68.
Southern Tours is considering acquiring Holiday Vacations. Management
believes Holiday Vacations can generate cash flows of $187,000, $220,000,
and $245,000 over the next three years, respectively. After that time, they feel
the business will be worth
73.
You just signed a consulting contract that will pay you $38,000, $52,000, and
$85,000 annually at the end of the next three years, respectively. What is the
present value of these cash flows given a 10.5 percent discount rate?
A. $139,975
B. $148,307
Section: 6.2
Topic: Loan payment
41.
You borrow $165,000 to buy a house. The mortgage rate is 4.5 percent and the
loan period is 30 years. Payments are made monthly. If you pay the mortgage
according to the loan agreement, how much total interest will you
117. You are preparing to make monthly payments of $72, beginning at the end of
this month, into an account that pays 6 percent interest compounded monthly.
How many payments will you have made when your account balance reaches
$9,312?
A. 97
B. 100
C. 119
36.
What is the future value of $1,200 a year for 40 years at 8 percent interest?
Assume annual compounding.
A. $301,115
B. $306,492
C. $310,868
D. $342,908
E. $347,267
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 06-02 How loan pa
Section: 6.2
Topic: Amortized loan
108. This morning, you borrowed $150,000 to buy a house. The mortgage rate is
7.35 percent. The loan is to be repaid in equal monthly payments over 20
years. The first payment is due one month from today. How much of the
Chapter 01 - Introduction to Corporate Finance
19. An annuity:
A. is a debt instrument that pays no interest.
B. is a stream of payments that varies with current market interest rates.
C. is a level stream of equal payments through time.
D. has no value.
Chapter 01 - Introduction to Corporate Finance
57. The three parts of the Du Pont identity can be generally described as:
I. operating efficiency, asset use efficiency and firm profitability.
II. financial leverage, operating efficiency and asset use effi
Chapter 01 - Introduction to Corporate Finance
57. Today, you are retiring. You have a total of $413,926 in your retirement savings and have
the funds invested such that you expect to earn an average of 3%, compounded monthly,
on this money throughout you
Chapter 01 - Introduction to Corporate Finance
28. You are the beneficiary of a life insurance policy. The insurance company informs you that
you have two options for receiving the insurance proceeds. You can receive a lump sum of
$50,000 today or receive
Chapter 01 - Introduction to Corporate Finance
3.
An annuity stream where the payments occur forever is called a(n):
A. annuity due.
B. indemnity.
C. perpetuity.
D. amortized cash flow stream.
E. amortization table.
AACSB: Analytic
Blooms: Remember
Diffic
Chapter 01 - Introduction to Corporate Finance
106.You want to have $10,000 saved ten years from now. How much less do you have to
deposit today to reach this goal if you can earn 6% rather than 5% on your savings?
A. $555.18
B. $609.81
C. $615.48
D. $928
Chapter 01 - Introduction to Corporate Finance
116. A firm has days' sales in inventory of 105 days, an average collection period of 35 days, and
takes 42 days, on average, to pay its accounts payable. Taken together, what do these three
figures imply abo
Chapter 01 - Introduction to Corporate Finance
85. Lee Sun's has sales of $3,000, total assets of $3,000, and a profit margin of 5%. The firm has a
total debt ratio of 60%. What is the return on equity?
A. 5%
B. 12.5%
C. 23.2%
D. 41.3%
E. 250%
Return on e
Chapter 01 - Introduction to Corporate Finance
10. You are considering two projects with the following cash flows:
Which of the following statements are true concerning these two projects?
I. Both projects have the same future value at the end of year 4,
Chapter 01 - Introduction to Corporate Finance
24. Bradley Snapp has deposited $6,000 in a guaranteed investment account with a promised
rate of 6% compounded annually. He plans to leave it there for 4 full years when he will
make a down payment on a car
Chapter 01 - Introduction to Corporate Finance
109. Moulton Incorporated has a 10% return on assets and a 20% dividend payout ratio. What is
the internal growth rate?
A. 8.2%
B. 8.7%
C. 9.4%
D. 10%
E. None of the above
Internal growth rate = cfw_.10*(1-.2
112. You want to buy a new sports coupe for $41,750, and the finance office at the
dealership has quoted you an 8.6 percent APR loan compounded monthly for
48 months to buy the car. What is the effective interest rate on this loan?
A. 8.28 percent
B. 8.41
93.
The Pawn Shop loans money at an annual rate of 23 percent and compounds
interest weekly. What is the actual rate being charged on these loans?
A. 25.16 percent
B. 25.80 percent
C. 26.49 percent
D. 26.56 percent
E. 26.64 percent
AACSB: Analytic
Blooms:
Running head: FINAL RATIO ANALYSIS
1
Final Ratio Analysis
Financial Statement Analysis
I.
Explaining Business Objectives and the Effect of the Objectives on the Ratios
Both AMD and Intel had understandable business objects. Though they both were slightly
Note: The difference = 0.1 $24,829 = $2,483
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 06-01 How to determine the future and present value of investments with multiple cash flows.
Section: 6.2
Topic: Annuity present value
34.
Difficulty: 1 Easy
Learning Objective: 06-02 How loan payments are calculated and how to find the interest rate on a loan.
Section: 6.2
Topic: Annuity present value
29.
Your employer contributes $50 a week to your retirement plan. Assume that
you work for
Section: 6.2
Topic: Interest rate
63.
Today, you turn 23. Your birthday wish is that you will be a millionaire by your
40th birthday. In an attempt to reach this goal, you decide to save $75 a day,
every day until you turn 40. You open an investment accou
Option A has a present value of $90,514.16 at 7.5 percent.
Option B has a present value of $85,255.68 at 7.5 percent.
Option C has a present value of $100,000.
Option C is the best choice since it has the largest present value.
AACSB: Analytic
Blooms: Ana
24.
You need $25,000 today and have decided to take out a loan at 7 percent for
five years. Which one of the following loans would be the least expensive?
Assume all loans require monthly payments and that interest is compounded
on a monthly basis.
A. int
83.
A preferred stock pays an annual dividend of $3.20. What is one share of this
stock worth today if the rate of return is 11.75 percent?
A. $23.48
B. $25.00
C. $27.23
D. $33.80
E. $35.55
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objecti
46.
You are buying a previously owned car today at a price of $3,500. You are
paying $300 down in cash and financing the balance for 36 months at 8.5
percent. What is the amount of each loan payment?
A. $101.02
B. $112.23
C. $118.47
D. $121.60
E. $124.40
103. John's Auto Repair just took out a $52,000, 10-year, 8 percent, interest-only
loan from the bank. Payments are made annually. What is the amount of the
loan payment in year 10?
A. $7,120
B. $8,850
C. $13,264
D. $49,000
E. $56,160
Payment in year 10 =
78.
You plan on saving $5,200 this year, nothing next year, and $7,500 the
following year. You will deposit these amounts into your investment account at
the end of each year. What will your investment account be worth at the end of
year three if you can
98.
City Bank wants to appear competitive based on quoted loan rates and thus
must offer a 7.75 percent annual percentage rate on its loans. What is the
maximum rate the bank can actually earn based on the quoted rate?
A. 8.06 percent
B. 8.14 percent
C. 8