Module 2 Assigned Problems
1) Calculate solutions to the following assigned problems:
a) Chapter 4: Problems 1 and 3 on page 124 of the textbook.
b) Chapter 5: Problems 3, 6, 7, and 11 on pages 164-165 of the textbook.
c) Chapter 6: Problems 2, 5, 6, 11, and 19 on pages 216-219 of the textbook.
Text Book: Contemporary Financial Management
Course: 450 Intermediate finance
a) Chapter 4: Problems 1 and 3 on page 124 of the textbook:
1.Last year, Blue Lake Mines, Inc., had earnings after tax of $650,000. Included in its expenses
were depreciation of $400,000 and deferred taxes of $100,000. The company also
purchased new capital equipment for $300,000 last year. Calculate Blue Lake’s after-tax
cash flow for last year
3. Consider the Industrial Supply Company example (Table 4.4) again. Assume that the
company plans to maintain its dividend payments at the same level in 2009 as in 2008.
Also assume that all of the additional financing needed is in the form of short-term notes
payable. Determine the amount of additional financing needed and pro forma financial
statements (that is, balance sheet, income statement, and selected financial ratios) for
2009 under each of the following conditions
Increase in Sales Increase in Expenses
a. $3,750,000 $3,750,000
$3,000,000 $2,800,000
c. $4,500,000 $4,000,000
b) Chapter 5: Problems 3, 6, 7, and 11 on pages 164-165 of the textbook:
3. The Lancer Leasing Company has agreed to lease a hydraulic trencher to the Chavez Excavation
Company for $20,000 a year over the next eight years. Lease payments are to be
made at the beginning of each year. Assuming that Lancer invests these payments at an annual
rate of 9 percent, how much will it have accumulated by the end of the eighth year?
6.
A leading broker has advertised money multiplier certificates that will triple your money
in nine years; that is, if you buy one for $333.33 today, it will pay you $1,000 at the end of
nine years. What rate of return will you earn on these money multiplier certificates?
7. What is the present value of $800 to be received at the end of eight years, assuming the
following annual interest rate?
a..4 percent, discounted annually
b. 8 percent, discounted annually
c. 20 percent, discounted quarterly
d. 0 percent
11. What would you be willing to pay for a $1,000 bond paying $70 interest at the end of each