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Finance Questions: PV, FV, Stock Return, Ratios, NPV & IRR

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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.

BALANCE SHEET
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
Accruals 1,000
Current Liabilities \$ 4,000
Long term Debt 10,000
Equity 25,000
Total liabilities & equity \$39,000

Develop Emperor's:
Find--- Current Ratio,Quick Ratio,Inventory Turnover,Debt Ratio,Return of Equity,Times interest Earned

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:

Year \$
1 \$40,000
2 \$60,000
3 \$90,000
4 \$90,000
5 \$90,000

Find--- What is the payback period for the expansion project?
What is the net present value (NPV) of for the expansion project?
What is the internal rate of return (IRR) for the expansion project?

Solution Preview

Hello Student,

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 ...

Solution Summary

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.

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