Strategic and financial planning – Wal-mart (Based on Annual Report of Fiscal 2014)

Find the company Wal-Mart annual report from SEC.gov or the investor relations section of the company’s website. Be careful not to use quarterly reports.

Write a 700 -1000 word paper in which you describe the relationship between strategic and financial planning. Include the following:
• A strategic planning initiative for the organization Wal-Mart – Identify an initiative discussed in the organization’s annual report.
• How the initiative affects the organization’s financial planning
• How the initiative affects costs and revenues of the supply chain
• Ethical concerns related to the initiative

Answer is using Annual Report for Fiscal 2014.

Week-3 Individual Assignment

Illustration 2-9
Financial ratio classifications
A single ratio by itself is not very meaningful. Accordingly, in this and the following chapters, we will use various comparisons to shed light on company performance:
1. Intracompany comparisons covering two years for the same company.
2. Industry-average comparisons based on average ratios for particular industries.
3. Intercompany comparisons based on comparisons with a competitor in the same industry

Question 1
Using these data from the comparative balance sheet of Rosalez Company, perform horizontal analysis. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000), (20%). Round percentages to 0 decimal places, e.g. 12%.)
Increase or (Decrease)
Dec. 31, 2012 Dec. 31, 2011 Amount Percentage
Accounts receivable $ 545,500 $ 393,400 $

%
Inventory $ 820,400 $ 604,600 $

%
Total assets $3,146,500 $2,742,100 $

%

Question 2
Using these data from the comparative balance sheet of Rosalez Company, perform vertical analysis. (Round percentages to 1 decimal place, e.g. 12.5%.)
Dec. 31, 2012 Dec. 31, 2011
Amount Percentage Amount Percentage
Accounts receivable $ 543,900
% $ 417,700
%
Inventory $ 821,700
% $ 617,000
%
Total assets $3,175,700
% $2,787,300
%

Question 3
Vertical analysis (common-size) percentages for Vallejo Company’s sales, cost of goods sold, and expenses are listed here.
Vertical Analysis 2012 2011 2010
Sales 100 % 100 % 100 %
Cost of goods sold 60.8 63.8 66.4
Expenses 24.7 27.8 28.8

Did Vallejo’s net income as a percent of sales increase, decrease, or remain unchanged over the 3-year period? Provide numerical support for your answer.

Question 4
Horizontal analysis (trend analysis) percentages for Spartan Company’s sales, cost of goods sold, and expenses are listed here.
Horizontal Analysis 2012 2011 2010
Sales 96.2 % 104.8 % 100.0 %
Cost of goods sold 101.0 98.0 100.0
Expenses 105.6 95.4 100.0

Explain whether Spartan’s net income increased, decreased, or remained unchanged over the 3-year period.

Question 5

These selected condensed data are taken from recent balance sheets of Bob Evans Farms (in thousands).
2009 2008
Cash $ 13,606 $ 7,669
Accounts receivable 23,045 19,951
Inventories 31,087 31,345
Other current assets 12,522 11,909
Total current assets $ 80,260 $ 70,874
Total current liabilities $245,805 $326,203
(a)
Compute the current ratio for each year. (Round answers to 2 decimal places, e.g. .12 : 1.)
2009 2008
Current ratio:
:
Question 6
Staples, Inc. is one of the largest suppliers of office products in the United States. It had net income of $738.7 million and sales of $24,275.5 million in 2009. Its total assets were $13,073.1 million at the beginning of the year and $13,717.3 million at the end of the year. What is Staples, Inc.’s asset turnover ratio and profit margin ratio? (Round answers to 2 decimal places, e.g. 1.25 or 2.05%.)
Asset turnover ratio
times
Profit margin ratio
%

Question 7
Selected data taken from a recent year’s financial statements of trading card company Topps Company, Inc. are as follows (in millions).
Net sales $326.7
Current liabilities, beginning of year 41.1
Current liabilities, end of year 62.4
Net cash provided by operating activities 10.4
Total liabilities, beginning of year 65.2
Total liabilities, end of year 73.2
Capital expenditures 3.7
Cash dividends 6.2

Compute these ratios: current cash debt coverage ratio, cash debt coverage ratio, and free cash flow. Provide a brief interpretation of your results. (Round answers to 2 decimal places, e.g. 0.12.)
Current cash debt coverage ratio
times
Cash debt coverage ratio
times
Free Cash Flow $
millions

Finance Questions

1. A bond is currently selling for $1,087. If the yield to maturity is 10%, the coupon rate will be:
less than 10%.
equal than 10%.
more than 10%.
2. The ABC Co. has $1,000 face value stock outstanding with a market price of $937.6. The stock pays interest annually, matures in 9 years, and has a yield to maturity of 10.7 percent. What is the current yield?

3. What is the net present value of the following cash flows? Assume an interest rate of 3.5%

Year CF
0 -$11,895
1 $7,722
2 $5,687
3 $5,120

4. A stock just paid a dividend of D0 = $3.4. The required rate of return is rs = 15.8%, and the constant growth rate is g = 3%. What is the current stock price?

5. A project has the following cash flows. What is the internal rate of return?
Year 0 1 2 3
Cash flow -$121,000 68,150 $42,200 $39,100

6. ABC is reviewing a project that will cost $1,431.The project will produce cash flows $210 at the end of each year for the first two years and $772 at the end of each year for the next two years. What is the profitability index? Assume interest rate is 4%.

7. A 8.9 percent $1,000 bond matures in 17 years, pays interest semiannually, and has a yield to maturity of 16.02 percent. What is the current market price of the bond?

8. ABC Corp. just paid a dividend of $2.4 per share at the end of the year. The stock has a required rate of return is 18%. The dividend is expected to grow at 6.9%. What is dividend at time = 8? (solve for D8?)

9. Uptown Insurance offers an annuity due with semi-annual payments for 19 years at 4.9 percent interest. The annuity costs $176,239 today. What is the amount of each annuity payment?

10. The principal amount of a bond that is repaid at the end of term is called the par value or the:
call premium
perpetuity value
face value
back-end value
coupon value

11. ABC’s last dividend paid was $4.4, its required return is 13%, its growth rate is 6%, and its growth rate is expected to be constant in the future. What is ABC’s expected stock price in 19 years?

12. What is the effective rate of 18% compounded monthly?

13. Suppose an investment offers to double your money in 39 years. What annual rate of return are you being offered if interest is compounded semi-annually?

14. A cost that has already been incurred and cannot be recouped is called as a(n):
Answer
sunk cost
financial cost
opportunity cost
side cost
relevant cost
15. Suppose the real rate is 9.83% and the inflation rate is 4.65%. Solve for the nominal rate.

16. The common stock of ABC Industries is valued at $49 a share. The company increases their dividend by 3.1 percent annually and expects their next dividend to be $1.84. What is the required rate of return on this stock?

17. A bond that sells for less than face value is called as:
discount bond
premium bond
par value bond
debenture
perpetuity
18. How many years will it take to quadruple (i.e. 4 times) your money at 9% compounded quarterly?

19. Suppose that today’s stock price is $49.8. If the required rate on equity is 18.6% and the growth rate is 7.9%, compute the expected dividend (i.e. compute D1)

20. Given the following cash flows, calculate the payback period:
Year CF
0 -921
1 368
2 253
3 291
4 784

21. An investment is acceptable if the profitability index (PI) of the investment is:
less than the net present value (NPV).
less than one.
greater than one.
greater than the internal rate of return (IRR).
greater than a pre-specified rate of return.

Chapter-15 Comprehensive Problem 4

Chapter – 15 COMPREHENSIVE PROBLEM 4 : Equinox products
Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2014, were as follows:
a. Issued 15,000 shares of $20 par common stock at $30, receiving cash.
b. Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash.
c. Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.
d. Declared a quarterly dividend of $0.50 per share on common stock and $1.00 per share on preferred stock. On the date of record, 100,000 shares of common stock were outstanding, no treasury shares were held, and 20,000 shares of preferred stock were outstanding.
e. Paid the cash dividends declared in (d).
f. Purchased 7,500 shares of Solstice Corp. at $40 per share, plus a $150 brokerage commission.
The investment is classified as an available-for-sale investment.
g. Purchased 8,000 shares of treasury common stock at $33 per share.
h. Purchased 40,000 shares of Pinkberry Co. stock directly from the founders for $24 per share. Pinkberry has 125,000 shares issued and outstanding. Equinox Products Inc. treated the investment as an equity method investment.
i. Declared a $1.00 quarterly cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock had been issued.
j. Paid the cash dividends to the preferred stockholders.
k. Received $27,500 dividend from Pinkberry Co. investment in (h).
l. Purchased $90,000 of Dream Inc. 10-year, 5% bonds, directly from the issuing company, at their face amount plus accrued interest of $375. The bonds are classified as a heldto maturity long-term investment.
m. Sold, at $38 per share, 2,600 shares of treasury common stock purchased in (g).
n. Received a dividend of $0.60 per share from the Solstice Corp. investment in (f).
o. Sold 1,000 shares of Solstice Corp. at $45, including commission.
p. Recorded the payment of semiannual interest on the bonds issued in (c) and the amortization of the premium for six months. The amortization is determined using the straight-line method.
q. Accrued interest for three months on the Dream Inc. bonds purchased in (l).
r. Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income.
s. The fair value for Solstice Corp. stock was $39.02 per share on December 31, 2014. The investment is adjusted to fair value, using a valuation allowance account.
Assume Valuation Allowance for Available-for-Sale Investments had a beginning balance of zero.

Instructions
1. Journalize the selected transactions.
2. After all of the transactions for the year ended December 31, 2014, had been posted [including the transactions recorded in part (1) and all adjusting entries], the data below and on the following page were taken from the records of Equinox Products Inc.
a. Prepare a multiple-step income statement for the year ended December 31, 2014, concluding with earnings per share. In computing earnings per share, assume that the average number of common shares outstanding was 100,000 and preferred dividends were $100,000. (Round earnings per share to the nearest cent.)
b. Prepare a retained earnings statement for the year ended December 31, 2014.
c. Prepare a balance sheet in report form as of December 31, 2014.

Income statement data:
Advertising expense ………………………………………… $ 150,000
Cost of merchandise sold……………………………………. 3,700,000
Delivery expense ……………………………………………. 30,000
Depreciation expense—office buildings and equipment…….. 30,000
Depreciation expense—store buildings and equipment ……… 100,000
Dividend revenue……………………………………………… 4,500
Gain on sale of investment…………………………………….. 4,980
Income from Pinkberry Co. investment………………………… 76,800
Income tax expense…………………………………………….. 140,500
Interest expense………………………………………………… 21,000
Interest revenue…………………………………………………. 2,720
Miscellaneous administrative expense…………………………… 7,500
Miscellaneous selling expense…………………………………… 14,000
Office rent expense………………………………………………. 50,000
Office salaries expense….………………………………………… 170,000
Office supplies expense…………………………………………… 10,000
Sales…………………………………….………………………… 5,254,000
Sales commissions………………………………………………… 185,000
Sales salaries expense…………………………………………….. 385,000
Store supplies expense……………………………………………. 21,000
Retained earnings and balance sheet data:
Accounts payable ………………………………………………… $ 194,300
Accounts receivable………………………………………………. 545,000
Accumulated depreciation—office buildings and equipment…… 1,580,000
Accumulated depreciation—store buildings and equipment …… 4,126,000
Allowance for doubtful accounts………………………………… 8,450
Available-for-sale investments (at cost) …………………………. 260,130
Bonds payable, 5%, due 2022……………………………………. 500,000
Cash …………………………………….……………………… 246,000
Common stock, $20 par (400,000 shares authorized;
100,000 shares issued, 94,600 outstanding) …………………… 2,000,000
Dividends:
Cash dividends for common stock……………………………… 155,120
Cash dividends for preferred stock……………………………. 100,000
Stock dividends for common stock …………………………… 66,240
Goodwill ………………………………………………………. 500,000
Income tax payable ……………………………………………. 44,000
Interest receivable ……………………………………………… 1,125
Investment in Pinkberry Co. stock (equity method)…………… 1,009,300
Investment in Dream Inc. bonds (long term) ………………….. 90,000
Merchandise inventory (December 31, 2014), at lower
of cost (FIFO) or market……………………………………….. $ 778,000
Office buildings and equipment………………………………… 4,320,000
Paid-in capital from sale of treasury stock……………………… 13,000
Excess of issue price over par—common stock………………… 886,800
Excess of issue price over par—preferred stock………………… 150,000
Preferred 5% stock, $80 par (30,000 shares authorized;
20,000 shares issued) ……………………………………………. 1,600,000
Premium on bonds payable……………………………………… 19,000
Prepaid expenses………………………………………………… 27,400
Retained earnings, January 1, 2014……………………………… 9,319,725
Store buildings and equipment……………………………………. 12,560,000
Treasury stock (5,400 shares of common stock at cost of
$33 per share) …………………………………………………….. 178,200
Unrealized gain (loss) on available-for-sale investments…….. (6,500)
Valuation allowance for available-for-sale investments ……… (6,500)

Accounting II

P1-1A. Barone’s Repair Inc. was started on May 1. A summary of May transactions is presented below.
1. Stockholders invested $10,000 cash to start the repair company.
2. Purchased equipment for $5,000 cash.
3. Paid $400 cash for May office rent.
4. Paid $500 cash for supplies.
5. Incurred $250 of advertising costs in the Beacon News on account.
6. Received $5,100 in cash from customers for repair service.
7. Paid dividends of $1,000 cash.
8. Paid part -time employee salaries $2,000.
9. Paid utility bills $140.
10. Provided repair service on account to customers $750.
11. Collected cash of $120 for services billed in transaction (10).

Instructions
A. Prepare a tabular analysis of the transactions, using the following column headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Common Stock, and Retained Earnings. Revenue is called Service Revenue.
B. Form an analysis of the Retained Earnings column, compute the net income or net loss for May.

P1-2A. On August 31, the balance sheet of Nashville Veterinary Clinic showed Cash $9,000, Accounts Receivable, $1,700 Supplies $600, Office Equipment $6,000, Accounts Payable $3,600, Common Stock $1,3000, and Retained Earnings $700. During September the following transactions occurred.
1. Paid $2,900 cash on accounts payable.
2. Collected $1,300 of accounts receivable.
3. Purchased additional office equipment for $2,100, paying $800 in cash and the balance on the account.
4. Earned revenue of $8,000 of which $2,500 is paid in cash and the balance is due in October.
5. Paid cash dividens of $1,000.
6. Paid salaries $1,700, rent for September $900, and advertising expense $300.
7. Incurred utilities expense for month on account $170.
8. ‘Received $10,000 from Capital Bank—- money borrowed on a not payable.

Instructions
A. Prepare the tabular analysis of the September transactions beginning with the August 31 balances. The column headings should be as follows: Cash + Accounts Receivable + Supplies + Office Equipment = Notes payable + Accounts Payable + Common Stock + Retained Earnings.
B. Prepare an income statement for September, a retained earnings statement for September, and a balance sheet at September 30.

Question-2
The ledger of Hixson Company at the end of the current year shows accounts receivable 120,000, sales 840,000 and sales returns and allowance 30,000.
A) If Hixson uses the direct write off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Hixson determines that fells 1.400 balance is uncollectible.
B) If allowance for doubtful accounts has a credit balance of 2,100 in the trial balance journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1 % of net sales, and (2) 10 % of accounts receivable
C) If allowance for doubtful accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable.

Question-2
Information related to plant assets, natural resources, and intangibles at the end of 2011 for Spain Company is as follows: buildings $1,100,000; accumulated depreciation-buildings $650,000; goodwill $410,000; coal mine $500,000; accumulated depletion-coal mine $108,000. Complete the partial balance sheet of Spain Company for these items. (List assets with smallest net book value first. Enter all amounts as positive amounts and subtract where necessary.)

Question-3
Match the statement with the term most directly associated with it.
Goodwill
Intangible assets
Research and development costs
Amortization
Franchise
Rights, privileges, and competitive advantages that result from the ownership of
long-lived assets that do not possess physical substance
The allocation of the cost of an intangible asset to expense in a rational and
systematic manner.

right to sell certain products or services, or use certain trademarks or trade names
within a desiqnated qeoqraphic area.

Costs incurred by a company that often lead to patents or new products. These costs
must be expensed as incurred.

The excess of the cost of a company over the fair market value of the net assets
acquired.

Question-4
Presented below are selected transactions at Ingles Company for 2011.
Jan. 1 Retired a piece of machinery that was purchased on January 1, 2001. The machine cost $62,000 on that date. It had a useful life of 10 years with no salvage value. (Assume depreciation is up to date as of December 31, 2010.)
June 30 Sold a computer that was purchased on January 1, 2008. The computer cost $40,000. It had a useful life of 5 years with no salvage value. The computer was sold for $14,000.
Dec. 31 Discarded a delivery truck that was purchased on January 1, 2007. The truck cost $39,000. It was depreciated based on a 6-year useful life with a $3,000 salvage value.
Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Ingles Company uses straight-line depreciation.(For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Question-5
Beka Company owns equipment that cost $50,000 when purchased on January 1, 2008. It has been depreciated using the straight-line method based on estimated salvage value of $5,000 and an estimated useful life of 5 years.
Prepare Beka Company’s journal entries to record the sale of the equipment in these four independent situations.
A.Sold for $28,000 on January 1, 2011. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

B. Sold for $28,000 on May 1, 2011. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)
C. Sold for $11,000 on January 1, 2011. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

D. Sold for $11,000 on October 1, 2011. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Question-6
At December 31, 2011, Jimenez Company reported the following as plant assets.
Land $4,000,000
Buildings $28,500,000
Less: Accumulated depreciation-buildings 12,100,000 16,400,000
Equipment 48,000,000
Less: Accumulated depreciation-equipment 5,000,000 43,000,000
Total plant assets $63,400,000
During 2012, the following selected cash transactions occurred.
April 1 Purchased land for $2,130,000.
May 1 Sold equipment that cost $780,000 when purchased on January 1, 2008. The equipment was sold for $450,000.
June 1 Sold land purchased on June 1, 2002, for $1,500,000. The land cost $400,000.
July 1 Purchased equipment for $2,000,000.
Dec. 31 Retired equipment that cost $500,000 when purchased on December 31, 2002. No salvage value was received.

A. Journalize the above transactions. The company uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 50-year life and no salvage value. The equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

B. Record adjusting entries for depreciation for 2012.

C. Complete the plant assets section of Jimenez’s balance sheet at December 31, 2012. (List in the same order as the partial balance sheet presented in the problem. Enter all amounts as positive amounts and subtract where necessary.)

Answer is in word and excel

Accounting – 3 questions

Finance Problems P1-1A, P1-2A, BYP1-4

P1-1A. Barone’s Repair Inc. was started on May 1. A summary of May transactions is presented below.
1. Stockholders invested $10,000 cash to start the repair company.
2. Purchased equipment for $5,000 cash.
3. Paid $400 cash for May office rent.
4. Paid $500 cash for supplies.
5. Incurred $250 of advertising costs in the Beacon News on account.
6. Received $5,100 in cash from customers for repair service.
7. Paid dividends of $1,000 cash.
8. Paid part -time employee salaries $2,000.
9. Paid utility bills $140.
10. Provided repair service on account to customers $750.
11. Collected cash of $120 for services billed in transaction (10).

Instructions
A. Prepare a tabular analysis of the transactions, using the following column headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Common Stock, and Retained Earnings. Revenue is called Service Revenue.
B. Form an analysis of the Retained Earnings column, compute the net income or net loss for May.

P1-2A. On August 31, the balance sheet of Nashville Veterinary Clinic showed Cash $9,000, Accounts Receivable, $1,700 Supplies $600, Office Equipment $6,000, Accounts Payable $3,600, Common Stock $1,3000, and Retained Earnings $700. During September the following transactions occurred.
1. Paid $2,900 cash on accounts payable.
2. Collected $1,300 of accounts receivable.
3. Purchased additional office equipment for $2,100, paying $800 in cash and the balance on the account.
4. Earned revenue of $8,000 of which $2,500 is paid in cash and the balance is due in October.
5. Paid cash dividens of $1,000.
6. Paid salaries $1,700, rent for September $900, and advertising expense $300.
7. Incurred utilities expense for month on account $170.
8. ‘Received $10,000 from Capital Bank—- money borrowed on a not payable.

Instructions
A. Prepare the tabular analysis of the September transactions beginning with the August 31 balances. The column headings should be as follows: Cash + Accounts Receivable + Supplies + Office Equipment = Notes payable + Accounts Payable + Common Stock + Retained Earnings.
B. Prepare an income statement for September, a retained earnings statement for September, and a balance sheet at September 30.

BYP1-4. Mary and Jack Gray, local golf stars, opened the Chip-Shot Driving Range Company on March 1, 2008. They invested $25,000 cash and received common stock in exchange for their investment. A caddy shack was constructed for cash at a cost of $8,000, and $800 was spent on golf balls and golf clubs. The Grays leased five acres of land at a cost of $1000 per month and paid the first month’s rent. During the first month, advertising costs totaled $750, of which $150 was unpaid at March 31, and $400 was paid to members of the high school golf team for retrieving golf balls. All revenues from customers were deposited in the company’s bank account. On March 15, Mary and Jack received a dividend of $1,000. A $100 utility bill was received on March 31 but was not paid. On March 31, the balance in the company’s bank account was $18,900.

Mary and Jack thought they had a pretty good first month of operations. But, their estimates of profitability ranged from a loss of $6,100 to net income of $2,450.

Instructions
With the class divided into groups, answer the following.
A. How could the Grays have concluded that the business operated at a loss of $6,100? Was this a valid basis on which to determine net income?
B. How could the Grays have concluded that the business operated at a net income of $2,450?
(Hint: Prepare a balance sheet at March 31.) Was this a valid basis on which to determine net income?
C. Without preparing an income statement, determine that actual net income for March.
D. What was the revenue earned in March?

FIN370 Future Value (15 questions solved in excel)

1. (Future value) Leslie Mosallam, who recently sold her Porsche, placed $ 10,000 in a savings account paying annual compound interest of 6 percent.

a. Calculate the amount of money that will accumulate if Leslie leaves the money in the bank for 1, 5, 15 year(s).

b. Suppose Leslie moves her money into an account that pays 8 percent or one that pays 10 percent. Rework part (a) using 8 percent and 10 percent.

c. What conclusions can you draw about the relationship between interest rates, time, and future sums from the calculations you just did?

a. After placing $10,000 in a savings account paying annual compound interest of 6 percent, the amount of money that will accumulate if Leslie leaves the money in the bank for 1 year(s) is _________________________. (Round to the nearest cent.)

2. (Present value) Sarah Wiggum would like to make a single investment and have $2.0 million at the time of her retirement in 35 years. She has found a mutual fund that will earn 4 percent annually. How much will Sarah have to invest today? If Sarah earned an annual return of 14 percent, how soon could she retire?

a. If Sarah can earn 4 percent annually for the next 35 years, the amount of money she will have to invest today is $_________________(Round to the nearest cent.)

3. (Solving for n) How many years will it take for $500 to grow to $991.99 if it’s invested at 6 percent compounded annually?

The number of years it will take for $500 to grow $991.99 at 6 percent compounded is _________years. (Round to one decimal place.)

4. (Solving for i) Lance Murdoc k purchased a wooden statue of a Conquistador for $7,600 to put in his home office 7 years ago. Lance has recently married, and his home office is being converted into a sewing room. His new wife, who has far better taste than Lance, thinks the Conquistador is hideous and must go immediately. Lance decided to sell it on e-Bay and only received %5,200 for it, and so he took a loss on the investment. What was his rate of return, that is, the value of i?

What was Lance Murdoc’s rate of return, that is, the value of i? Enter a negative percentage for a loss

_______% (Round to two decimal places.)

5. (Future value of an ordinary annuity) What is the future value of $500 per year for 10 years compounded annually at 5 percent?

The future value of $500 per year for 10 years compounded annually at 5 percent is $___________. (Round to the nearest cent.)

6. (Present value of an ordinary annuity) What is the present value of $2,500 per year for 8 years discounted back to the present at 10 percent?

The present value of $2,500 per year for 8 years discounted back to the present at 10 percent is $____________. (Round to the nearest cent.)

7. (Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $90,000 at the end of year one and then grows at a rate of 4% per year indefinitely? The rate of interest used to discount the cash flows is 11%.

The present value of the growing perpetuity is $___________. (Round to the nearest cent.)

8. (Present value of complex cash flows) How much do you have to deposit today so that beginning 11 years from now you can withdraw $10,000 a year for the next 5 years (periods 11 through 15) plus an additional amount of $20,000 in the last year (period 15)? Assume an interest rate of 6 percent.

The amount of money you have to deposit today is $____________. (Round to the nearest cent.)

9. (Break-even analysis) The Marvel Mfg. Company is considering whether or not to construct a new robotic production facility. The cost of this new facility is $600, 000 and it is expected to have a six-year life with annual depreciation expense of $100, 000 and no salvage value. Annual sales from the new facility are expected to be 2,000 units with a price of $1,000 per unity. Variable production costs are $600 per unit, and fixed cash expenses are $80,000 per year.

a. Find the accounting and the cash break-even units of production

b. Will the plant make a profit based on its current expected level of operations

c. Will the plant contribute cash flow to the firm at the expected level of operations?

a. The accounting break-even units of production is __________units. (Round to the nearest whole number.)

10. (Break-even analysis) Farrington Enterprises runs a number of sporting goods businesses and is currently analyzing a new T-shirt printing business. Specifically, the company is evaluating the feasibility of this business based on its estimates of unit sales, the price per unit, variable cost per unit and fixed costs. The company initial estimates of annual sales and other critical variables are shown below:

Unit sales 5,000

Price per unit $12.00

Variable cost per unit $8.00

Fixed cash expense per year $10,000

Depreciation expense $5,000

a. The accounting break-even units of production is ______________units. (Round to the neares interger.)

11. (Financial forecasting) Which of the following accounts would most likely vary directly with the level of firm sales?

Cash yes or no

Notes payable yes or no

Marketable securities yes or no

Plant and equipment yes or no

Accounts payable yes or no

Inventories yes or no

Long-term debt yes or no

Will this account vary with sales (cash)? yes or no

12. (Corporate income tax) Meyer Inc. has taxable income (earnings before taxes) of $300,000. Calculate Meyer’s federal income tax liability using the tax table shown below. What are the firm’s average and marginal tax

Taxable Income Marginal Tax Rate

$0-$50,000 15%

$50,001-$75,000 25%

$75,001-$100, 000 34%

$100,001-$335,000 39%

$335,000-$10,000,000 34%

$10,000,000-$15,000,000 35%

$15,000,001-$18,333,333 38%

Over $18,333,333 35%

The firm’s tax liability for the year is $___________. (Round to the nearest dollar.)

13. (Working with the balance sheet) The Caraway Seed Company grows heirloom tomatoes and sells their seeds. The heirloom tomato plants are preferred by many growers for their superior flavor. At the end of the most recent year the firm had current assets of $50,000 net fixed assets of $250,000, current liabilities of $30,000, and long term debt of $100,000.

a. Calculate Caraway’s stockholders equity.

b. What is the firm’s net working capital?

c. If Caraway’s current liabilities consist of $20,000 in accounts payable and $10,000 in short-term debt (notes payable), what is the firm’s net working capital?

a. Calculate Caraway’s stockholder’s equity.

Caraway’s stockholders’ equity is $______________. (Round to the nearest dollar)

14. (Review of financial statements) A scrambled list of accounts from the income statement and balance sheet of Belmond, Inc. is found below:

Inventory $6,540

Common Stock 44,940

Cash 16,560

Operating expenses 1,320

Short-term notes payable 590

Interest expense 940

Depreciation expense 520

Sales 12,810

Accounts receivable 9,620

Accounts payable 4,840

Long-term debt 55,060

Cost of goods sold 5,760

Buildings and equipment 122,190

Accumulated depreciation 34,310

Taxes 1,430

General and administrative expense 880

Retained earnings ?

a. How much is the firm’s net working capital?

b. Complete an income statement and a balance sheet for Belmond.
c. If you were asked to respond to complete parts a. and b. as part of a training exercise, what could you tell your boss about the company’s financial condition based on your answers?

15. (Analyzing the quality of firm earnings) Kabutell, Inc. had net income of $75,000, cash flow from financing activities of $50,000, depreciation expenses of $50,000, and cash flow from operating activities of $575,000.

a. Calculate the quality of earnings ratio. What does this ration tell you?

b. Kabutell, Inc. reported the following in its annual reports for 2011-2013:

($ million) 2011 2012 2013

Cash Flow from Operations $478 $403 $470

Capital Expenditures (CAPEX) $459 $447 $456

Calculate the average capital acquisitions ratio over the three year period. How would you interpret these results?

a. What is Kabuutell’s quality of earnings ratio ______________% (Round to one decimal place.)