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Calculating NPV, capital structure, current ratio

See attached Excel file.

SHOW YOUR WORK in order to get part credit if your answer is wrong on problems

1 Whats the PV of $5000 received 5 years from now; your personal investment
track record is 10%

2 Whats the annual payment required on a 3 year $20,000 auto loan which has a
15% stated interest rate

3 Whats the net present value of a project which requires $100,000 investment and
generates $26,000/yr in financial benefits; your compamies discount rate is 10%
The project will last 4 years

4 What does "capital structure" refer to and why are decisions about it important to
a firms CFO

5 What is the current ratio for a firm with the following balance sheet

Assets Liabilities & Owners Equity

cash 1000 a/payable 5000
a/r 2000 mortgage payable 5000
inventory 3000

equipment 4000 owners equity 10000
bldg 10000

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Solution Preview

Please see the attached Excel spreadsheet.

1 Whats the PV of $5000 received 5 years from now; your personal investment
track record is 10%

Present Value = 5,000 / (1 + .10^5)
PV = 3,105

2 Whats the annual payment required on a 3 year $20,000 auto loan which has a
15% stated interest rate

This is a typical fixed rate annuity question whereby the time between payments doesn't vary, the interest rate stays the same, and the amount of the payments is always the same.
The annual payment would be $8,319.72
This amount is obtained by using the following formula: PV = ...

$2.19