Module 1 (Ch1,2)
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CUNY College of Staten Island *
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Course
ECONOMIC H
Subject
Finance
Date
Feb 20, 2024
Type
xlsx
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17
Uploaded by nikhildhurvey25
Chapter 1- Example 5
Rate
10*(PW)/Highest Value or Worth
A(PW)
$25,000 Rate (A)
10.00
B(PW)
$20,000 Rate(B)
C(PW)
$18,000 Rate (C )
WEIGHTED FACTOR COMPARISON FORM
Company: Ajax Manufacturing Company
Description of investment:
Factor
Wt
A
B
C
Rt
Sc
Rt
Sc
Rt
Sc
1. Present worth
30
10.00
300.00
2. Product quality
40
8
320.00
10
5
3. Fill time, customer order
20
3
60.00
10
7
4. Supplier reputation
10
8
80.00
5
10
Totals
100
760.00
mdehghani:
You do not need to change they type to percentage.
Intrest Rate
8%
Using Simple Intrest Calculation
Payments
n
Loan Amount
Intrest
Total
1st
1
$4,000.00 $0.00 2
$3,000.00 3
$3,000.00 4
$3,000.00 2nd
$0.00 Using Compound Intrest Calculation
Payments
EOY
Loan Amount
Intrest
Total
1st
1
$4,000.00 $0.00 .
2
$3,000.00 .
3
$3,000.00 .
4
$3,000.00 2nd
$0.00 Payment Amount
Payment Amount
Robert borrows $4,000 from Susan and agrees to pay $1,000 plus accrued interest at the end of the first year and $3,000 plus accrued interest at the end of the fourth year. What should be the size of the payments if 8% simple interest is used?
COMMENT BOX
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Intrest Rate
12%
Using Equation
Using future worth factor (Table)
Using Exc
EOY
Loan Amount
EOY
Loan Amount
EOY
0
$1,000.00 0
$1,000.00 0
1
1
1
2
2
2
3
3
3
4
4
4
5
5
5
Dia St. John borrows $1,000 at 12% compounded annually. The loan is to be repaid after 5 years. How m
she repay in 5 years?
cel
Loan Amount
$1,000.00 much must
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Using Rule of 72
Intrest Rates
2%
3%
4%
6%
8%
12%
Periods (n)
72/(rate *100)
How long does it take for money to double
in value, if you earn (a) 2%, (b) 3%, (c) 4%, (d) 6%, (e) 8%, or (f) 12% annual compound interest?
Using interest tables & interpolating
Intrest Rates
Periods (Y)
FV factor (X)
12%
12%
Interpolation (X=2)
How long does it take for money to double
in value, if you earn (a) 2%, (b) 3%, (c) 4%
interest?
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%, (d) 6%, (e) 8%, or (f) 12% annual compound
Using Matematical Solution
Intrest Rates
Periods (n)
2%
35.003 Yrs 3%
23.450 Yrs 4%
17.673 Yrs 6%
11.896 Yrs 8%
9.006 Yrs 12%
How long does it take for money to double
in value, if you earn (a) 2%, (b) 3%, (c) 4%, 12% annual compound interest?
𝐹=𝑃 〖
(1+𝑖)
〗
^𝑛
2=1
〖
(
money to double
in v
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(d) 6%, (e) 8%, or (f) 𝑛= log2/log 〖
(1+𝑖)
〗
1 (1+𝑖)
〗
^𝑛
value
Using NPER
Using Goal Seek
Intrest Rates
Periods (n)
Intrest Rates
Periods (n)
FV
Intrest Rates
2%
35.003 Yrs 2%
1.000 Yrs 2%
3%
23.450 Yrs 3%
1.000 Yrs 3%
4%
17.673 Yrs 4%
1.000 Yrs 4%
6%
11.896 Yrs 6%
1.000 Yrs 6%
8%
9.006 Yrs 8%
1.000 Yrs 8%
12%
12%
6.115 Yrs 12%
How long does it take for money to double
in value, if you earn (a) 2%, (b) 3%, (c) 4%, (d) 6%, (e) 8%, or (f) 12% annual compound interest?
Using Solver
Periods (n)
FV
35.003 Yrs 23.450 Yrs 17.673 Yrs 11.896 Yrs 9.006 Yrs 6.116 Yrs
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Intrest Rate
5%
Using Equation
Using future worth factor (Table)
EOY
Loan Amount
EOY
Loan Amount
0
0
1
1
2
2
3
3
4
$10,000.00 4
$10,000.00 How much must you deposit, today, in order to accumulate $10,000 in 4 years, if you earn 5% com
𝑃=𝐹/ 〖
(1+𝑖)
〗
^𝑛
Using Excel
EOY
Loan Amount
0
1
2
3
4
$10,000.00 mpounded annually on your investment?
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Match the following measurements with the terms below:
Question 15 options:
12345
cash conversion efficiency ratio
12345
economic ordering quantity
12345
credit terms
12345
net working capital
12345
days of working capital
1.
5.1%
2.
47.2 days
3.
1/10, n/30
4.
$200,000
5.
700 units
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A2
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Return on Sales
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Company A
8.00%
4 times
a. Which company is more efficient?
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5 times
Company C
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What is the return on the following investment?
Original Cost
Selling Price
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Percent
Investment
or Invested $
of Investment
Received $
Return
Bond
$955.00
$1000.00
$240.00
34.07%
29.84%
29.21%
32.88%
26.99%
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Q23
Selected data from Box Division's accounting records revealed the following:
Sales
$ 345,060
Average investment
$ 200,100
Net operating income
$ 24,300
Minimum rate of return (divisional cost of capital)
11%
Box Division's return on sales (ROS) is: (Round your percentages to one decimal place.)
Multiple Choice
11.1%.
4.1%.
7.0%.
19.2%.
12.1%.
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Solvency and Profitability Trend Analysis
Addai Company has provided the following comparative information:
20Y8
20Υ7
20Υ6
20Y5
20Υ4
Net income
$273,406
S367,976
S631,176
$884,000
$800,000
Interest expense
616,047
572,003
528,165
495,000
440,000
Income tax expense
31,749
53,560
106,720
160,000
200,000
Total assets (ending balance)
4,417,178
4,124,350
3,732,443
3,338,500
2,750,000
Total stockholders' equity (ending balance)
3,706,557
3,433,152
3,065,176
2,434,000
1,550,000
Average total assets
4,270,764
3,928,396
3,535,472
3,044,250
2,475,000
Average total stockholders' equity
3,569,855
3,249,164
2,749,588
1,992,000
1,150,000
You have been asked to evaluate the historical performance of the company over the last five years.
Selected industry ratios have remained relatively steady at the following levels for the last five years:
20Y4-20Y8
Return on total assets
28%
Return on stockholders' equity
18%
Times interest earned
2.7
Ratio of liabilities to stockholders' equity
0.4
Required:
1.…
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21
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Problem 2
The price and cost data shown in the table below are for each of the three firms, F, G and H.
Firm
F
G
H
Sale price per
$18.00
$21.00
$30.00
wait
Variable
operating cost
$6.75
$13.50
$12.00
per unit
Fixed operating
$45,000
$30,000
$90,000
cost
Operating
breakeven point
Rank (1st, 2nd, or
3rd)
(a) What is the operating breakeven point in units for each firm? Fill in the blanks in the table above.
(b) How would you rank these firms in order from most risky to least risky? Fill in the blanks in the table above.
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Company X
$ 12,480,000
$ 3,120,000
$
Company Y
$ 28,480,000
$ 7,120,000
512,640
8.50%
Company Z
$ 20,480,000
$ 5,120,000
532,480
10.40%
Sales
Average operating assets
Net operating income
Minimum required rate of return
561,600
8.00%
Required:
1. Compute the return on investment (ROI) for each company using the formula stated in terms of margin and turnover.
2. Compute the residual income (loss) for each company.
3. Each company is presented with an investment opportunity that would yield a 9% rate of return.
a. Assume performance is measured based on ROI. Indicate whether each company will likely accept or reject the investment
opportunity.
b. Assume performance is measured based on residual income. Indicate whether each company will likely accept or reject the
investment opportunity.
Complete this question by entering your answers in the tabs below.
Req 1
Req 2
Reg ЗA
Req 3B
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Question 10.2
Provide the missing data for the following situations:
Red Division
White Division
Green Division
Sales
A
$10,000,000
E
Net operating income
$240,000
$500,000
$288,000
Total assets
B
C
$1,600,000
Return on investment
0.16
0.10
F
Return on sales
0.05
D
0.14
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Company X
$ 12,480,000
$ 3,120,000
561,600
8.00%
Company Y
$ 28,480,000
$ 7,120,000
2$
Company Z
$ 20,480,000
$ 5,120,000
532,480
Sales
Average operating assets
Net operating income
Minimum required rate of return
$
512,640
8.50%
10.40%
Required:
1. Compute the return on investment (ROI) for each company using the formula stated in terms of margin and turnover.
2. Compute the residual income (loss) for each company.
3. Each company is presented with an investment opportunity that would yield a 9% rate of return.
a. Assume performance is measured based on ROI. Indicate whether each company will likely accept or reject the investment
opportunity.
b. Assume performance is measured based on residual income. Indicate whether each company will likely accept or reject the
investment opportunity.
Complete this question by entering your answers in the tabs below.
Req 1
Req 2
Req ЗA
Req 3B
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Residual Income $23000
Operating income 45,337
Cost of Capital
12%
What is return on investment?
Don't round any intermediate calculations. Enter your answer to one decimal place. Do not use commas,
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