251 midterm quizes

docx

School

Humber College *

*We aren’t endorsed by this school

Course

1501

Subject

Finance

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by blackguytyrone20

Chapter 1&2 1 Ranney Inc. has sales of $44,500, costs of $24,100, depreciation expense of $1,800, and interest expense of $1,400. If the tax rate is 35 percent, what is the operating cash flow? (Do not round intermediate calculations.) Income Statement Sales $ 44,500 Costs (24,100) Depreciation (1,800) EBIT $ 18,600 Interest (1,400) Taxable income $ 17,200 Taxes (35%) (6,020) Net income $ 11,180 Operating cash flow = EBIT + Depreciation — Taxes Operating cash flow = $18,600 + $1,800 — $6,020 Operating cash flow = $14,380

2 e J o Consider the following abbreviated financial statements for Weston Enterprises: WESTON ENTERPRISES 2017 and 2018 Partial Statement of Financial Position 4.29/10 - Assets Liabilities and shareholders’ equity points awarded 2017 2017 2018 Current assets $ 938 Current liabilities $ 380 $ 410 Scored Net fixed assets 3,957 Long-term debt 2,022 2,177 . S ~ S . WESTON ENTERPRISES 2018 Statement of Comprehensive Income Sales $11,960 Costs 5,780 Depreciation 1,080 Interest paid 180 T a. What is the shareholders’ equity for 2017 and 20187 (Omit $ sign in your response. Negative amount should be indicated by minus sign.) a. Total assets 2017 Total liabilities 2017 Shareholders’ equity 2017 Total assets 2018 Total liabilities 2018 Shareholders’ equity 2018 $938 + $3,957 = $4,895 $380 + $2,022 = $2,402 $4,895 - $2,402 = $2,493 $992 + $4,584 = $5,576 $410 + $2,177 = $2,587 $5,576 - $2,587 = $2,989

NWC 2017 NWC 2018 Change in NWC CA17 - CL17 = $938 - $380 = $558 CA18 - CL18 = $992 - $410 = $582 NWC18 - NWC17 = $582 - $558 = $24 " " We can calculate net capital spending as: Net capital spending = Net fixed assets 2018 — Net fixed assets 2017 + Depreciation Net capital spending = $4,584 — $3,957 + $1,080 Net capital spending = $1707 Net capital spending Fixed assets bought - Fixed assets sold $1,707 $1,855 - Fixed assets sold Fixed assets sold = $1,855 - $1,707 Fixed assets sold = $148

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

EBIT EBIT EBIT EBT EBT EBT Taxes Taxes Taxes OCF OCF OCF Sales - Costs - Depreciation $11,968 - $5,780 - $1,080 $5,100 EBIT - Interest = $5,100 - $180¢ = $4,920 = EBT x 0.35 =$4,920 x 0.35 = $1,722 EBIT + Depreciation - Taxes $5,100 + $1,080 - $1,722 = $4,458

d. LTD18 - LTD17 $2,077 - $2,022 $155 Net new borrowing Net new borrowing Net new borrowing Cash flow to creditors Cash flow to creditors Cash flow to creditors Interest - Net new LTD $180 - $155 $25 Net new borrowing = $155 = Debt issued — Debt retired Debt retired = $390 — $155 = $235 Culligan Inc. has current assets of $12,600, net fixed assets of $27,000, current liabilities of $8,900, and long-term debt of $14,400. (Do not round intermediate calculations.) . Whatis the value of the shareholders’ equity account for this firm? Shareholders' equity $[16300 @ . How much is net working capital? Networking capal $ [3700] @ Shareholders’ equity = $39,600 -$14,400 — $8,900 = $16,300 Net Working Capital = Current Assets — Current Liabilities = $12,600 — $8,900 = $3700

Chapter 5 1 Conoly Co. has identified an investment project with the following cash flows. (Do not round ir 2 decimal places. Omit $ sign in your response.) Year Cash Flow 10/10 1 $ [GEf points awarded 2 1,270 3 1,530 If the discount rate is 9 percent, what is the PV of these cash flows? Present value $|%$4271.21| @ If the discount rate is 20 percent, what is the PV of these cash flows? Present value $|$3,32886| @ If the discount rate is 30 percent, what is the PV of these cash flows? Present value $($272772| @

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

To find the PV of a lump sum, we use: PV =FV / (1+r)F PV@9% = $890 / 1.09 + $1,270 / 1.092 + $1,530 / 1.09° + $1,700 / 1.09% = $4,271.21 PV@20% = $890 / 1.20 + $1,270 / 1.202 + $1,538 / 1.20°> + $1,700 / 1.20% = $3,328.86 PV@30% = $890 / 1.38 + $1,270 / 1.302 + $1,538 / 1.30° + $1,700 / 1.30% = $2,727.72 NPV CPT NPV CPT NPV CPT $4,271.21 $3,328.86 $2,727.72

2 At 610 percent interest, how long does it take to double your money? To quadruple it? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) 1010 points awarded Double your money ° years Quadruple your money ° years Enter 6.10% -$1 Solve for 11.71 Enter 6.10% -$1 Solve for 23.41 Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2010, Deutscher-Menzies sold Arkies under the Shower, a painting by renowned Australian painter Brett Whiteley, at auction for a price of $1,160,000. Unfortunately for the previous owner, he had purchased it three years earlier at a price of $1,740,000. What was his annual rate of return on this painting? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Negative amounts should be indicated by a minus sign.) Annual rate of return 3 10/10 points awarded Annual rate of return 0% Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2010, Deutscher-Menzies sold Arkies under the Shower, a painting by renowned Australian painter Brett Whiteley, at auction for a price of $1,160,000. Unfortunately for the previous owner, he had purchased it three years earlier at a price of $1,740,000. Enter $1,740,000 -$1,160,000 I/Y PMT Solve for -12.64% What was his annual rate of return on this painting? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Negative amounts should be indicated by a minus sign.)

I 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 $170 annually if the next payment occurs one year from today? The market interest rate is 4.4 10/10 percent. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) points awarded Present value Scored A consol is a perpetuity. To find the PV of a perpetuity, we use the equation: Pv=C/r PV = $170/ 0.044 PV = $3,863.64

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Chapter 5 PT 2 1 0/10 At what discount rate would Barrett be indifferent between accepting and rejecting the project? (Do not round intermediate points awarded ~ calculations. Round the final answer to 2 decimal places.) Discount rate Q% Barrett Pharmaceuticals is considering a drug project that costs $2.51 million today and is expected to generate end-of-year annual cash flows of $229,000, forever. PVv=C/r $2,510,000 = $229,000 / r r=%$229000 / $2,510,000 r=0.0912 or 9.12% You want to buy a new sports car from Muscle Motors for $83,000. The contract is in the form of a 72-month annuity due ata 7.50 percent annual percentage rate. What will your monthly payment be? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) 2 10/10 points awarded Monthly payment $($1,42617| @ Enter 72 7.50% / 12 -$83,000 I A | A Kl | EE Solve for $1,426.17

You need a 30-year, fixed-rate mortgage to buy a new home for $280,000. Your bank will lend you the money at a 5.75 percent APR for this 360-month loan. However, you can only afford monthly payments of $850, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. 3 10/10 points awarded How large will this balloon payment have to be for you to keep your monthly payments at $850? (Do not round intermediate - calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Scored Balloon payment $1$750,91716 | @ PVA = $850[(1 - {1 / [1 + (0.058/12)]1}3%9) / (e@.@58/12)] = $145,654.48 The monthly payments of $850 will amount to a principal payment of $145,654.48. The amount of principal you will still owe is: $280,000 - 145,654.48 = $134,345.52 Balloon payment = $134,345.52[1 + (8.058/12)]13%9 = $750,917.16 The PV of the following cash flow stream is $7,950 when discounted at 8.1 percent annually. What is the value of the missing cash flow? (Do not round intermediate calculations. Round the final answer to 2 decimal places. 0/10 Omit $ sign in your response.) points awarded Year Cash Flow 3,272.29 £ 0.1% 2 3 2,158 a 2,750