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# Rocking Horse Corp, Charlie Spleen, Oliver Inc

1)Rocking Horse Corporation reported net income for 2004 of \$100,000, sales of \$300,000, expenses (excluding depreciation) of \$150,000, and depreciation expense of \$50,000. The company's accounts receivable balance increased by \$25,000 during the year and its accounts payable balance remained the same. The company's change in cash for the year is estimated to be:
A)\$125,000 B) \$175,000 C) \$100,000 D) \$300,000

2)Charlie Spleen wants to retire in 25 years, and he wants to have an annuity of \$20,000 a year for 20 years after retirement. Charlie wants to receive the first annuity payment at the end of the 25th year. Using an interest rate of 8%, how much must Charlie invest today in order to have his retirement annuity (round to nearest \$10).
A)\$28,670 B) \$30,970 C) \$26,440 D) \$23,720

3)How much would you be willing to pay for a 10-year ordinary annuity if the payments are \$500 per year and the rate of return is 6.25% annually?
A)\$4,132 B) \$3,637 C) \$3,864 D) \$3,423

4)You purchased 1,000 shares of Oliver Inc. common stock one year ago for \$50 per share. You decided to take your profit today by selling at \$55.00 per share. What is your holding period return?
A)15.0% B) 12.5% C) 10.0% D) 50.0%

#### Solution Preview

Financial Management
1)Rocking Horse Corporation reported net income for 2004 of \$100,000, sales of \$300,000, expenses (excluding depreciation) of \$150,000, and depreciation expense of \$50,000. The company's accounts receivable balance increased by \$25,000 during the year and its accounts payable balance remained the same. The company's change in cash for the year is estimated to be:

A)\$125,000 B) \$175,000 C) \$100,000 D) \$300,000