02 Jan Note: Enter your answer

Question 1

A firm has a return on equity of 13.1 percent, a net profit margin of 8.4 percent, and total equity of $743.1. What is the net income?

if 2 decimal only then answer will be $97.35 (Kindly check with the instructor about the decimals requirement and whether to mention or not $ symbol.)

Question 2

1. An investment is acceptable if the profitability index (PI) of the investment is:

greater than a pre-specified rate of return.

greater than one.

greater than the internal rate of return (IRR).

less than the net present value (NPV).

less than one.

Question 3

Suppose an investment offers to triple your money in 35 years. What annual rate of return are you being offered if interest is compounded monthly?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Question 4

ABC Company has a debt-equity ratio of 0.62. What is the debt ratio?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Question 5

Your firm has the following balance sheet statement items: total current liabilities of $325,000; total assets of $3,655,000; fixed and other assets of $1,770,000; and long-term debt of $200,000. What is the amount of the firm’s net working capital?

$325,000

$1,080,000

$1,560,000

$1,685,000

$1,885,000

Question 6

In 2012, ABC had operating income (EBIT) of $31,753, interest expense of $4,192, and dividend expense of $1,405. If the tax rate is 44%, what is the transfer to Retained Earnings?

Enter your answer rounded off to two decimal points.

Question 7

What is the net present value of the following cash flows? Assume an interest rate of 8.99%

Year CF

0 -$10,981

1 $5,179

2 $6,481

3 $7,025

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answers box.

Question 8

ABC’s current assets comprise of cash, accounts receivables, and inventory. ABC has $12,648 in cash, $6,279 in accounts receivables, and $10,259 in inventory. If the current ratio is 2.1 times, compute the quick ratio.

Note: Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

Question 9

Consider a taxable bond with a yield of 12.4% and a tax-exempt municipal bond with a yield of 4.2%. At what tax rate would you be indifferent between the two bonds?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Question 10

A project has the following cash flows. What is the internal rate of return?

Year 0 1 2 3

Cash flow -$121,000 68,150 $42,200 $39,100

14.82%

13.47%

12.71%

13.85%

14.39%

Question 11

ABC is reviewing a project that will cost $1,324.The project will produce cash flows $457 at the end of each year for the first two years and $636 at the end of each year for the next two years. What is the profitability index? Assume interest rate is 10%.

Note: Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

Question 12

If you put $238 in a savings account at the beginning of each year for 18 years, how much money will be in the account at the end of the 18th year? Assume that the interest rate is 7.

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Question 13

ABC recently reported $22,546 of sales, $7,640 of operating costs other than depreciation, and $1,366 of depreciation. The company had $5,818 of bonds that carry a 4% interest rate, and its income tax rate was 44%. How much was its net cash flow?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Question 14

If you receive $348 at the end of each year for the first three years and $826 at the end of each year for the next three years. What is the present value? Assume interest rate is 6%.

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Question 15

In its most recent financial statements, ABC reported $57,648 of net income and $640,616 of retained earnings. The previous retained earnings were $787,805. How much in dividends was paid to shareholders during the year?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Question 16

ABC Company has net income of $112,484, return on assets of 8.85 percent, and debt-equity ratio of 0.56. What is the return on equity?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Question 17

Assume that a company has $140,022 of taxable income from operations plus $10,532 of interest income and $18,328 of dividend income. What is the company’s federal tax liability?

Question 18

What is the effective rate of 7% compounded monthly?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Question 19

ABC Company earned $438,069 in taxable income for the year. How much tax does the company owe on this income?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Question 20

If you receive $1,566 at the end of each year for the first three years and $1,737 at the end of each year for the next two years. What is the future value of this cash flow stream? Assume interest rate is 7%.

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Question 21

How many years will it take to double your money at 15% compounded semi-annually?

Enter your answer rounded off to TWO decimal points.

Question 22

ABC has the following data for the year ending 12/31/10: Net income = $600; Net operating profit after taxes (NOPAT) = $3,455; Total assets = $2,500; Short-term investments = $200; Stockholders’ equity = $1,800; Total debt = $700; and Total operating capital = $6,609. ABC’s weighted average cost of capital is 6%. What is its economic value added (EVA)?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Question 23

ABC Company offers a perpetuity which pays annual payments of $18,791. This contract sells for $273,771 today. What is the interest rate?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Question 24

As the required rate of return is decreased, the:

PV decreases, FV decreases

PV increases, FV decreases

PV increases, FV increases

PV decreases, FV increases

Question 25

John invests $15,000 into a retirement account. He expects to earn 12 percent, compounded monthly, on his money for the next 10 years. After that, for the next 15 years, he wants to be more conservative, so he only expects to earn 6 percent, compounded semi-annually. How much money will John have in his account when he retires 25 years from now, assuming this is the only deposit he makes into the account?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Question 26

You’ve decided to pursue higher education and enroll in a MS in Finance program. If you borrowed $50,000 at a fixed interest rate of 7.5% and can only make payments of $5,000 per year to pay off the loan, at the end of this and each additional year. How many years will it take before you can once again live debt-free?

Enter your answer in the answer box rounded off to TWO decimal points.

Question 27

Mansi Inc. is considering a project that has the following cash flow data. What is the project’s payback?

Year 0 1 2 3

Cash flows -$750 $300 $325 $350

2.85 years

1.91 years

2.36 years

2.59 years

2.12 years

Question 28

Consider a 7-year loan with annual payments at 5%. If the loan amount is $45,000, compute the principal repaid in the seventh year.

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.