A payment of $20,000 6 years from now is equivalent, at 11% interest, to an annu
ID: 1094551 • Letter: A
Question
A payment of $20,000 6 years from now is equivalent, at 11% interest, to an annual payment for 12 years starting at the end of this year. The equivalent uniform annual payment is closest to
Select one:
a. $1263.52
b. $1425.72
c. $1726.21
d. $1562.34
A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT?
Select one:
a. The present value of the $1,000 would be smaller if interest were compounded monthly rather than semiannually.
b. The periodic rate is less than 3%.
c. The PV of the $1,000 lump sum has a higher present value than the PV of a 3-year, $333.33 ordinary annuity.
d. The periodic interest rate is greater than 3%.
e. The present value would be greater if the lump sum were discounted back for more periods.
An individual wishes to deposit a sum of $5,000 now and $10,000 three years from now in the same account. Determine the accumulated amount at the end of 10 years if the interest rate is 9% per year, compounded quarterly.
Select one:
a. $29,764
b. $31,235
c. $30,821
d. $40,140
Brown Office Supplies recently reported $15,500 of sales, $8,250 of operating costs other than depreciation, and $1,750 of depreciation. It had $9,000 of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. How much was the firm's earnings before taxes (EBT)?
Select one:
a. $5,638
b. $5,369
c. $5,114
d. $4,627
e. $4,870
Helmuth Inc's latest net income was $1,250,000, and it had 225,000 shares outstanding. The company wants to pay out 45% of its income. What dividend per share should it declare?
Select one:
a. $2.50
b. $2.26
c. $2.14
d. $2.38
e. $2.63
If the discount (or interest) rate is positive, the future value of an expected series of payments will always exceed the present value of the same series.
Select one:
a. True
b. False
If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual rate by multiplying the periodic rate by the number of periods per year.
Select one:
a. True
b. False
Jim Clark borrowed $20,000 from a friendly credit union to buy a car at 8.5% interest per year compounded monthly for 60 months. The monthly payment for Jim is nearly equal to _______________.
Select one:
a. 333.33
b. $520.43
c. $626.25
d. $410.33
Meyer Inc's assets are $625,000, and its total debt outstanding is $185,000. The new CFO wants to establish a debt/assets ratio of 55%. The size of the firm does not change. How much debt must the company add or subtract to achieve the target debt ratio?
Select one:
a. $158,750
b. $166,688
c. $175,022
d. $192,962
e. $183,773
Meyer Inc's assets are $625,000, and its total debt outstanding is $185,000. The new CFO wants to establish a debt/assets ratio of 55%. The size of the firm does not change. How much debt must the company add or subtract to achieve the target debt ratio?
Select one:
a. $166,688
b. $192,962
c. $158,750
d. $183,773
e. $175,022
Other things held constant, the more debt a firm uses, the lower its profit margin will be.
Select one:
a. False
b. True
The greater the number of compounding periods within a year, then (1) the greater the future value of a lump sum investment at Time 0 and (2) the greater the present value of a given lump sum to be received at some future date.
Select one:
a. False
b. True
The maintenance expense on a piece of machinery is estimated to be $150 in the first year and is to increase by $150 every year thereafter until year 6. If the interest rate is 8%, the approximate equivalent uniform annual maintenance cost for 6 years is
Select one:
a. $423
b. $341
c. $491
d. $515
The present value of a future sum decreases as either the discount rate or the number of periods per year increases, other things held constant.
Select one:
a. True
b. False
The time dimension is important in financial statement analysis. The balance sheet shows the firm's financial position at a given point in time, the income statement shows results over a period of time, and the statement of cash flows reflects specific changes in accounts over that period of time.
Select one:
a. False
b. True
Which of the following investments would have the highest future value at the end of 10 years? Assume that the effective annual rate for all investments is the same and is greater than zero.
Select one:
a. Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments).
b. Investment A pays $250 at the beginning of every year for the next 10 years (a total of 10 payments).
c. Investment D pays $2,500 at the end of 10 years (just one payment).
d. Investment C pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments).
e. Investment E pays $250 at the end of every year for the next 10 years (a total of 10 payments).
Which of the following statements is CORRECT?
Select one:
a. If a company uses some of its bank deposits to buy short-term, highly liquid marketable securities, this will cause a decline in its current assets as shown on the balance sheet.
b. If a company issues new long-term bonds to purchase fixed assets during the current year, this will increase both its reported current assets and current liabilities at the end of the year.
c. Dividends paid reduce the net income that is reported on a company
A payment of $20,000 6 years from now is equivalent, at 11% interest, to an annual payment for 12 years starting at the end of this year. The equivalent uniform annual payment is closest to Select one: a. $1263.52 b. $1425.72 c. $1726.21 d. $1562.34 A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT? Select one: a. The present value of the $1,000 would be smaller if interest were compounded monthly rather than semiannually. b. The periodic rate is less than 3%. c. The PV of the $1,000 lump sum has a higher present value than the PV of a 3-year, $333.33 ordinary annuity. d. The periodic interest rate is greater than 3%. e. The present value would be greater if the lump sum were discounted back for more periods. An individual wishes to deposit a sum of $5,000 now and $10,000 three years from now in the same account. Determine the accumulated amount at the end of 10 years if the interest rate is 9% per year, compounded quarterly. Select one: a. $29,764 b. $31,235 c. $30,821 d. $40,140 Brown Office Supplies recently reported $15,500 of sales, $8,250 of operating costs other than depreciation, and $1,750 of depreciation. It had $9,000 of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. How much was the firm's earnings before taxes (EBT)? Select one: a. $5,638 b. $5,369 c. $5,114 d. $4,627 e. $4,870 Helmuth Inc's latest net income was $1,250,000, and it had 225,000 shares outstanding. The company wants to pay out 45% of its income. What dividend per share should it declare? Select one: a. $2.50 b. $2.26 c. $2.14 d. $2.38 e. $2.63 If the discount (or interest) rate is positive, the future value of an expected series of payments will always exceed the present value of the same series. Select one: a. True b. False If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual rate by multiplying the periodic rate by the number of periods per year. Select one: a. True b. False Jim Clark borrowed $20,000 from a friendly credit union to buy a car at 8.5% interest per year compounded monthly for 60 months. The monthly payment for Jim is nearly equal to _______________. Select one: a. 333.33 b. $520.43 c. $626.25 d. $410.33 Meyer Inc's assets are $625,000, and its total debt outstanding is $185,000. The new CFO wants to establish a debt/assets ratio of 55%. The size of the firm does not change. How much debt must the company add or subtract to achieve the target debt ratio? Select one: a. $158,750 b. $166,688 c. $175,022 d. $192,962 e. $183,773 Meyer Inc's assets are $625,000, and its total debt outstanding is $185,000. The new CFO wants to establish a debt/assets ratio of 55%. The size of the firm does not change. How much debt must the company add or subtract to achieve the target debt ratio? Select one: a. $166,688 b. $192,962 c. $158,750 d. $183,773 e. $175,022 Other things held constant, the more debt a firm uses, the lower its profit margin will be. Select one: a. False b. True The greater the number of compounding periods within a year, then (1) the greater the future value of a lump sum investment at Time 0 and (2) the greater the present value of a given lump sum to be received at some future date. Select one: a. False b. True The maintenance expense on a piece of machinery is estimated to be $150 in the first year and is to increase by $150 every year thereafter until year 6. If the interest rate is 8%, the approximate equivalent uniform annual maintenance cost for 6 years is Select one: a. $423 b. $341 c. $491 d. $515 The present value of a future sum decreases as either the discount rate or the number of periods per year increases, other things held constant. Select one: a. True b. False The time dimension is important in financial statement analysis. The balance sheet shows the firm's financial position at a given point in time, the income statement shows results over a period of time, and the statement of cash flows reflects specific changes in accounts over that period of time. Select one: a. False b. True Which of the following investments would have the highest future value at the end of 10 years? Assume that the effective annual rate for all investments is the same and is greater than zero. Select one: a. Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments). b. Investment A pays $250 at the beginning of every year for the next 10 years (a total of 10 payments). c. Investment D pays $2,500 at the end of 10 years (just one payment). d. Investment C pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments). e. Investment E pays $250 at the end of every year for the next 10 years (a total of 10 payments). Which of the following statements is CORRECT? Select one: a. If a company uses some of its bank deposits to buy short-term, highly liquid marketable securities, this will cause a decline in its current assets as shown on the balance sheet. b. If a company issues new long-term bonds to purchase fixed assets during the current year, this will increase both its reported current assets and current liabilities at the end of the year. c. Dividends paid reduce the net income that is reported on a company??s income statement. d. If a company pays more in dividends than it generates in net income, its retained earnings as reported on the balance sheet will decline from the previous year's balance. e. Accounts receivable are reported as a current liability on the balance sheet. Which of the following statements is CORRECT? Select one: a. Other things held constant, the higher a firm's debt ratio, the higher its TIE ratio will be. b. Debt management ratios show the extent to which a firm's managers are attempting to magnify returns on owners' capital through the use of financial leverage. c. Other things held constant, the more debt a firm uses, the higher its operating margin will be. d. Debt management ratios show the extent to which a firm's managers are attempting to reduce risk through the use of financial leverage. The higher the debt ratio, the lower the risk. e. Other things held constant, the more debt a firm uses, the higher its profit margin will be. Which of the following statements is CORRECT? Select one: a. If you solve for I and get a negative number, then you must have made a mistake. b. If CF0 is positive and all the other CFs are negative, then you cannot solve for I. c. If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0. d. To solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is, essentially, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise. e. If you have a series of cash flows, and CF0 is negative but each of the following CFs is positive, you can solve for I, but only if the sum of the undiscounted cash flows exceeds the cost. Which of the following would be most likely to lead to a higher level of interest rates in the economy? Select one: a. The Federal Reserve decides to try to stimulate the economy. b. Households start saving a larger percentage of their income. c. The level of inflation begins to decline. d. The economy moves from a boom to a recession. e. Corporations step up their expansion plans and thus increase their demand for capital. Which of the following would indicate an improvement in a company??s financial position, holding other things constant? Select one: a. The inventory and total assets turnover ratios both decline. b. The times-interest-earned ratio declines. c. The debt ratio increases. d. The current and quick ratios both increase. e. The profit margin declines. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment? Select one: a. The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity lasts for only 5 rather than 10 years, hence that each payment is for $20,000 rather than for $10,000. b. The riskiness of the investment??s cash flows decreases. c. The discount rate increases. d. The total amount of cash flows remains the same, but more of the cash flows are received in the earlier years and less are received in the later years. e. The discount rate decreases. You plan to invest some money in a bank account. Which of the following banks provides you with the highest effective rate of interest? Select one: a. Bank 4; 6.0% with quarterly compounding. b. Bank 1; 6.1% with annual compounding. c. Bank 3; 6.0% with annual compounding. d. Bank 5; 6.0% with daily (365-day) compounding. e. Bank 2; 6.0% with monthly compounding. Amy Brown borrowed $1,000 at 8% interest compounded annually. She plans to pay off the loan as per the schedule below. The fourth payment, Y will have to be ___________. What is net present worth for each alternative given the interest rate is 7% Select one: a. -$1125.23 and $560.00 b. $322.42 and $420.00 c. -$1,255.25 and $600.00 d. $235.60 and $400.00 e. -$1,324.55 and $512.00 ANY HELP WOULD BE GREATLY APPRECIATED!!! Select one: a. $325.05 b. $347.19 c. $375.40 d. $365.25 Data for two mutually exclusive alternatives are given below. Select one: a. $11,284 b. $11,849 c. $ 9,699 d. $10,747 e. $10,210 Given the cash flow diagram below, determine the unknown value using an interest rate of 12%. Select one: a. $298 b. $108 c. $345 d. $460 What is the present value of the following cash flow stream at a rate of 12.0%?Explanation / Answer
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