business finance final exam

You are evaluating the balance sheet for Goodman’s Bees Corporation. From the balance sheet you find the following balances: cash and marketable securities = $400,000, accounts receivable = $1,200,000, inventory = $2,100,000, accrued wages and taxes = $500,000, accounts payable = $800,000, and notes payable = $600,000. Calculate Goodman Bees’ net working capital.

1,800,000

The Fitness Studio, Inc.’s 2021 income statement lists the following income and expenses: EBIT = $538,000, interest expense = $63,000, and net income = $435,000. Calculate the 2021 taxes reported on the income statement.

40,000

The Fitness Studio, Inc.’s 2021 income statement lists the following income and expenses: EBIT = $773,500, interest expense = $100,000, and taxes = $234,500. The firm has no preferred stock outstanding and 100,000 shares of common stock outstanding. Calculate the 2021 earnings per share.

4.39

You are evaluating the balance sheet for PattyCake’s Corporation. From the balance
sheet you find the following balances: cash and marketable securities = $400,000; accounts receivable = $1,200,000; inventory = $2,100,000; accrued wages and taxes = $500,000; accounts payable = $800,000; and notes payable = $600,000. Calculate PattyCakes’ current ratio, quick ratio, and cash ratio

current ratio : 1.95

quick ratio : .84

cash ratio : .21

If Silas 4-Wheeler, Inc. has an ROE of 18 percent, equity multiplier of 2, and a
profit margin of 18.75 percent, what is the total asset turnover and the capital intensity?

total asset turnover : .48

capital intensity : 2.08

A deposit of $350 earns the following interest rates:
o 8 percent in the first year,
o 6 percent in the second year, and
o 5.5 percent in the third year.
What would be the third-year future value?

422.72

Approximately how many years does it take to double a $100 investment when interest
rates are 7 percent per year?

10.29

At age 30 you invest $1,000 that earns 8 percent each year. At age 40 you invest $1,000 that earns 12 percent per year. In which case would you have more money at age 60?

Age 30 FV30 - 10,062.66 FV40 - 9,646.29

Ten years ago, Hailey invested $2,000 and locked in a 9 percent annual interest rate for 30 years (end 20 years from now). Aidan can make a 20-year investment today and lock in a 10 percent interest rate. How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

3,944.31

What is the future value of a $900 annuity payment over five years if interest
rates are 8 percent?

5,279.94

What is the present value, when interest rates are 7.5 percent, of a $50 payment
made every year forever?

666.67

If the future value of an ordinary, 7-year annuity is $6,500 and interest rates
are 8.5 percent, what is the future value of the same annuity due?

7,052.50

A loan is offered with monthly payments and a 10 percent APR. What’s the loan’s
effective annual rate (EAR)?

10.47

Assume that you contribute $200 per month to a retirement plan for 20 years. Then you are able to increase the contribution to $300 per month for another 30 years. Given a 7 percent interest rate, what is the value of your retirement plan after the 50 years?

1,211,611.27

Payday loans are very short-term loans that charge very high interest rates. You can borrow $225 today and repay $300 in two weeks. What is the compounded annual rate implied by this 33.33 percent rate charged for only two weeks?

176,961.79

There is a four year loan with $25,000 for 4 years and 9% interest rate. What is the monthly payment amount?

622.13

How many years will it take to pay off a $5,000 loan with a monthly payment of 150 and an interest rate of 17%?

45.43 months (4 years)

Determine the interest payment for the following three bonds: 3.5 percent coupon corporate bond (paid semiannually), 4.25 percent coupon Treasury note, and a corporate zero coupon bond maturing in ten years. (Assume a $1,000 par value.)

17.5

21.25

Consider the following three bond quotes; a Treasury note quoted at 97:27, and a corporate bond quoted at 103.25, and a municipal bond quoted at 101.90. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars?

977.50

1,032.50

5,095

What is the current yield of a 3.8 percent coupon corporate bond quoted at a price of 102.08?

3.72

What is the taxable equivalent yield on a municipal bond with a yield to maturity of 3.5 percent for an investor in the 33 percent marginal tax bracket?

5.22%

On March 9, 2009, the Dow Jones Industrial Average reached a new low. The index closed at 6,547.05, which was down 79.89 that day. What was the return (in percent) of the stock market that day?

1.2055%

You would like to buy shares of Sirius Satellite Radio (SIRI). The current ask and bid quotes are $3.96 and $3.93, respectively. You place a market buy-order for 500 shares that executes at these quoted prices. How much money did it cost to buy these shares?

1,980

A preferred stock from Duquesne Light Company (DQUPRA) pays $3.55 in annual dividends. If the required return on the preferred stock is 6.7 percent, what’s the value of the stock?

52.99

Ultra Petroleum (UPL) has earnings per share of $1.56 and a P/E ratio of 32.48. What’s the stock price?

50.67

FedEx Corp stock ended the previous year at $103.39 per share.
a. It paid a $0.35 per share dividend last year. It ended last year at $106.69. If you owned 200
shares of FedEx, what was your dollar return and percent return?

3.53

Compute the expected return given these three economic states, their likelihoods,
and the potential returns:
Probability Return
Fast growth 0.3. 40%
Slow growth 0.4 10 %
Recession 0.3 -25 %

8.5

Hastings Entertainment has a beta of 0.65. If the market return is expected to be 11 percent and the risk-free rate is 4 percent, what is Hastings’ required return?

8.55

Suppose that Tap Dance, Inc.’s capital structure
features 65 percent equity, 35 percent debt, and that its before-tax cost of debt is 8 percent, while its cost of equity is 13 percent.

??

Suppose you sell a fixed asset for $109,000 when its book value is $129,000. If your company’s marginal tax rate is 39 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?

113,200

Your company is considering a new project that will require $1
million of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $150,000 using straight-line depreciation. The cost of capital is 13 percent, and the firm’s tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation.

Using equation 12-2, the depreciation per year will be:

156,818.44

You are trying to pick the least-expensive car for your new delivery service. You
have two choices: the Scion xA, which will cost $14,000 to purchase and which will have OCF of -$1,200 annually throughout the vehicle’s expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $20,000 to purchase and which will have OCF of -$650 annually throughout that vehicle’s expected four-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 12 percent, which one should you choose?
One iteration of each delivery car will consist of the following cash flows:

scion xA

You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs
$57,000, has a five-year life, and has an annual OCF (after tax) of -$10,000 per year. The Keebler CookieMunster costs $90,000, has a seven-year life, and has an annual OCF (after tax) of -$8,000 per year. If your discount rate is 12 percent, what is each machine’s EAC?

P707

You are considering the purchase of one of two machines used in your
manufacturing plant. Machine A has a life of two years, costs $80 initially, and then $125 per year in maintenance costs. Machine B costs $150 initially, has a life of three years, and requires $100 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine. Which is the better machine for the firm? The discount rate is 12 percent and the tax rate is zero.

Machine B

Compute the NPV statistic for Project Y and note whether the firm
should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent.
Project Y
Time 0 1 2 3 4
Cash Flow -$8,000 $3,350 $4,180 $1,520 $300

???