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Unit 7: Final Exam
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YEARPROJECT APROJECT B0-$48,000-$126,0001$18,400$69,7002$31,300$80,9003$11,700$0
3. A project has an initial cost of $8,500 and produces cash inflows of $2,700, $4,800, and $1,600 over the next three years, respectively. What is the NPV if the required rate of return is 8%? 4. Ginny Trueblood is considering an investment, which will cost her $120,000. The investment produces no cash flows for the first year. In the second year, the cash inflow is $35,000. This inflow will increase to $55,000 and then $75,000 for the following two years before ceasing permanently. Ginny requires a 10% rate of return and has a required payback period of three years. Should the project be accepted?
5. A semiannual 10% coupon bond that matures in 40 years has a current price of $800. What is its yield to maturity (YTM)?
6. Boogie Woogie Dance Studio has 9.8% coupon bonds on the market with 18 years to maturity. The bonds make semiannual payments and currently sell for 106.8 percent of par value. What is the current yield on these bonds?
7. Mitzi’s, II. bonds offer a 5% semi-annual coupon at a current market price of $989.20 and 20 years to maturity. The bonds have a face value of $1,000 and. What is the current yield on these bonds?
8. Toby’s has a profit margin of 8.6 percent, a return on assets of 14.5 percent, and a debt to equity ratio of 1.4. What is the return on equity?
Use the information below to answer questions 8, 9, and 10.
2013 2014
Sales
$4,300
$5,500
Depreciation
750
850
COGS
2422
2533
Interest Expense
180
196
Cash
200
400
Accts Receivables
200
300
Notes Payable
100
150
Long-term debt
2956
1835
Net fixed assets
8000
9500
Accounts Payable
50
100
Inventory
1800
1700
Dividends
225
250
Tax rate
35%
30%
9. What is the ROA for 2014?
10. What are the day’s sales in inventory (Inventory period) in 2014?
11. What is the quick ratio for 2014?
12. Bonner Collision has shareholders’ equity of $141,800. The firm owes a total of $126,000 of which 60 percent are current liabilities. The firm net fixed assets of $161,900. What is the amount of the net working capital?
13. A firm has a total debt ratio of 57 percent, a total asset turnover of 1.12, and a profit margin of 4.9 percent. The total assets are $511,640. What is the amount of the net income?
14. Zombie Corp. has a profit margin of 5.1%, total asset turnover of 1.95, and ROE of 15%. What is the firm’s debt-equity ratio?
15. You are comparing two annuities with equal present values. The applicable discount rate is 9.5 percent. One annuity pays $11,000 on the first day of each year for twenty years. How much does the second annuity pay each year for twenty years if it pays at the end of each year?
16. An investment pays $1500 every six months (semiannually) over the next 5 years at an annual rate of 8%. What is the future value of the investment?
17. What is corporate governance? How does corporate governance affect the returns generated for stockholders?
19. You estimate that you will have $30,500 in student loans by the time you graduate. The interest rate is 6.5 percent. If you want to have this debt paid in full within five years, how much must you pay each month?
21. Why do U.S. corporations go international?
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