Principles of Finance
⦁ A company had cash and marketable securities worth $200,000 accounts payables worth $51,000, inventory of $1,501,500, accounts receivables of $5,288,128, short-term notes payable worth $220,000, other current liabilities of 100,000, and other current assets of $121,800. Calculate the company net working capital and describe how managers manage the firm working capital.
⦁ Your parents have given you $1,500 a year before your graduation so that you can take a trip when you graduate. You wisely decide to invest the money in a bank CD that pays 7% interest. You know that the trip costs $1600 right now and that inflation for the year is predicted to be 3%. Will you have enough money in a year to purchase the trip? Show your calculations.
⦁ If the following financial information related to XYZ Company. Total Revenues last year $970, depreciation expenses $50, costs of goods sold $450, and interest expenses $55. At the end of the year, current assets were $121 and current liabilities were $107. The company has an average tax rate of 35%. Calculate the net income for XYZ Company by setting up an income statement. (2 Marks)
⦁ Calculate the common-size balance sheet from the following information for the company: (2 Marks)
Cash 50,000 Accts/Pay 25,800
Acct/Rec 60,000 Accrued expenses 30,000
Inventories 200,500 Short-term N/P 9,700
Total Current assets 310,500 Current liabilities 65,500
Net fixed assets 132,000 Long-term debt 150,000
Total assets 442,500 Total liabilities 215,500
Owner’s equity 227,000
Total liabilities and owners’ equity 442,500
⦁ Ten years ago, Amanda Cortez invested $20,000 in an account paying an annual interest rate of 5%. What is the value of the investment today? What is the interest on interest earned on this investment?
⦁ You have just won a lottery that promises an annual payment of $120000 beginning immediately. You will receive a total of 15 payments. If you can invest the cash flow in an investment that is paying 8% annually, what is the present value of this annuity?
⦁ XXX company has forecast a rate of return of 20% if the economy booms (30% probability); a rate of return of 19% if the economy in in a growth phase (40% probability); a rate of return of 2.50% if the economy in in decline (20% probability); and a rate of return of -10% if the economy in a depression (10% probability). What is the company standard deviation of returns?
