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Question 1

You ve decided to pursue higher education and enroll in a MS in Finance program. If you borrowed \$150,000 at a fixed interest rate of 7.5% and can only make payments of \$25,000 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?

1 points
Question 2

Mark invests \$5,000 into a retirement account. He expects to earn 9 percent, compounded monthly, on his money for the next 15 years. After that, for the next 35 years, he wants to be more conservative, so he only expects to earn 5 percent, compounded semi-annually. How much money will Mark have in his account when he retires 50 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.

1 points
Question 3

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

Year 0 1 2 3 4 5

Cash flows -\$1,100 \$300 \$310 \$320 \$330 \$340

2.31 years
3.52 years
2.85 years
2.56 years
.
1 points
Question 4

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.

1 points
Question 5

As the required rate of return is increased, the:
PV decreases, FV decreases
PV increases, FV decreases
PV increases, FV increases
.
1 points
Question 6

ABC’s current assets comprise of cash, accounts receivables, and inventory. ABC has \$12,087 in cash, \$7,459 in accounts receivables, and \$11,981 in inventory. If the current ratio is 3.2 times, compute the quick ratio.

1 points
Question 7

If you receive \$269 at the end of each year for the first three years and \$800 at the end of each year for the next three years. What is the present value? 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.

1 points
Question 8

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

less than the net present value (NPV).

greater than the internal rate of return (IRR).

less than one.

greater than a pre-specified rate of return.

.
1 points
Question 9

What is the net present value of the following cash flows? Assume an interest rate of 16.98%

Year CF
0 -\$10,840
1 \$5,514
2 \$6,242
3 \$9,352

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

1 points
Question 10

ABC Company earned \$756,889 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.

1 points
Question 11

In 2012, ABC had operating income (EBIT) of \$21,307, interest expense of \$1,698, and dividend expense of \$2,587. If the tax rate is 38%, what is the transfer to Retained Earnings?

1 points
Question 12

Assume that a company has \$133,865 of taxable income from operations plus \$9,687 of interest income and \$16,768 of dividend income. What is the company s federal tax liability?

1 points
Question 13

ABC has the following data for the year ending 12/31/10: Net income = \$600; Net operating profit after taxes (NOPAT) = \$2,759; Total assets = \$2,500; Short-term investments = \$200; Stockholders’ equity = \$1,800; Total debt = \$700; and Total operating capital = \$4,614. ABC’s weighted average cost of capital is 15%. 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.

1 points
Question 14

ABC recently reported \$20,909 of sales, \$8,362 of operating costs other than depreciation, and \$1,293 of depreciation. The company had \$4,302 of bonds that carry a 7% interest rate

### Question 14

1. ABC recently reported \$20,909 of sales, \$8,362 of operating costs other than depreciation, and \$1,293 of depreciation. The company had \$4,302 of bonds that carry a 7% interest rate, and its income tax rate was 35%. 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.

1 points

### Question 15

1. Suppose an investment offers to triple your money in 26 years. What annual rate of return are you being offered if interest is compounded monthly?

1 points

### Question 16

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

1 points

### Question 17

1. 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?

 \$1,080,000 \$1,885,000 \$1,685,000 \$1,560,000 \$325,000

1 points

### Question 18

1. If you put \$108 in a savings account at the beginning of each year for 19 years, how much money will be in the account at the end of the 19th year? Assume that the interest rate is 8.

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.

1 points

### Question 19

1. If you receive \$792 at the end of each year for the first three years and \$8,382 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.

1 points

### Question 20

1. Consider a taxable bond with a yield of 10.6% and a tax-exempt municipal bond with a yield of 4.4%. At what tax rate would you be indifferent between the two bonds?

1 points

### Question 21

1. ABC Company offers a perpetuity which pays annual payments of \$16,593. This contract sells for \$221,788 today. What is the interest rate?

1 points

### Question 22

1. ABC is reviewing a project that will cost \$1,494.The project will produce cash flows \$429 at the end of each year for the first two years and \$883 at the end of each year for the next two years. What is the profitability index? Assume interest rate is 7%.

1 points

### Question 23

1. A firm has a return on equity of 21 percent, a net profit margin of 8.4 percent, and total equity of \$675.1. What is the net income?

1 points

### Question 24

1. 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

 14.39% 13.47% 12.71% 13.85% 14.82%

1 points

### Question 25

1. What is the effective rate of 24% compounded monthly?

1 points

### Question 26

1. ABC Company has a debt-equity ratio of 0.69. What is the debt ratio?

1 points

### Question 27

1. In its most recent financial statements, ABC reported \$68,853 of net income and \$592,366 of retained earnings. The previous retained earnings were \$679,945. 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.

1 points

### Question 28

ABC Company has net income of \$105,045, return on assets of 6.5 percent, and debt-equity ratio of 0.66. What is the return on equity?