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# ABC Widget Company's net income and earnings per share

1. You will receive \$8,000 in 5 years from a rich uncle. A money advance company has offered you \$6,300 right now if you'll sign a contract assigning the future payment to them. You think the proper discount rate over the next 5 years is about 6 percent. As such, you calculate the present value of the cash to be ________________

4. ABC Widget Company has 100,000 shares of its stock outstanding. The company had sales of \$800,000 last year. The company's cost of goods sold was \$300,000. The company also recorded interest expense of \$20,000, selling and administrative expenses of \$40,000, and depreciation expense of \$30,000. During the year, the company's board of directors declared a dividend to its common stockholders. The total dividend, which was paid during the year, was \$80,000. Finally, the company paid taxes of \$110,000 during the year.

What was the company's net income for the year? __________. What was the earnings per share? _____________

5. All of the following are functions of security exchanges except:
a. Allocating scarce capital
b. Aiding in new financing
c. Holding demand deposits
d. Creating continuous markets

6. When Tri-C Corp. compares its financial ratios to industry averages, it has a higher current ratio, an average quick ratio, and a low inventory turnover. What might you assume about Tri-C?

a) Its cash balance is too low.
b) Its cost of goods sold is too low.
c) Its current liabilities are too low.
d) Its average inventory is too high.

#### Solution Preview

Finance Problems
1. You will receive \$8,000 in 5 years from a rich uncle. A money advance company has offered you \$6,300 right now if you'll sign a contract assigning the future payment to them. You think the proper discount rate over the next 5 years is about 6 percent. As such, you calculate the present value of the cash to be ________________
PV = FV/(1 + i)n where PV is the present value
FV is the future value
i is the discount rate
n is the period

PV = \$8,000
...

#### Solution Summary

This solution is comprised of a detailed explanation to answer what is the present value of the money, what was ABC Widget Company's net income and earnings per share, and what might we assume about Tri-C Corp.

\$2.19