Q1- Future value: Ning Gao is planning to buy a house in five years. She is looking to invest $25,000 today in an index mutual fund that will provide her a return of 12 percent annually. How much will she have at the end of five years? (Round to the nearest dollar.)
Q2---Multiple compounding periods (FV): Normandy Textiles had a cash inflow of $1 million, which it needs for a long-term investment at the end of one year. It plans to deposit this money in a bank CD that pays daily interest at 3.75 percent. What will be the value of the investment at the end of the year? (Round to the nearest dollar.)
Q3-- Ahmet purchased a stock for $45 one year ago. The stock is now worth $65. During the year, the stock paid a dividend of $2.50. What is the total return to Ahmet from owning the stock? (Round your answer to the nearest whole percent.)
Q4-- Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)
Q5-- You have borrowed $10,000 to pay off your Spring Break trips. You plan to make monthly payments over a 10-year period. If the loan's interest rate is 10% compounded monthly, how much interest will you pay over the life of the loan?
Q6-- Your uncle promises to give you $550 per quarter for the next five years starting today. How much is his promise worth right now if the interest rate is 8% compounded quarterly?
Q7-- Emperor Corporation's financial statements for the last year are shown below. All figures are in thousands ($000). The firm paid a $1,000 dividend to its stockholders during the year. Two million shares of stock are outstanding. The stock is currently trading at a price of $50. There were no sales of new stock. Lease payments totaling $400 are included in cost and expense.
ASSETS INCOME STATEMENT
Cash $ 2,000 Sales $100,000
Accounts receivable 12,000 COGS 80,000
Inventory 14,000 Gross Margin $ 20,000
Current Assets $28,000 Cash Expenses $ 8,000
Gross Fixed assets $27,000 Depreciation 1,600
Accumulated depreciation (16,000) EBIT $ 10,400
Net fixed assets 11,000 Interest 800
Total assets $39,000 EBT $ 9,600
LIABILITIES Tax 2,600
Accounts payable $ 3,000 Net Income $ 7,000
Current Liabilities $ 4,000
Long term Debt 10,000
Total liabilities & equity $39,000
Q8-- Use the following information for the next four questions. Norlin Corporation is considering an expansion project that will begin next year (Time 0). Norlin's cost of capital is 12%. The initial cost of the project will be $250,000, and it is expected to generate the following cash flows over its five-year life:
Before you attempt question 1 and 2 you need to note the following excerpt:
The future value of an asset or cash is its value at a specified date in the future that is equivalent in value ...
This solution provides an in depth explanation to a number of finance related questions. Information is included which will help you in calculating the present or future value given a particular situation; the return on a stock; ratios, such as, current ratio, quick ratio, inventory turnover, debt ratio, return on equity and times interest earned; and the net present value, pay-back period and internal rate of return of a project.