66.
All of Fake Stone's costs and net working capital vary directly with sales. Sales
are projected to increase by 3.5 percent. What is the pro forma accounts
receivable balance for next year?
A. $1,659.80
B. $1,661.84
C. $1,780.20
D. $1,787.80
E. $1,800.
B. $5,023.10
C. $5,592.20
D. $5,920.67
E. $6,293.30
Pro forma retained earnings = $4,190 + [($3,420 - $1,368) 1.025)] =
$6,293.30
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 04-01 How to apply the percentage of sales method.
Secti
92.
Seaweed Mfg., Inc. is currently operating at only 86 percent of fixed asset
capacity. Fixed assets are $387,000. Current sales are $510,000 and are
projected to grow to $664,000. What amount must be spent on new fixed
assets to support this growth in
66.
What lesson does the future value formula provide for young workers who are
looking ahead to retiring some day?
The future value formula is: FV = PV (1 + r)t. Time is the exponent. While the
rate of return is important and has a direct affect on the g
61. You have just made a $1,500 contribution to your individual retirement account.
Assume you earn a 12 percent rate of return and make no additional
contributions. How much more will your account be worth when you retire in 25
years than it would be if
48.
The Corner Store has $219,000 of sales and $193,000 of total assets. The firm
is operating at 87 percent of capacity. What is the capital intensity ratio at full
capacity?
A. 0.62
B. 0.68
C. 0.77
D. 1.35
E. 1.47
Full-capacity sales = $219,000/0.87 = $
58.
The Dog House has net income of $3,450 and total equity of $8,600. The debtequity ratio is 0.60 and the payout ratio is 30 percent. What is the internal
growth rate?
A. 14.47 percent
B. 17.78 percent
C. 21.29 percent
D. 29.40 percent
E. 33.33 percent
32.
You are depositing $1,500 in a retirement account today and expect to earn an
average return of 7.5 percent on this money. How much additional income will
you earn if you leave the money invested for 45 years instead of just 40 years?
A. $10,723.08
B.
101. A) What are the assumptions that underlie the internal growth rate and B) what
are the implications of this rate?
The basic assumptions are: Costs and net working capital increase
proportionately with sales. Fixed assets also increase proportionately
81.
The most recent financial statements for Watchtower, Inc. are shown here
(assuming no income taxes):
Assets and costs are proportional to sales. Debt and equity are not. No
dividends are paid. Next year's sales are projected to be $4,750. What is the
37.
You want to have $25,000 saved 6 years from now to buy a house. How much
less do you have to deposit today to reach this goal if you can earn 5.5 percent
rather than 5 percent on your savings? Today's deposit is the only deposit you
will make to this
76.
Hungry Howie's is currently operating at 84 percent of capacity. What is the
total asset turnover ratio at full capacity?
A. .68
B. .78
C. .95
D. 1.29
E. 1.42
Full-capacity sales = $17,300/0.84 = $20,595.24
Total asset turnover at full-capacity = $20,
43.
A Procrustes approach to financial planning is based on:
A. a policy of producing a financial plan once every five years.
B. developing a plan around the goals of senior managers.
C. a proactive approach to the economic outlook.
D. a flexible capital
A. $19,800
B. $21,070
C. $23,600
D. $24,240
E. $26,810
Pro forma net fixed assets = $19,600 (1 + 0.075) = $21,070
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 04-01 How to apply the percentage of sales method.
Section: 4.3
Topic: P
22.
Alex invested $10,500 in an account that pays 6 percent simple interest. How
much money will he have at the end of four years?
A. $12,650
B. $12,967
C. $13,020
D. $13,256
E. $13,500
Ending value = $10,500 + ($10,500 .06 4) = $13,020
AACSB: Analytic
Bl
56.
You have just received notification that you have won the $1.4 million first prize
in the Centennial Lottery. However, the prize will be awarded on your 100th
birthday, 78 years from now. The appropriate discount rate is 8 percent. What
is the present
71.
Fake Stone, Inc. is projecting sales to decrease by 4 percent next year while
the profit margin remains constant. The firm wants to increase the dividend
payout ratio by 2 percent. What is the projected increase in retained earnings
for next year?
A.
27.
You own a classic automobile that is currently valued at $150,000. If the value
increases by 6.5 percent annually, how much will the automobile be worth ten
years from now?
A. $244,035.00
B. $251,008.17
C. $270,013.38
D. $281,570.62
E. $291,480.18
Fut
A. $-10,246
B. -$8,122
C. -$6,708
D. $2,407
E. $3,309
Essay Questions
99. Why do financial managers need to understand the implications of both the
internal and the sustainable rates of growth?
100.Identify the four primary determinants of a firm's growth