business writing - User Robin Juratovac Submitted 9/15/10...

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Unformatted text preview: User Robin Juratovac Submitted 9/15/10 4:42 PM Name Exam 1 - Chapters 1-4 Status Completed Score 101.5 out of 140 points Instructions • Question 1 0 out of 3.5 points Use the information for the question(s) below. Assume that you are 30 years old today, and that you are planning on retirement at age 65. Your current salary is $45,000 and you expect your salary to increase at a rate of 5% per year as long as you work. To save for your retirement, you plan on making annual contributions to a retirement account. Your first contribution will be made on your 31st birthday and will be 8% of this year's salary. Likewise, you expect to deposit 8% of your salary each year until you reach age 65. Assume that the rate of interest is 7%. The present value (PV) (at age 30) of your retirement savings is closest to: Answer Selected Answer: $108,000 Correct Answer: $87,000 • Question 2 0 out of 3.5 points Steve is offered an investment where for every $1.00 invested today, he will receive $1.10 at the end of each of the next five years. Steve concludes that in five years time he will have $1.10 for every $1.00 invested and that this investment will increase his personal value. What is Steve's major error in reasoning when making this decision? Answer Selected Answer: The value of the cash he has today is greater than the value of the cash he may have in the future. Correct Answer: Costs and benefits must be in the same terms to be compared. • Question 3 3.5 out of 3.5 points Use the table for the question(s) below. Luther Corporation Consolidated Income Statement Year ended December 31 (in $ millions) 2006 2005 Total sales 610.1 578.3 Cost of sales (500.2) (481.9) Gross profit 109.9 96.4 Selling, general, and administrative expenses (40.5) (39.0) Research and development (24.6) (22.8) Depreciation and amortization (3.6) (3.3) Operating income 41.2 31.3 Other income------ Earnings before interest and taxes (EBIT) 41.2 31.3 Interest income (expense) (25.1) (15.8) Pretax income 16.1 15.5 Taxes (5.5) (5.3) Net income 10.6 10.2 Price per share $16 $15 Shares outstanding (millions) 10.2 8.0 Stock options outstanding (millions) 0.3 0.2 Stockholders' Equity 126.6 63.6 Total Liabilities and Stockholders' Equity 533.1 386.7 Refer to the income statement above. Luther's return on equity (ROE) for the year ending December 31, 2006 is closest to: Answer Selected Answer: 8.4% Correct Answer: 8.4% • Question 4 3.5 out of 3.5 points Which of the following people may not manage the operations of a firm in which they are part or full owners? Answer Selected Answer: limited partners in a limited partnership Correct Answer: limited partners in a limited partnership • Question 5 3.5 out of 3.5 points Which of the following is NOT an advantage of a sole proprietorship?...
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This note was uploaded on 01/30/2012 for the course GEB 345816 taught by Professor Oppe during the Spring '11 term at Florida State College.

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business writing - User Robin Juratovac Submitted 9/15/10...

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