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# Finance

### Income Statement

Gill Bates, Jr. spent \$1,000,000 developing a software utility that is intended to be sold to small businesses. In his first full year of business following the development, he sold 50,000 copies at \$109 each. The direct cost of packaging, and fulfilling orders for the software was \$34 per unit. Overhead costs are 10% of this di

### NPV and Cash Flows

Machine A and B are mutually exclusive and are expected to produce the follwing real cash flows. The real opportunity cost of capital is 10%. Cash Flows (Thousands) Machine Co C1 C2 C3 A -100 110 121 0 B -120 110 121 133 Calculate the NPV of each machine. Calculate the equivalent annual cash flow fr

### Income statement and compute the profit margin

Kit Karson, the owner of Karson Kutlery and Knives, LLC is preparing a loan application. Using the data below (only), prepare an income statement and compute the profit margin on sales. Include totals for gross margin, sales general, and administrative earnings before interest and taxes (sometimes called "income from operations"

### Standard Deviation and Dividend Calculation

Mr. Boyles has made an investment that will generate returns that are subject to the state of the economy during the year. Use the following information to calculate the standard deviation of the return distribution for Mr. Boyles' investment. (Round to the Nearest Hundredth) State Return Pro

### Expected Return and Stock Portfolio Value

(1) The risk-free rate of return is currently 5 percent, whereas the market risk premium is 11 percent. If the beta of Briar Tek's stock is 2, then what is the expected return on Briar Tek? (2) A stock portfolio is equally allocated among Stock A, B, and C. Stocks A, B, and C have betas of 1.9, 1, and 0.57, respectively. Th

### Determining the expected return of the combined portfolio

Karen purchased a stock for \$40 last year. She found out today that she had a -75% return on her investment. Which of the following must be true? A. The stock is worth \$10 today. B. The stock is worth \$30 today. C. The stock paid no dividends during the year. D. Both A and C must be true. You invested \$15,000 in a por

### Expected Return and Standard Deviation of Returns

The beta of Microsoft's stock is 1.2, whereas the risk-free rate of return is 4 percent. Assume that the expected return on the market is 16 percent. Then, what is the expected return on Microsoft stock? The return distribution for the asset XYZ is as shown below: Return Probability - 0.1 0.10 + 0.1

### Cash Flow Cost

Maxwell Food is considering a project that has the following cash flow data. What is the project's IRR? Year 0 1 2 3 4 5 Cash flows -\$9,500 \$2,000 \$2,025 \$2,050 \$2,075 \$2,100 Oranges Inc. is considering a project that has the following cash flow and Cost o

### Compound Interest

Carrie needs to accumulate \$40,000 to make a down payment on a house at the end of 4 years. How much money should she deposit in a bank account today to accomplish this if the bank pays 6% interest compounded per year?

### Current and Quick Ratios

XYZ Corp. has sales of \$1,000,000, and its most recent balance sheet shows \$27,000 in Cash, Total Assets of \$805,000, Total Liabilities of \$287,000, Total Current Assets of \$405,000, Total Current Liabilities of \$175,000, and Inventory of 210,000. What are the firm's Current and Quick Ratios?

### Net Working Capital: Solar Solutions

Solar Solutions reports the following account balances: inventory of \$6,200 (equipment), accounts payable of \$15,500, cash of \$11,200, and accounts receivable of \$12,400. How much does the firm have in net working capital?

### Balanced sheet: retained earnings

Big Golf Corp paid taxes of \$ 90,000 and purchased equipment worth \$175,000 during the year that ended June 30, 2008. The firm had net income of \$500,000 during the year ended June 30, 2008. After paying out \$95,000 in dividends, the balance went into retained earnings. If the firm's total retained earnings were \$900,000, what w

### Lancaster Lumber Supply sold \$19,200 worth of treated wood to Singletary Home Builders on account on March 25 of this year. The sales tax associated with the purchase was \$1,344 and Lancaster is required to remit sales taxes to the State Tax Commission office within twenty days of the end of the month (i.e. by April 20th.) How much is Lancaster required to submit to the State Tax Commission on this individual sale by April 20th? Answer A. 1,083.87 (sales tax applicable to the period from April 01 to April 20) B. None of the other answers C. None because the client has not yet paid Lancaster. D. \$1,344 E. \$260.13 (sales tax applicable to the remaining 6 days in March)

Lancaster Lumber Supply sold \$19,200 worth of treated wood to Singletary Home Builders on account on March 25 of this year. The sales tax associated with the purchase was \$1,344 and Lancaster is required to remit sales taxes to the State Tax Commission office within twenty days of the end of the month (i.e. by April 20th.) H

### Sarah Conner is an employee working for Cyberdyne Industries

Sarah Conner is an employee working for Cyberdyne Industries as a custodial worker. On her pay stub (given to her to confirm her direct deposits) she found that Cyberdyne withheld \$85 worth of Social Security and Medicare taxes based off the combined percentages of 6.20 and 1.45%. In regard to Sarah's paycheck only, how much is

### R. Cunningham had been speaking with A. Fonzarelli about selling his portion of a partnership in "Arnold's Good Time Hamburger Haven and Karaoke Extravaganza!" Currently Fonzarelli's Owner's Equity account in "Arnold's" is \$397,412. Cunningham has offered him \$200,000 for half of his equity, so that Fonzarelli won't be completely out of the hamburger business which he loves so much. C. Arnold, who is Fonzarelli's partner has no problems with Fonzarelli selling half his equity in the company and generally likes Cunningham as long as he doesn't have to deal with him too terribly often. If Fonzarelli agrees to the deal what kind of journal entry would be recorded on the books of "Arnold's Good Time Hamburger Haven and Karaoke Extravaganza?" Answer A. A Debit to C. Arnold-Capital for \$397,412; A Credit to A. Fonzarelli for \$198,706, and a Credit to R. Cunningham for \$198,706 B. None of the other answers C. A Debit to A. Fonzarelli-Capital for \$198,706; A Credit to R. Cunningham-Capital for \$198,706 D. A Debit to R. Cunningham-Capital for \$200,000; and a Credit to A. Fonzarelli-Capital for \$200,000 E. A Debit to A. Fonzarelli-Capital for \$198,706; A Credit to R. Cunningham-Capital for \$200,000 and a Credit for \$197,412 for Paid in Capital in Excess of Par

R. Cunningham had been speaking with A. Fonzarelli about selling his portion of a partnership in "Arnold's Good Time Hamburger Haven and Karaoke Extravaganza!" Currently Fonzarelli's Owner's Equity account in "Arnold's" is \$397,412. Cunningham has offered him \$200,000 for half of his equity, so that Fonzarelli won't be completel

### Duke and L. Duke General Partnership: Loss of Profit

Duke and L. Duke operated a general partnership performing minor automobile repairs in their small rural town for nearly six years. During the past four moths the cousins have noticed a steady decline in customers thanks to the new Wal-Mart that was built about ten miles away that offers one stop shopping for high quality low pr

### Financial Journal Entries for Inventories

Fargo company established a \$250 petty cash fund on March 1 of this year. On March 22, the fund showed \$155 in cash, and receipts for the following expenditures: \$32 postage, \$48 gasoline expenses, and \$13 transportation-in. Fargo uses the perpetual system of accounting for merchandise inventories. What would be the journal en

### Freeman's Invoice Payment

M. Freeman received an invoice from D. Wayans Reproduction Automotive Parts. The invoice stated the total of \$52,000 for twelve pairs of Corvette fenders with the terms 2/10, n/30 printed at the bottom. Please use the information in the preceding question regarding M. Freeman's purchase of auto parts from D. Wayans. If Free

### Determining the probability distribution for the stock price

A stock price is currently \$50. Assume that the expected return from the stock is 18% and its volatility is 30%. What is the probability distribution for the stock price in 2 years? Calculate the mean and standard deviation distribution. Determine the 95% confidence interval.

### Brownian motion process

if S follows the geometric Brownian motion process in equation dS/S = ? dt + ? dz , What is the process followed by: a) y= 2S b) y= S^2 c) y= e^S d) y= e^(r(T-t))/ S in each case express the coefficient of dt and dz in terms of y rather than S.

### Financial Question: Calculating the DSO

Harper Corp.'s sales last year were \$395,000, and its year-end receivables were \$42,500. Harper sells on terms that call for customers to pay 30 days after the purchase, but many delay payment beyond Day 30. On average, how many days late do customers pay? Base your answer on this equation: DSO - Allowed credit period = Average

### Effective Annual Rates (APR resulting EAR)

2 parts- question Part-1 Create a table using Excel that shows for Annual Percentage Rates (APRs) for 15% to 1%, the corresponding rates per period (period rate = APR/ number of periods per year), and the resulting Effective Annual Rates. The Periods per year, Period Rates and EARs should automatically change when the length

### Ending Balance for Retained Earnings Next Year

Common stock is \$29,562 and retained earnings are \$58,425 is currently what is on balance sheet. Suppose next year the company posts \$43,000 in net profit and 16,00 in dividends. what will the companies ending balance for retained earnings be next year?

### Calculate the expected returns

Suppose that the Treasury bill rate were 6% rather than 4%. Assume that the expected return on the market stays at 10%. Use the betas in Table 8.2 (p. 193) - provided below. Stock Beta (B) Expected return Stock Beta (B) Expected return Amazon 2.16 15.40%

### ratios and entries

Please explain why financial ratios are more meaningful for financial analysis than individual entries.

### The bail out money given to the car companies GM and Chrysler came from the Fed acting in its role as "lender of last resort"true or falseIf product prices were stated in term of tobacco leaves, then tobacco leaves would be functioning primarily as a. fiat moneyb. legal tenderc. a store of valued. a unit of account

The bail out money given to the car companies GM and Chrysler came from the Fed acting in its role as "lender of last resort" true or false If product prices were stated in term of tobacco leaves, then tobacco leaves would be functioning primarily as a. fiat money b. legal tender c. a store of value d. a unit of account

### Swanson's stock today

1) During the past few years, Swanson Company has retained, on the average, 70% of its earnings in the business. The future retention rate is expected to remain at 70% of earnings, and long-run earnings growth is expected to be 10%. If the risk-free rate, kRF, is 8%, the expected return on the market, kM, is 12%, Swanson's beta

### Preferred Form of Finance

A and B are arguing again over which form of financing (debt or equity) is better. Assume that both are residents of the same country, and are subject to the same marginal tax rate on equity income which is 25%. Further, assume that expected rates of return on debt and zero-beta equity are as follows: Rd = 8% Re = 6% I

### Longer term treasury yields higher than yields on shorter term treasury

Currently the yield on the 10 year treasury note is ~ 255 basis points (2.55%) above the yield on the 2 year treasury note. Although it is normal to see higher yields on longer term treasuries, these maturity yield differentials are substantially greater than the yield differentials that have been typical over the last 30 years

### Derivative security analysis: butterfly spread strategy

An investor discovers the call option prices on Platinum Mining Co are: A call with an exercise price of \$1950 costs \$108,43. A call with an exercise price of \$2000 costs \$81,75 and a call with an exercise price of \$2050 costs \$59,98. All the options have the same maturity date. The current stock price is \$2000 a) Create a b