B

You have just won the lottery and will receive $540,000 in one year. You will receive payments for 15 years, which will increase 4 percent per year. The appropriate discount rate is 11 percent. Required: What is the present value of your winnings? a.$12,780,355 b.$4,810,590 c.$112,862 d.$4,618,166 e.$12,780,355

B

A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a: a. Corporation. b. Sole proprietorship. c. General partnership. d. Limited partnership. e. Limited liability company.

C

Which of the following are advantages of the corporate form of business ownership? I. Limited Liability for firm debt. II.Double taxation. III.Ability to raise capital. IV.Unlimited firm life. a.I and II only. b.III and IV only. c.I, III, and IV only. d.II, III, and IV only. e.I, II, III, and IV.

C

Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers? a. Articles of incorporation. b. Corporate breakdown. c. Agency problem. d. Bylaws. e. Legal liability.

C

You just won the magazine sweepstakes and opted to take unending payments. The first payment will be $21,500 and will be paid one year from today. Every year thereafter, the payments will increase by 2.5 percent annually. What is the present value of your prize at a discount rate of 7.9 percent? a. $350,000 b. $348,409 c. $398,148 d. $291,006 e. $346,900

C

Beatrice invests $1,300 in an account that pays 3 percent simple interest. How much more could she have earned over a 4-year period if the interest had compounded annually? a.$19.21 b.$28.65 c.$25.61 d.$7.16 e.$15.90

D

Suppose the first comic book of a classic series was sold in 1954. In 2015, the estimated price for this comic book in good condition was about $310,000. This represented a return of 22 percent per year. For this to be true, what was the original price of the comic book in 1954? a. $.75 b. $.50 c. $1.33 d. $1.67 e. $1.40

D

Today, you are retiring. You have a total of $289,416 in your retirement savings. You want to withdraw $2,500 at the beginning of every month, starting today and expect to earn 4.6 percent, compounded monthly. How long will it be until you run out of money? a. 29.97 years b. 8.56 years c. 22.03 years d. 12.71 years e. 18.99 years

D

Which of the following apply to a partnership that consists solely of general partners? I. Double taxation of partnership profits. II. Limited partnership life. III. Active involvement in the firm by all the partners. IV. Unlimited personal liability for all partnership debts. a.II only. b.I and II only. c.II and III only. d.I, II, and IV only. e.II, III, and IV only.

D

Which of the following is a capital structure decision? a.Determining which one of two projects to accept. b.Determining how to allocate investment funds to multiple projects. c.Determining the amount of funds needed to finance customer purchases of a new product. d.Determining how much debt should be assumed to fund a project. e.Determining how much inventory will be needed to support a project.

D

Which one of the following represents the most liquid asset? a. $100 account receivable that is discounted and collected for $96 today. b. $100 of inventory which is sold today on credit for $103. c. $100 of inventory which is discounted and sold for $97 cash today. d. $100 of inventory that is sold today for $100 cash. e. $100 accounts receivable that will be collected in full next week.

D

Which type of business organization has all the respective rights and privileges of a legal person? a. Sole proprietorship. b. General partnership. c. Limited partnership. d. Corporation. e. Limited liability company.

D

You have some property for sale and have received two offers. The first offer is for $89,500 today in cash. The second offer is the payment of $35,000 today and an additional guaranteed $70,000 two years from today. If the applicable discount rate is 11.5 percent, which offer should you accept and why? a. You should accept the $89,500 today because it has the higher net present value. b. You should accept the $89,500 today because it has the lower future value. c. You should accept the first offer as it is a lump sum payment. d. You should accept the second offer because it has the larger net present value. e. It does not matter which offer you accept as they are equally valuable.

D

Corporate bylaws: a.Must be amended should a firm decide to increase the number of shares authorized. b.Cannon be amended once adopted. c.Define the name by which the firm will operate. d.Describe the intended life and purpose of the organization. e.Determine how a corporation regulates itself.

E

The decision to issue additional shares of stock is an example of which one of the following? a.Working capital management. b.Net working capital decision. c.Capital budgeting. d.Controller's duties. e.Capital structure decision.

E

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?a.Increase in the amount of quarterly dividend. b.Decrease in the per unit production costs. c.Increase in the number of shares outstanding. d.Decrease in the net working capital. e.Increase in the market value per share.

E

Which one of the following terms is defined as the mixture of a firm's debt and equity financing? a. Working capital management. b. Cash management. c. Cost analysis. d. Capital budgeting. e. Capital structure.

E

During 2014, Raines Umbrella Corp. had sales of $790,000. Cost of goods sold, administratice and selling expenses, and depreciation expenses were $610,000, $85,000, and $190,000, respectively. In addition, the company had an interest expenseof $52,000 and a tax rate of 35 percent. (Ignore any tax carryback or carryforward provisions.) a.What is Raine's net income for 2014? b.What is the company's operating cash flow?

a. -147,000 b. 95,000

In March 2012, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $250 in March 2042, but investors would receive nothing until then. Investors paid DMF $125 for each of these securities; so they gave up $125 in March 2012, for the promise of a $250 payment 30 years later. a.Assuming that your purchased the bond for $125, what rate of return wouldyou earn if you held the bond for 30 years until it maturedwith a value of $250? b.Suppose under the terms of the bond you could redeem the bond in 2022. DMF agreed to pay an annual interest rate of .6 percent until that date. How much would the bond be worth at that time? c.In 2022, instead of cashing in the bond for its then current value, you decide to hold the bond until it matures in 2042. What annual rate of return will you earn over the last 20 years?

a. 2.34% b. 132.71 c. 3.22%

Solve for the unknown interest rate in each of the following: Present Value/Yrs/IR/FV a. $310/5/__/418 b. $430/19/__/1,553 c. $46,000/20/__/269,914 d. $45,261/30/__/1,285,194

a. 6.16% b. 6.99% c. 9.25% d. 11.80%

Find the EAR in each of the following cases. Required: (a)7% compounded quarterly (b)17% compounded monthly (c)7% compounded daily (d)16% with infinite compounding

a. 7.19% b. 18.39% c. 7.25% d. 17.35%