Write your answer in the space provided or on a separate sheet of paper. 40)Bill
ID: 2467463 • Letter: W
Question
Write your answer in the space provided or on a separate sheet of paper. 40)Bill wanta to buy a new boat in 7 years. He experts the new boat will cost $28,000. bill has $18,000 in an investment account today. What rale of return must Bill earn on his investments to be able to buy the boat on time? 41)How could an analyst determine whether a company's ratio is good or bad? 42)Your parents are complaining about the price of items today compared to what they cost years ago. If an automobile that.it cost $12,(100 in 1980 costs $40,000 in 2010, caUulate the annual growth rate in the automobile's price.Explanation / Answer
40)
Let bill earn rate of return=r
Future value=Present value*(1+r)^n, where n=number of years
28000=18000*(1+r)^7
(1+r)^7=28000/18000
1+r=(28000/18000)^(1/7)= 1.065153547
r=6.5%
Thus required rate of return=6.5%
42)
There can be many ratios to analyse the company. The analyst should analyse different ration with different reference. A higher liquidity ratio(Current ratio) represents a good firm, A higher activity ratio(inventory turnover etc.) is considered to be good. A high profitability ratio is considered to be good.
43)
Number of years =2010-1980=30
Annual growth rate=(40000/12000)^(1/30)-1=0.040948615
Annual growth rate=4.09%
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