Ferrari, Curfman Company, The Troxel Co., Rag Doll Co.
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3) You are trying to save for $140,000 Ferrari. You have $30,000 to invest and your bank pays 4.2% annual interest. How long before you have enough to buy the car?
8) In a typical month, Curfman Company receives 100 checks totaling $75,000. These are delayed 4 days on average. What is the average daily float?
10) Calculating Cost of Equity. The Troxel Co. just issued a dividend of $2.30 per share on its common stock. The company is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the stock sells for $42 a share, what is the company's cost of equity?
12) Cash Equation. Rag Doll Company has a book net worth of $38,000. Long-term debt is $6,500. Net working capital, other than cash, is $4,300. Fixed assets are $32,500. How much cash does the company have? If current liabilities are $7,200, what are current assets?
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This solution is comprised of a detailed explanation to answer how long before you have enough to buy the car, what is the average daily float, what is the company's cost of equity, and what are current assets.
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3) You are trying to save for $140,000 Ferrari. You have $30,000 to invest and your bank pays 4.2% annual interest. How long before you have enough to buy the car?
FV = PV(1+i)n where PV is the present value
FV is the future value
i is the interest rate
n is the period
We will assume that $140,000 is the future value.
140,000 = 30,000(1 + 0.042)n
4.6667 = (1.042)n
n LN(1.042) = LN(4.6667)
n = LN(4.6667)/LN(1.042)
n = 1.5404/0.0411
n = 37.44 years
8) In a typical month, Curfman Company receives 100 checks totaling $75,000. These are delayed 4 days on average. What is the ...
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