Wk_2_Problems

CHAPTER TWO (PG.42) A1. (Present and future values) a. What is the future value of $2,000 invested today if it earns 20% interest for one year' For two years' FV = PV(1 + r)n FV = 2,000(1 + 0.20)1 FV = 2,000(1.20) FV = 2,400 FV = PV(1 + r)n FV = 2,000(1 + 0.20)2 FV = 2,000(1.44) FV = 2,880 b. What is the present value of $2,000 discounted at 20% if it is received in one year' In two years' PV = FV / (1 + r)n PV = 2,000 / (1 + 0.20)1 PV = 2,000 / (1.20) PV = 1,666.67 PV = FV / (1 + r)n PV = 2,000 / (1 + 0.20)2 PV = 2,000 / (1.44) PV = 1,388.89 B1. (Present value) What is the present value of $15,000 to be received 11 years from today when the annual discount rate is 10%' PV = FV / (1 + r)n PV = 15,000 / (1 + 0.10)11 PV = 15,000 / (2.853117) PV = 5,257.41 CHAPTER THREE (PG.58) B1. (Financial statements) Consider the following financial information for Sunny Fruit Co. Balance Sheet, December 31 Partial Income Statement, (Figures in millions of dollars) latest year ending December 31 (Figures in millions of dollars) Assets Latest Year Previos Year Laibilites and Stockholders' Equity Latest year Previous Year Current Assets 400 200 Current Laibilites 150 195 Sales 900 Net Fixed Assets 600 400 Long-Term Debt 500 100 Cost of goods sold 200 Selling and administrative expenses 200 Depreciation 100 Interest Expense 50 a. What is stockholders’ equity in the previous and latest years' PREVIOUS LATEST Stockholders’ equity = Assets − Liabilities Stockholders’ equity = Assets − Liabilities Stockholders’ equity = (200+400) - (195+100) Stockholders’ equity = (400+600) - (150+500) Stockholders’ equity = 600-295 Stockholders’ equity = 1000-650 Stockholders’ equity = 305 Stockholders’ equity = 350 b. Assume a tax rate of 40%. What are income taxes paid and net income after taxes for the latest year' Sales 900 Cost of goods sold 200 Selling and admin expenses 200 Depreciation 100 Interest Expense 50 TAXABLE INCOME 350 Taxes at 40% 140 NET INCOME 210 c. The company did not issue or repurchase any stock during the latest year. What dividend was paid' 50 interest expense 350-305=45 210-45=165 d. Given the change in net fixed assets and depreciation expense, what is the amount of fixed assets purchased during the latest year' 600 - 400 = 200 + 100 = 300 e. What is net working capital in the previous and latest years' PREVIOUS Working capital = Current assets − Current liabilities Working capital = 200 − 195 Working capital = 5 LATEST Working capital = Current assets − Current liabilities Working capital = 400 − 150 Working capital = 250 f. What is cash provided (used) by operations during the latest year (the increase in working capital is a use of cash)' What is cash provided (used) by investing activities' What is cash provided (used) by financing activities' 1) 210+100-245=65 2) -300 3) 400-165=235