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Your father's employer was just acquired, and he was given a severance payment of $397,500, which he
invested at a 7.5% annual rate. He now plans to retire, and he wants to withdraw $35,000 at the end of
each year, starting at the end of this year. How many years will it take to exhaust his funds, i.e., run the
account down to zero?
27.19
24.55
26.13
21.38
26.40
Feedback:
I/YR 7.5%
PV
$397,500
PMT $35,000
FV
$0.00
N
26.40
Score: 1 of 1
2.

Your uncle has $1,135,000 and wants to retire. He expects to live for another 25 years and to earn 7.5%
on his invested funds. How much could he withdraw at the end of each of the next 25 years and end up
with zero in the account?
$98,766.96
$93,675.88
$92,657.67
$101,821.61
$120,149.50
N
25
I/YR 7.5%
PV
$1,135,000
FV
$0.00
PMT $101,821.61
Score: 1 of 1
3.
Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were
$250,000. The firm's total-debt-to-total-assets ratio was 60.0%. Based on the DuPont equation, what was
the ROE?

22.61%
17.86%
19.00%
23.18%
23.56%
Sales
$325,000
Assets
$250,000
Net income
$19,000
Debt ratio
60.0%
Debt = Debt% Assets =
$150,000
Equity = Assets - Debt =
$100,000
Profit margin = NI / Sales =
5.85%
TATO
1.30
Equity multiplier = Assets / Equity
=
2.50
ROE
19.00%
Score: 1 of 1
4.

Suppose you inherited $870,000 and invested it at 8.25% per year. How much could you withdraw at the
beginning of each of the next 20 years?
$67,543.38
$76,715.94
$99,230.40
$83,386.89
$97,562.66
N
20
I/YR 8.25%
PV
$870,000
FV
$0.00
PMT $83,386.89
Score: 1 of 1
5.
Last year Jandik Corp. had $295,000 of assets, $18,750 of net income, and a debt-to-total-assets ratio of
37%. Now suppose the new CFO convinces the president to increase the debt ratio to 48%. Sales and total
assets will not be affected, but interest expenses would increase. However, the CFO believes that better
cost controls would be sufficient to offset the higher interest expense and thus keep net income
unchanged. By how much would the change in the capital structure improve the ROE?

2.63%
2.13%
1.69%
2.22%
1.90%
Assets
$295,000
Old debt ratio
37%
Old debt = Assets Old debt% =
$109,150
Old equity
$185,850
New debt ratio
48%
New debt = Assets New debt% =
$141,600
New Equity = Assets - New debt =
$153,400
Net income
$18,750
New ROE = New income / New
Equity
12.22%
Old ROE = Old income / Old Equity
10.09%
Increase in ROE
2.13%
Score: 1 of 1

6.
Edwards Electronics recently reported $11,250 of sales, $5,500 of operating costs other than depreciation,
and $1,250 of depreciation. The company had no amortization charges, it had $3,500 of bonds that carry a
6.25% interest rate, and its federal-plus-state income tax rate was 35%. How much was its net cash flow?
$3,284.75

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