Question

Choice Problem s of the annual sales for a firm with $400,000 inimes, a total asset tuover of 3.0 assume total remains unchanged A $300,000 B. $33,333 C$900,000 D$1,600,000 E. 54,800,000 12. What is the NPV (Net Present Value of a project that costs $549,000 today and cash into $4,200 monthly paid annually for seven years from today the opportunity cost of capitalis PV 549.00 A $-241.731 8. S-246,496 ONT = 12.00 C. $ 101,106 N - 7 D. $302.504 IIYR = 4 % E. $851,504 13. A firm has current liabilities of $11.000, a current ratio of 1.65, and a quick ratio of 1.05 Calculate the level of inventory for this firm. A $5,600 8. $6,000 C. $6,600 D. $7,000 E. $7,600 14. How much will you have in 20 years, with daily compounding, of $14,000 invested today at 8%? A $3,004 N=20*365 B. $30,225 C. $62,253 PV = 14,000 D. $67,214 $69,330 INR= 8/365 FV = ? 15. You want to set up a scholarship fund at San Jose State University, which pays a student $25,000/year, indefinitely. Assuming a discount rate of 5.25%, how much would you need today? IYR = 5.25 A. $1,312.50 B. $4,761.90 C. $131,250.00 D. $473,335.71 E. $476,190.48

Answer 1

Question 11.

Debt Ratio= Total Liabilities/Total Assets

Asset Turn over Ratio= Sales/Total Assets

Given,

Debt Ratio= 0.25, Asset Turn over Ratio =3.0 and Total Liabilities= $400,000

Substituting these values,

$400,000/Total Assets = 0.25

Therefore, Total assets= $400,000/0.25 = $ 1,600,000

Sales/ 1,600,000 = 3

Therefore, Sales= $1,600,000 * 3 = $ 4,800,000

The answer is option E

Question 12.

NPV= $-246,496.44   Calculated using the PV function of Excel as follows

| Строити C5 O f =PV(C2,C3,C4,0,0)-C1 A в 1 Initial cost $ 549,000 2 Opportunity cost of capital Rate 4% 3 Number of cash flows Nper 4 Yearly payments=4,200*12 PMT $ (50,400) 5 NPV ($246,496.44) 6 7

Hence the answer is option B (Rounded to $ -246,496)

Question 13.

Current Ratio= Current Assets (CA)/Current Liabilities(CL)

Quick Ratio= (Current assets-Inventory)/Current Liabilities.

Given,

Current Liabilities= $11,000

Current Ratio= 1.65 and Quick Ratio= 1.05

Substituting the values,

1.65=$11,000/CA. Therefore, CA= $11,000/1.65 = $18,150

1.05=($18,150 – Inventory)/$11,000

Therefore, inventory= =$18,150- $11,000*1.05 = $6,600

The answer is option C

Question 14.

Future value of $14,000 in 20 years is $69,330.30 calculated as follows:

А B C D 1 Future Value 2 3 Future value of an amount is calculated using the formula FV=P(1+r)^n 4 Where P= Principal (Presen Value), 5 n= number of compounding periods 6 r= Rate of interest per period in decimals All amounts in $ 8 Given that 9 Present Value (P)= 14000 No. of years (N)= 201 10 Rate of interest (% p.a)=R= 8 No. of times compounded a year (t)= 11 12 Calculations: 13 Formula Cell reference Value 14 Interest rate per period in decimals (r =R/(100*t) D10/(100*G10) 0.000219178 15 No. of periods (n)= N*t G9*G10 7300 16 (1+r)= 1+G14 1.000219178 17 (1+r)^n= G164G15 4.95216415 18 Future value FV= P*(1+r)^n D9*617 69330.29811 19 Rounded to $69,330.30 20

Hence answer is option E (Rounded to $69,330)

Question 15.

The cash flow stream constitutes a perpetuity.

Amount needed today (Present Value of perpetuity)= PMT/r

Where PMT= Periodical cash flow and r= interest rate for the period.

Given, yearly payment PMT= $25,000 and r= 5.25%

Hence PV= $25,000/5.25% = 476190.48

The answer is option E