Chapter3
FinancialStatements,CashFlow,andTaxes
AnswerstoEndofChapterQuestions
31
The four financial statements contained in most annual reports are the balance sheet, income
statement,statementofretainedearnings,andstatementofcashflows.
32
Accountantstra
1.
Question: Shop-Til-You-Drop Inc. recently reported net income of $5.2 million and depreciation of $600,000.
What is was
net cash flow? Assume it has no amortization expense.
Your Answer:
2.
$5,400,000
$5,600,000
$5,800,000
$6,000,000
$6,200,000
CORRECT
4> A 12-year, $1000 face value bond has an 7.5% annual coupon. The bond has a current yield of 8%. What
is the bonds yield to maturity?
List out what we are given
FV= $1000
Years to Maturity = N = 12 (Paid annually, so only 1 payment per year)
Coupon (ann
UNIT 2: QUIZ RESULTS & EXPLANATION
Grade Details 1. Question:
The U.S. Treasury offers to sell you a bond for $613.81. No payments will be made until the bond matures 10 years from now, at which time it
will be redeemed for $1,000. What interest rate woul
Bond Yield to Maturity
Formula:
RATE(nper,pmt,pv,fv,type,guess)
Callaghan Motors' bonds has a $1000 par value bond with a 5% coupon rate paid annually. The bond will mature in 5
years and is trading at a price of $862.08 in the market. If you are looking
Weighted Average Cost of Capital ~ Excel Example
You were hired as a consultant to Keys Company, and you were provided with the following data:
Target capital structure: 40% debt, 10% preferred, and 50% common equity. The cost of debt is 6.00%,
the cost o
Net Present Value (NPV)
Internal Rate of Return (IRR)
Excel Formula: =NPV(Rate,CF1,CF2,CF3,.)-Initial Investment
=IRR(Values, Guess)
Cells in Blue are calculated automatically.
Swannee Resorts is considering a new project whose data is shown below. The eq
Question The Nunnally Company has equal amounts of low-risk, average-risk, and
: high-risk projects. Nunnally estimates that its overall WACC is 12%. The
CFO believes that this is the correct WACC for the companys average-risk
projects, but that a lower r
I came across a tricky quiz question
An increase in a firms expected growth rate would normally cause its required rate of
return to
Increase
Decrease
Fluctuate
Remain constant
Possibly increase, decrease, or have no effect
Explanation: The expected
Bond Pricing
Excel Formula: =PV(rate,nper,pmt,fv,type)
Cells in Blue are calculated automatically.
Callaghan Motors' bonds have 10 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the
coupon interest rate is 8%; and th
Time Value of Money - Rate
Excel Formula: =Rate(nper,pmt,pv,fv,type,guess)
Cells in Blue are calculated automatically.
Jenny makes a deal with a family member to borrow $10,000 today and agrees to pay back $15,000 in 5 years. What would the interest rate
Time Value of Money - Payment
Excel Formula: =PMT(rate,nper,pv,fv,type)
Cells in Blue are calculated automatically.
Janice is looking at a new car. The price of the car is $18,000 and she intends to take out a loan for 5 years. The bank offers her a loan
Time Value of Money - Finding Present Value
Excel Formula:
=PV(rate,nper,pmt,fv,type)
Cells in Blue are calculated automatically.
What is the present value of $5000 paid to you in 3 years if the interest rate is 8%?
First, fill in what is given in the pro