4-1A. (Financial forecasting) Zapatera Enterprises is evaluating its financing requirements for
the coming year. The firm has only been in business for one year, but its Chief Financial Officer
predicts that the firm's operating expenses, current assets, net fixed assets, and current liabilities
will remain at their current proportion of sales.
Last year Zapatera had $12 million in sales with net income of $1.2 million. The firm anticipates
that next year's sales will reach $15 million with net income rising to $2 million. Given its present high rate of growth, the firm retains all of its earnings to help defray the cost of new investments.
The firm's balance sheet for the year just ended is as follows:
Zapatera Enterprises, Inc.
12/31/03 % OF SALES
Current assets $3,000,000 25%
Net fixed assets 6,000,000 50%
L I A B I L I T I E S A N D OWNERS' EQUITY
Accounts payable $3,000,000 25%
Long-term debt 2,000,000 NAa
Total liabilities $5,000,000
Common stock 1,000,000 NA*
Paid-in capital 1,800,000 NA*
Retained earnings 1,200,000
Common equity 4,000,000
ᵃNot- applicable. This figure does not vary directly with sales and is assumed to remain constant for purposes of making next year's forecast of financing requirements.
Estimate Zapatera's total financing requirements (i.e., total assets) for 2004 and its net funding requirements (discretionary financing needed).
5-1A. (Compound interest) To what amount will the following investments accumulate?
a. $5,000 invested for 10 years at 10 percent compounded annually
b. $8,000 invested for 7 years at 8 percent compounded annually
c. $775 invested for 12 years at 12 percent compounded annually
d. $21,000 invested for 5 years at 5 percent compounded annually
5-4A. (Present value) What is the present value of the following future amounts?
a. $800 to be received 10 years from now discounted back to the present at 10 percent
b. $300 to be received 5 years from now discounted back to the present at 5 percent
c. $1,000 to be received 8 years from now discounted back to the present at 3 percent
d. $1,000 to be received 8 years from now discounted back to the present at 20 percent
5-5A. (Compound annuity) What is the accumulated sum of each of the following streams of
a. $500 a year for 10 years compounded annually at 5 percent
b. $100 a year for 5 years compounded annually at 10 percent
c. $35 a year for 7 years compounded annually at 7 percent
d. $25 a year for 3 years compounded annually at 2 percent
5-6A. (Present value of an annuity) What is the present value of the following annuities?
a. $2,500 a year for 10 years discounted back to the present at 7 percent
b. $70 a year for 3 years discounted back to the present at 3 percent
c. $280 a year for 7 years discounted back to the present at 6 percent
d. $500 a year for 10 years discounted back to the present at 10 percent
The solution computes Compound interest, present value, annuity etc in excel.