FINC Final part 1

Assets in the balance sheet are listed in the order of:

Liquidity

You are scheduled to receive $33,000 in two years. When you receive it, you will invest it for 6 more years at 8.0 percent per year. How much will you have in 8 years?

52,366.7

Find the APR if the EAR is 8.6 compounded on weekly basis. Hint: Use the formula EAR = [1+(APR/m]^m - 1

8.26

Which one of the following is a capital structure decision? A) Determining how to allocate investment funds to multiple projects B) Determining how much debt should be assumed to fund a project C) Determining the amount of funds needed to finance customer purchases of a new product

B

Which one of the following is a capitol budgeting decision? A) Determining how much money should be kept in the checking account. B) Deciding whether or not to purchase a new machine for the production line C) Determining how many shares of stock to issue

B

Which of the following actions by a financial manager is most apt to create an agency problem? A) Refusing to expand the company if doing so will lower the value of the equity. B) Refusing to lower selling prices if doing so will reduce net profits C) Increasing current profits when doing so lowers the value of the firms equity

C

Corporate Dividends are what

Taxable as personal income when received by shareholders even though that income was taxed at the corporate level

What is the future value of $1,000 in 20 years assuming an interest rate of 11% compounded semiannually?

$8,513.31

The 2018 balance sheet of saddle creek inc. showed current assets of $1,490 and current liabilities of $980. The 2019 balance sheet showed current assets of $1,700 and current liabilities of $1,080. What was the company's 2019 change in net working capital, or NWC? Hint Change: in NWC = NWCend - NWCbeg

$110

Jetson spacecraft corp shows the following information on its 2019 income statement Sales: $$214,000, costs = $91,000, other expenses $6,100: depreciation expense = $9,100, interest expense = $13,300; taxes= $37,800; dividends = $10,100. In addition you're told that the firm issued $7,900 in new equity during 2009 and redeemed $9,500 in outstanding long term debt. What is the 2019 cash flow to stockholders? Hint: CFS = Dividends - Net new equity

$2,200

A project that provides annual cash flows $2,400 for 10 years costs $13,100 today. If the required return is 9 percent, what is the NPV for this project?

$3,302.38

Wakers inc. has sales of $43 million, total assets of $24 million, and total debt of $8 million. If the profit margin is 8%, what is the net income?

$3,440,000

Imprudential, inc. has an unfunded pension liability of $850 million that must be paid in 16 years. To asses the value of the firm's stock, financial analysts want to discount this liability back to the present. IF the relevant discount rate is 6.5 percent, what is the present value of this liability?

$310,331,029

You have just received notification that you have won the $4.5 million first prize in the centennial lottery. However, the prize will be awarded on your 100th birthday. 72 years from now. What is the present value of the windfall if the appropriate discount rate is 10%?

$4,709.11

Klingon widgets inc purchased new cloaking machinery three years ago for $6 Million. The machinery can be sold to the Romulans today for $4.85 million. Kilgons current balance sheet shows net fixed assets of $3 Million capital of $510,000. If all the current assets were liquidated today, the company would receive $1.8 million. What is the book value of kilgons assets today? Hint: CA = NWC + CL

$5,110,000

The ashwood company has a long term debt ratio of .50 and current ratio of 1.60. Current liabilities are $970, sales are $5,175, profit margin is 9.8 percent, and ROE is 17.60 percent. What is the amount of the firm's net fixed assets? Hint: This is another complex problem that requires a number of steps. Remember that CA+NFA = TA. So if you can find CA and TA, then you can solve for NFA. HELPFUL equations: Long-term debt ratio = LTD/(LTD+TE) CR=CA/CL PM= NI/Sales ROE = NI/TE

$5,181.07

Organic chicken company has a debt equity of .70. return on assets is 9.20 percent, and total equity is $504,000. What is the net income? HINT: You'll need the ROE

$78,826

For the year just ended, Ypsilanti Yogurt shows an increase in its fixed assets account of $675. The company took $140 in depreciation expenses for the year. How much did the company spend on new fixed assets?

$815

Majon inc has identified the following two mutually exclusive project. If the return is 8 percent, Project A has a NPV of _________ and an IRR of __________. Year Cash flow A 0 -$36,000 1 18,900 2 14,400 3 11,900 4 8,900

$9,834.05 21.55%

Braam Fire Prevention corp, has a profit margin of 10.70% percent, total asset turnover of 1.39, and ROE of 18.71%. What is its firm's debt equity ratio? HINT: Refer to to the Du Pont inentity

.26

You are looking at an investment that has an effective annual rate of 6 percent. What is the effective monthly return?

.49%

Crystal lake inc has a total debt ratio of .36. What is the debt equity ratio? Hint: what you are given is TD/(TD+TE). What you need to find is TD/TE

.56

An investment project has an annual inflows of $5,200, $6,300, $7,100, and $8,400, and a discount rate of 19 percent for these cash flows if the initial cost is $8,000?

1.82 years

Live forever Life insurance co. is selling a perpetuity contract that pays $1,450 monthly. The contract currently sells for $74,000. What is the monthly return on this investment vehicle?

1.96%

Solve for the unknown interest rate in each of the following. Present value: $189 Years: 4 Future value: $287 Interest rate: ???

11.01

At 6.25% interest, how long does it take to double your money? Hint: t= In(FV/PV)/In(1+r)

11.43

Barcain credit corp. wants to earn an effective annual return on its consumer loans of 14 percent per year. The bank uses daily compounding on its loans. What is the APR of these loans?

13.11%

Sybovec company has a debt equity ratio of .85. Return on assets is 7.3 percent, and total equity is $910,000. What is the return on the equity (ROE)? Hint: This question uses the equity multiplier of the DuPont indentity to figure out ROE

13.51

Organic Chicken Company has a debt equity ratio of .7. Return on assets is 9.20 percent, and total equity is $504,000. What is the return on equity(ROE)? Hint: First find the equity multiplier, EM= 1 D/E. Then use the EM to convert ROA to ROE.

15.64%

If you put up $32,000 today in exchange for a 8.50 percent, 18 year annuity, what will the annual cash flow be?

3,533.77

In January 2007, the average price of an asset was $28,858. 8 years earlier, the average price $21,808. What was the annual increase in selling price?

3.56

You have just made your first $3,000 contribution to your retirement account. Assuming you earn an 7% rate of return and make no additional contributions. What will your account be worth when you retire in 35 years?

32,029.74

Seaborn co. has identified an investment project with the following cash flows. If the discount rate is 12%, what is the present value of these cash flows? Years Cash Flows 1 $850 2 $1,040 3 $1,340 4 $1,160

3279

An investment offers $5,200 per year for $15 years, with the first payment occurring one year from now. If the required return is 7%, what is the value of the investment today?

47,361.15

An investment project provides cash inflows of $650 per year for 9 years. What is the project payback period if the initial cost is $3,640.

5.6 years

During the year, the senbet discount tire company had gross sales of $865,000. The firm's cost of goods sold and selling expenses were $455,000 and $210,000 respectively. The company also has notes payable of $680,000. The company also had notes payable of $680,000. These notes carried an interest rate of 4 percent. Depreciation was $105,000. The tax rate was 21%. What was the company's net income? Hint: Build the income statement. The interest expense for the company is the amount of debt times the interest rate on the debt.

53,562

Schwert Corp, shows the following information on its 2019 income statement: Sales = $246,000, costs=$135,000, other expenses =$7,100; depreciation expense = $19,000 interest expense = $10,000: taxes $18,876 dividends $9,800. In addition, you're told that the firm issued $7,900 in the new equity during 2019 and redeemed $6,800 in outstanding long term debt. What is the 2019 operating cash flows? First build the income statement. OCF= EBIT + Depreciation - taxes

85,024

A shareholder is....

Any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm

Project B cash flow. what is the NPV and IRR? Year Cash Flow 0 -$36,000 1 6,100 2 14,400 3 11,900 4 23,100

NPV is $12,592 IRR 20.03%

If the required rate of return is 8%, which project creates more value for the firm?

Project B because of the greater NPV.

Which one of the following is a means by which shareholders can replace company management? Proxy Fight Agency Play Promotion Stock Options Sarbanes Oxley Act

Proxy Fight

A controller typically handles the accounting activities, such as tax management, data processing, financial accounting, and cost accounting True or false

True

A firm evaluates all of its projects by using the NPV decision rule. Year Cash flows 0 -$31,000 1 24,000 2 16,000 3 11,0000 At a required return of 38 percent, what is the NPV for this project?

$-1,021.52

XXL Roach Exterminators inc has sales of $704,000 , costs of $255,000, depreciation expense of $39,000, interest expense of $32,000, and a tax rate of 40% What is the net income for the firm? Hint: Construct a simple income statement using the information given.

$226,800

Penguin Pucks inc has a current assets of $3,400, net fixed assets of $18,500, current liabilities of $2,900, and long term debt of $7,700. How much is the net working capital? Hint: NWC = CA - CL

$500

For the following set of cash flows, what is the NPV at a discount rate of 22% year cash flow 0 -$9,900 1 4,900 2 3,700 3 5,100

-$589.11

Although appealing to more refined tastes, art as a collectable has not always performed so profitability. During 2003, a sculpture was sold at auction for a price of $10,309,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,374,500. What was his annual rate of return on this sculpture?

-4.46%

SDJ, inc. has a net working capital of $1,640, current liabilities of $4,450, and inventory of $1,895. What is the current ratio? Hint: Current ratio is CR = CA/CL

1.37 CA = CL + NWC = $4,450 + $1,640 = $6,090 So the current ratio is: CA/CL = $6,090/$4,450 = 1.37 times

An investor purchasing a British consol is entitled to receive annual payments from the british government forever. What is the price of a consol that pays $75 annually if the next payment occurs one year from today? The market rate is 3.1 percent.

2,419.35

Compute the future value of $1,250 compounded annually for 10 years at 5 percent.

2036.12

Terri Simmons is single and had $189,000 in taxable income. What is the average tax rate?

22.31

What is the IRR of the following set of cash flows? year cash flows 0 -$9,444 1 5,700 2 4,200 3 4,100

24.26%

A ___________ is responsible for evaluating and recommending proposed long term investments

Capitol expenditures manager

Which of the following legal forms of an organization has the ease of dissolution?

Sole Proprietorships

Based only on the following information for Bennington corp,. did cash go up or down? By how much? Decrease in inventory $490 Decrease in accounts payable $140 Increase in notes payable $740 Increase in accounts receivable $270

Up by $820

Finance is ...

the art and science of managing money

What is the payback period for the following set of cash flow? year cash flow 0 -$2,500 1 $2,400 2 $1,600 3 $1,800 4 $2,300

1.06 years

Dinero Bank Offers you a $36,000, o-year term loan at 8 percent annual interest. What will your annual loan payment be?

6,264.53

Compute the future value of $2,350 continuously compounded for 9 years at an APR of 12 percent. Hint: Use the formula FV=PVe^rt

6,920

Sheaves, inc has sales of $22,400, costs of $11,600, depreciation expense of $2,200, and interest expense of $1,370. If the tax rate is 22%, what is the operating cash flow, or OCF? Hint: OCF= EBIT + Depreciation - taxes

9,209.4