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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