CLICK HERE TO DOWNLOAD THIS TUTORIAL INSTANTLY
Which of the following refers to all institutions and procedures that provide for transactions in short-term debt instruments generally issued by borrowers with very high credit ratings?
A) Capital market
B) Commercial banks
C) Money market
D) Stock market
Li Retailing reported the following items for the current year: Sales = $3,000,000;
Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative
Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000;
and Taxes = $300,000. Li’s gross profit is equal to
You have been depositing money at the end of each year into an account drawing 8% interest. What is the balance in the account at the end of year four if you deposited the following amounts?
Year End of Year Deposit
Given the following financial statements for ACME Corporation, and assuming that ACME paid a common dividend of $80,000 in 2010, what is the company’s financing cash flow for 2010?
Income Statement Balance Sheet
Year Ended 12/31/10 12/31/2010 12/31/2009
Sales $1,300,000 Current Assets $50,000 $45,000
Cost of Goods Sold 750,000 Gross Fixed Assets 880,000 650,000 Operating Expenses 200,000 Less Accum. Depr. 450,000 350,000
Depreciation Expense 100,000 Fixed Assets 430,000 350,000 EBIT 250,000 Total Assets $480,000 $395,000
Interest Expense 50,000 EBT 200,000 Current Liabilities $35,000 $50,000 Taxes 80,000 Long-term Debt 330,000 270,000 Net Income $120,000 Common Stock 5,000 5,000
Retained Earnings 110,00070,000
Total Liabilities & Equity $480,000 $395,000
The balance sheet and income statement for Becker, Becker & Becker is presented below.
Balance Sheet (000)
Accounts receivable 1,500
Current assets 2,500
Net fixed assets 5,000
Total Assets 7,500
Accounts payable 1,200
Bank note 300
Total current liabilities 1,500
Long term debt 4,000
Common stock 300
Retained earnings 1,700
Total liabilities and owners’ equity $7,500
Income Statement (000)
Net sales $8,500
Cost of goods sold (3,400)
Gross profit 5,100
Operating expenses (2,900)
Net operating income 2,200
Interest expense (580)
Earnings before taxes 1,620
Income tax (34%) (551)
Net income $1,069
a. Compute the following ratios:
b. All other things equal, compute the dollar amount of sales needed to achieve an 18% return on total assets for the coming year.
c. Given Becker’s inventory turnover ratio, find a way of computing the current level of inventory given this ratio and assuming the current level of inventories is unknown.
11. A bond matures in 20 years, at which time it pays the owner $1,000. It also pays $70 at the end of each of the next 20 years. If similar bonds are currently yielding 8%, what is the market value of the bond?
A) Over $1,000
B) Under $1,000
C) Exactly $1,000
D) Cannot be determined from the information given
12. You have just purchased a share of preferred stock for $50.00. The preferred stock pays an annual dividend of $5.50 per share forever. What is the rate of return on your investment?
13. You have $25,000 in an investment account today. How much will be in the account in 30 years if the account earns:
(a) 8% per year,
(b) 8% compounded semiannually
(c) 8% compounded quarterly,
(d) 8% compounded monthly, and
(e) 8% compounded daily?
14. You are considering an investment in First Allegiance Corp. The firm has a beta of 1.6. Currently, U.S. Treasury bills are yielding 2.75% and the expected return for the S & P 500 is 14%. What rate of return should you expect for your investment in First Allegiance?
15. Answer the questions below using the following information on stocks A, B, and C.
A B C
Expected Return 20% 21% 10%
Standard Deviation 12% 10% 10%
Beta 1.8 2.2 0.8
Assume the risk-free rate of return is 3% and the expected market return is 12% Calculate the required return for stocks A, B, and C.
b. Assuming an investor with a well-diversified portfolio, which stock would the investor want to add to his portfolio?
c. Assuming an investor who will invest all of his money into one security, which stock will the investor choose?