## Taylor Inc.,

Taylor Inc., the company you work for, is considering a new project whose data are shown below. What is the project’s Year 1 cash flow?

## Orwell Building Supplies

Orwell Building Supplies’ last dividend was \$1.75. Its dividend growth rate is expected to be constant at 25% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price?

## Burke Tires

Burke Tires just paid a dividend of D0 = \$1.32. Analysts expect the company’s dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock’s current market value?

## Rogoff Co.’s

Rogoff Co.’s 15-year bonds have an annual coupon rate of 9.5%. Each bond has face value of \$1,000 and makes semiannual interest payments. If you require an 11.0% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

## The Herrara Co., had \$273,000 in taxable income. Compute the company’s income taxes. What is the average tax rate?

QUESTION

1. The ability of the firm to pay off short-term obligations as they come due is indicated by:

 My Grade Point Average Turnover Ratios Liquidity Ratios Profitability Ratios

QUESTION 2

ABC earned a net profit margin of 5.5% last year and had an equity multiplier of 2.6. If its total assets are \$81 million and its sales are 180 million, what is the firm’s return on equity?

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

QUESTION 3

A firm has sales of \$350,000, a profit margin of 6 percent, a total asset turnover rate of 1.25, and an equity multiplier of 1.4. What is the return on equity?

 10.50 percent 7.50 percent 7.75 percent 11.11 percent 5.36 percent

QUESTION 4

ABC Corporation has the following ratios: Total Asset Turnover= 1.6 Total debt to total assets= 0.5 Current Ratio= 1.7 Current Liabilities= \$2,000,000 Sales = \$16,000,000 What is the amount of current assets?

 2,000,000 3,200,000 3,400,000 1,000,000

QUESTION 5

The Baker s Dozen has current liabilities of \$5,600, net working capital of \$2,100, inventory of \$3,900, and sales of \$13,500. What is the quick ratio? Assume pre-paid expenses are zero.

 0.68 0.7 1.38 1.47 2.08

QUESTION 6

If the debt ratio is 0.60, the Debt/Equity Ratio is:

 1.25 0.25 1.2 0.2 0.8 1.5

QUESTION 7

Toast and Butter, Inc., has total assets of \$712,000 and an equity multiplier of 1.6. What is the debt-equity ratio?

 0.6 0.67 0.63 1.6 1.67

QUESTION 8

XYZ has total sales of \$210, assets of \$82, return on equity of 26%, and net profit margin of 5%. What is the amount of equity?

Enter you answer rounded off to two decimal points. Do not enter \$ in the answer box.

QUESTION 9

Top Sound, Inc., has total assets of \$212,000, a debt-equity ratio of .6, and net income of \$9,500. What is the return on equity?

 6.87 percent 7.17 percent 7.34 percent 7.50 percent 7.67 percent

QUESTION 10

If the debt ratio is 0.75, the Debt/Equity Ratio is:

 0.75 0.25 1 5 1.75 3

QUESTION 11

If the Debt/Equity Ratio is 0.60. What is the Debt Ratio?

 0.40 0.375 0.60 1 o.4444

QUESTION 12

If the debt ratio is 0.20, the Equity Multiplier is:

 1.25 0.25 1.2 0.2 0.8 1.5

QUESTION 13

ABC’s balance sheet indicates a book value of shareholders’ equity of \$879,832. The firm’s earning per share are \$3.5 and the price-earnings ratio is 12.12. If there are 58,347 shares outstanding, what is the book value per share?

Enter your answer rounded off to two decimal points. Do not enter \$ in the answer box.

Hint: Market value per share is same as market price per share

QUESTION 14

ABC’s balance sheet indicates a book value of shareholders’ equity of \$713,385. The firm’s earning per share are \$2.5 and the price-earnings ratio is 9.6. If there are 47,987 shares outstanding, what is the market-to-book ratio?

Hint: Market value per share is same as market price per share

QUESTION 15

A firm has total assets of \$682,000 and total equity of \$424,000. What is the debt-equity ratio?

 1.61 0.61 1.64 0.62

QUESTION 16

Wexford Hotels has sales of \$289,600, depreciation of \$21,400, interest of \$1,300, Operating Income of \$23,269.70, and a tax rate of 34 percent. What is the times interest earned ratio?

 20 17.9 18.5 16 19.8

QUESTION 17

ABC’s balance sheet indicates a book value of shareholders’ equity of \$866,173. The firm’s earning per share are \$2.6 and the price-earnings ratio is 12.98. If there are 56,487 shares outstanding, what is the market value per share?

Enter your answer rounded off to two decimal points. Do not enter \$ in the answer box.

Hint: Market value per share is same as market price per share.

QUESTION 18

If the Debt/Equity Ratio is 0.80. What is the Debt Ratio?

 0.40 0.375 0.60 1 o.4444

QUESTION 19

ABC, Inc., has a market-to-book ratio of 2, net income of \$82,313, a book value per share of \$19.5, and 46,103 shares of stock outstanding. What is the price-earnings ratio?

1 points

QUESTION 20

If the debt ratio is 0.80, the Equity Multiplier is:

 0.8 0.2 1 5 1.8 4

1 points

QUESTION 21

If the Debt/Equity Ratio is 0.50. What is the Debt Ratio?

 0.50 0.375 0.60 1 o.3333

1 points

QUESTION 22

XYZ earned a net profit margin of 4.2% last year and had an equity multiplier of 2.5. If its total assets are \$108 million and its sales are 183 million, what is the firm’s debt ratio?

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

1 points

QUESTION 23

XYZ earned a net profit margin of 4.6% last year and had an equity multiplier of 3.8. If its total assets are \$97 million and its sales are 194 million, what is the firm’s return on assets?

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

1 points

QUESTION 24

If Roten, Inc., has a equity multiplier of 1.75, total asset turnover of 1.30, and profit margin of 8.5 percent, what is the return on equity (ROE)?

 19.34% 2.275% 1.75% 14.875%

1 points

QUESTION 25

1. ABC’s Balance Sheet lists Current Assets of \$300, Current Liabilities of \$200, Fixed Assets of \$700, Long-Term Debt of \$400. ABC has 200 shares outstanding. What is the market-to-book ratio (MTB) if the market price per share is \$8?
 4 times 400 times 2 times 8 times 0.25 times

1 points

QUESTION 26

1. A firm has total equity of \$70,312.50, a profit margin of 8 percent, an equity multiplier of 1.6, and a total asset turnover of 1.3. What is the amount of the firm s sales?
 \$91,406 \$112,500 \$121,500 \$137,500 \$146,250

1 points

QUESTION 27

1. A firm has net working capital of \$1,100 and current liabilities of \$2,800. What is the current ratio?
 0.98 2.56 0.39 0.72 1.39

1 points

QUESTION 28

ABC has total sales of \$214, assets of \$114, return on equity of 32%, and net profit margin of 8%. What is the debt ratio?

Enter you answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

1 points

QUESTION 29

1. The Jamestown Group has equity of \$421,000, sales of \$792,000, and a profit margin of 6 percent. What is the return on equity?
 8.87 percent 6.19 percent 11.29 percent 10.27 percent 9.37 percent

QUESTION 30

1. Blackstone, Inc., has net income of \$9,433, a tax rate of 31%, and interest expense of \$715. What is the times interest earned ratio?

QUESTION 31

1. Smith Corporation has current assets of \$11,400, inventories of \$4,000, and a current ratio of 2.6. What is Smith s acid test ratio? Assume pre-paid expenses is zero.
 1.69 0.54 0.74 1.35

## If Roten, Inc., has a equity multiplier of 1.75

Managerial Finance Quiz 2  Sample problems

We are able to assist you in solving these problems and understanding the concepts.

We also have available step by step solutions to problems below in excel.

QUESTION 1
1. The ability of the firm to pay off short-term obligations as they come due is indicated by:

Turnover Ratios

Liquidity Ratios

Profitability Ratios

QUESTION 2
1. ABC earned a net profit margin of 5.5% last year and had an equity multiplier of 2.6. If its total assets are \$81 million and its sales are 180 million, what is the firm’s return on equity?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

QUESTION 3
1. A firm has sales of \$350,000, a profit margin of 6 percent, a total asset turnover rate of 1.25, and an equity multiplier of 1.4. What is the return on equity?

10.50 percent

7.50 percent

7.75 percent

11.11 percent

5.36 percent

QUESTION 4
1. ABC Corporation has the following ratios: Total Asset Turnover= 1.6 Total debt to total assets= 0.5 Current Ratio= 1.7 Current Liabilities= \$2,000,000 Sales = \$16,000,000 What is the amount of current assets?

2,000,000

3,200,000

3,400,000

1,000,000

QUESTION 5
1. The Baker s Dozen has current liabilities of \$5,600, net working capital of \$2,100, inventory of \$3,900, and sales of \$13,500. What is the quick ratio? Assume pre-paid expenses are zero.

0.68

0.70

1.38

1.47

2.08

QUESTION 6
1. If the debt ratio is 0.60, the Debt/Equity Ratio is:

1.25

0.25

1.20

0.20

0.80

1.5

QUESTION 7
1. Toast and Butter, Inc., has total assets of \$712,000 and an equity multiplier of 1.6. What is the debt-equity ratio?

0.60

0.67

0.63

1.60

1.67

QUESTION 8
1. XYZ has total sales of \$210, assets of \$82, return on equity of 26%, and net profit margin of 5%. What is the amount of equity?
Enter you answer rounded off to two decimal points. Do not enter \$ in the answer box.

QUESTION 9
1. Top Sound, Inc., has total assets of \$212,000, a debt-equity ratio of .6, and net income of \$9,500. What is the return on equity?

6.87 percent

7.17 percent

7.34 percent

7.50 percent

7.67 percent

QUESTION 10
1. If the debt ratio is 0.75, the Debt/Equity Ratio is:

0.75

0.25

1

5

1.75

3

QUESTION 11
1. If the Debt/Equity Ratio is 0.60. What is the Debt Ratio?

0.40

0.375

0.60

1

o.4444

QUESTION 12
1. If the debt ratio is 0.20, the Equity Multiplier is:

1.25

0.25

1.20

0.20

0.80

1.5

QUESTION 13
1. ABC’s balance sheet indicates a book value of shareholders’ equity of \$879,832. The firm’s earning per share are \$3.5 and the price-earnings ratio is 12.12. If there are 58,347 shares outstanding, what is the book value per share?
Enter your answer rounded off to two decimal points. Do not enter \$ in the answer box.
Hint: Market value per share is same as market price per share

1 points
QUESTION 14
1. ABC’s balance sheet indicates a book value of shareholders’ equity of \$713,385. The firm’s earning per share are \$2.5 and the price-earnings ratio is 9.6. If there are 47,987 shares outstanding, what is the market-to-book ratio?
Hint: Market value per share is same as market price per share

QUESTION 15
1. A firm has total assets of \$682,000 and total equity of \$424,000. What is the debt-equity ratio?

1.61

0.61

1.64

0.62

QUESTION 16
1. Wexford Hotels has sales of \$289,600, depreciation of \$21,400, interest of \$1,300, Operating Income of \$23,269.70, and a tax rate of 34 percent. What is the times interest earned ratio?

20

17.9

18.5

16

19.8

QUESTION 17
1. ABC’s balance sheet indicates a book value of shareholders’ equity of \$866,173. The firm’s earning per share are \$2.6 and the price-earnings ratio is 12.98. If there are 56,487 shares outstanding, what is the market value per share?
Enter your answer rounded off to two decimal points. Do not enter \$ in the answer box.
Hint: Market value per share is same as market price per share.

QUESTION 18
1. If the Debt/Equity Ratio is 0.80. What is the Debt Ratio?

0.40

0.375

0.60

1

o.4444

QUESTION 19
1. ABC, Inc., has a market-to-book ratio of 2, net income of \$82,313, a book value per share of \$19.5, and 46,103 shares of stock outstanding. What is the price-earnings ratio?

QUESTION 20
1. If the debt ratio is 0.80, the Equity Multiplier is:

0.8

0.2

1

5

1.8

4

QUESTION 21
1. If the Debt/Equity Ratio is 0.50. What is the Debt Ratio?

0.50

0.375

0.60

1

o.3333

QUESTION 22
XYZ earned a net profit margin of 4.2% last year and had an equity multiplier of 2.5. If its total assets are \$108 million and its sales are 183 million, what is the firm’s debt ratio?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

QUESTION 23
XYZ earned a net profit margin of 4.6% last year and had an equity multiplier of 3.8. If its total assets are \$97 million and its sales are 194 million, what is the firm’s return on assets?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

QUESTION 24
If Roten, Inc., has a equity multiplier of 1.75, total asset turnover of 1.30, and profit margin of 8.5 percent, what is the return on equity (ROE)?

19.34%

2.275%

1.75%

14.875%

QUESTION 25
ABC’s Balance Sheet lists Current Assets of \$300, Current Liabilities of \$200, Fixed Assets of \$700, Long-Term Debt of \$400. ABC has 200 shares outstanding. What is the market-to-book ratio (MTB) if the market price per share is \$8?

4 times

400 times

2 times

8 times

0.25 times

QUESTION 26
A firm has total equity of \$70,312.50, a profit margin of 8 percent, an equity multiplier of 1.6, and a total asset turnover of 1.3. What is the amount of the firm s sales?

\$91,406

\$112,500

\$121,500

\$137,500

\$146,250

QUESTION 27
A firm has net working capital of \$1,100 and current liabilities of \$2,800. What is the current ratio?

.98

2.56

.39

.72

1.39

QUESTION 28
ABC has total sales of \$214, assets of \$114, return on equity of 32%, and net profit margin of 8%. What is the debt ratio?
Enter you answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

QUESTION 29
The Jamestown Group has equity of \$421,000, sales of \$792,000, and a profit margin of 6 percent. What is the return on equity?

8.87 percent

6.19 percent

11.29 percent

10.27 percent

9.37 percent

QUESTION 30
Blackstone, Inc., has net income of \$9,433, a tax rate of 31%, and interest expense of \$715. What is the times interest earned ratio?

QUESTION 31
Smith Corporation has current assets of \$11,400, inventories of \$4,000, and a current ratio of 2.6. What is Smith s acid test ratio? Assume pre-paid expenses is zero.

1.69

0.54

0.74

1.35

## Stock Price and Dividends and Discount Growth Model

Question 1

1. A stock is expected to pay a dividend of \$1.1 at the end of the year.  The required rate of return is rs = 9.9%, and the expected constant growth rate is g = 7.7%.  What is the stock’s current price?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 2

1. ABC Enterprises’ stock is currently selling for \$60.3 per share.  The dividend is projected to increase at a constant rate of 5.3% per year.  The required rate of return on the stock is 12%.  What is the stock’s expected price 5 years from today (i.e. solve for P5)?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 3

1. A stock’s next dividend is expected to be \$2.2.  The required rate of return on stock is 12.4%, and the expected constant growth rate is 6.9%.  What is the stock’s current price?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 4

1. A stock just paid a dividend of \$2.6.  The required rate of return is 16.6%, and the constant growth rate is 4.3%.  What is the current stock price?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 5

1. If D1 = \$3.51, g (which is constant) = 2%, and P0 = \$29.65, what is the stock’s expected dividend yield for the coming year?

1 points

Question 6

1. ABC’s last dividend paid was \$1, its required return is 12.6%, its growth rate is 7.8%, and its growth rate is expected to be constant in the future.  What is Sorenson’s expected stock price in 7 years, i.e., what is P7?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 7

1. ABC’s stock has a required rate of return of 19%, and it sells for \$67 per share.  The dividend is expected to grow at a constant rate of 7.5% per year.  What is the expected year-end dividend, D1?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 8

1. ABC Enterprises’ stock is expected to pay a dividend of \$0.6 per share.  The dividend is projected to increase at a constant rate of 4.4% per year.  The required rate of return on the stock is 12.7%.  What is the stock’s expected price 3 years from today (i.e. solve for P3)?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 9

1. If last dividend = \$4.8, g = 4.7%, and P0 = \$67.2, what is the stock’s expected total return for the coming year?

1 points

Question 10

1. ABC Company’s last dividend was \$4.5.  The dividend growth rate is expected to be constant at 31% for 2 years, after which dividends are expected to grow at a rate of 6% forever.  The firm’s required return (rs) is 12%.  What is its current stock price (i.e. solve for Po)?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 11

1. The common stock of Wetmore Industries is valued at \$59.8 a share. The company increases their dividend by 6.7 percent annually and expects their next dividend to be \$0.6. What is the required rate of return on this stock?

1 points

Question 12

1. ABC is expected to pay a dividend of \$1.1 per share at the end of the year.  The stock sells for \$147 per share, and its required rate of return is 19.5%.  The dividend is expected to grow at some constant rate, g, forever.  What is the growth rate (i.e. solve for g)?

1 points

Question 13

1. ABC just paid a dividend of D0 = \$1.7.  Analysts expect the company’s dividend to grow by 31% this year, by 24% in Year 2, and at a constant rate of 6% in Year 3 and thereafter.  The required return on this stock is 16%.  What is the best estimate of the stock’s current market value?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 14

1. If D1 = \$2, g (which is constant) = 8.2%, and P0 = \$64.7, what is the stock’s expected total return for the coming year?

1 points

Question 15

1. ABC’s last dividend was \$3.1.  The dividend growth rate is expected to be constant at 20% for 3 years, after which dividends are expected to grow at a rate of 5% forever.  If the firm’s required return (rs) is 16%, what is its current stock price (i.e. solve for Po)?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 16

1. ABC Inc., is expected to pay an annual dividend of \$1.8 per share next year. The required return is 17.3 percent and the growth rate is 6.5 percent. What is the expected value of this stock five years from now?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 17

1. The common stock of Connor, Inc., is selling for \$31 a share and has a dividend yield of 2.2 percent. What is the dividend amount?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 18

1. A stock just paid a dividend of D0 = \$2.1.  The required rate of return is rs = 15.2%, and the constant growth rate is g = 5.4%.  What is the current stock price?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

## Portfolio diversification eliminates which one of the following?

Question 1

1. Portfolio diversification eliminates which one of the following?
 Total investment risk Portfolio risk premium Market risk Unsystematic risk Reward for bearing risk

Question 2

1. A \$36,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 1.29 while the beta of stock B is 0.90. One-half of the portfolio is invested in the risk-free security. How much is invested in stock A if the beta of the portfolio is 0.58?
 \$6,000 \$9,000 \$12,000 \$15,000 \$18,000

1 points

Question 3

1. Standard deviation measures _____ risk while beta measures _____ risk.
 systematic; unsystematic unsystematic; systematic total; unsystematic total; systematic asset-specific; market

1 points

Question 4

1. You own a portfolio of two stocks, A and B. Stock A is valued at \$6,540 and has an expected return of 11.2 percent. Stock B has an expected return of 8.1 percent. What is the expected return on the portfolio if the portfolio value is \$9,500?
 9.58 percent 9.62 percent 9.74 percent 9.97 percent 10.23 percent

1 points

Question 5

1. What is the beta of the following portfolio?
 0.98 1.02 1.11 1.14 1.2

1 points

Question 6

1. You own a portfolio that has \$1,900 invested in Stock A and \$2,700 invested in Stock B. If the expected returns on these stocks are 9 percent and 15 percent, respectively, what is the expected return on the portfolio?
 10.57 percent 11.14 percent 11.96 percent 12.52 percent 13.07 percent

1 points

Question 7

1. The stock of Billingsley United has a beta of 0.92. The market risk premium is 8.4 percent and the risk-free rate is 3.2 percent. What is the expected return on this stock?
 8.87 percent 9.69 percent 10.93 percent 11.52 percent 12.01 percent

1 points

Question 8

1. What is the beta of the following portfolio?
 1.08 1.14 1.17 1.21 1.23

Question 9

1. The systematic risk is same as:
 Unique risk Diversifiable risk Asset-specific risk Market risk Unsystematic risk

Question 10

1. You own a portfolio invested 25.17% in Stock A, 16.06% in Stock B, 10.11% in Stock C, and the remainder in Stock D. The beta of these four stocks are 0.68, 0.84, 0.47, and 1.24. What is the portfolio beta?

1 points

Question 11

1. You have observed the following returns on ABC’s stocks over the last five years:

3.5%, 8.2%, -13.5%, 12.7%, -2.2%

What is the arithmetic average returns on the stock over this five-year period.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 12

1. Suppose a stock had an initial price of \$62.27 per share, paid a dividend of \$5.8 per share during the year, and had an ending share price of \$86.37. What are the percentage returns if you own 25 shares?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Question 13

1. Suppose a stock had an initial price of \$91.87 per share, paid a dividend of \$9.3 per share during the year, and had an ending share price of \$90.79. If you own 193 shares, what are the dollar returns?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

Question 14

1. Calculate the expected returns of your portfolio

 Stock Invest Exp Ret A \$251 7.4% B \$955 19% C \$1,265 25.4%

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box.

Question 15

1. Suppose a stock had an initial price of \$93.2 per share, paid a dividend of \$5.6 per share during the year, and had an ending share price of \$106.03. What are the dollar returns?

Note: Enter your answer rounded off to two decimal points. Do not enter \$ or comma in the answer box. For example, if your answer is \$12.345 then enter as 12.35 in the answer box.

1 points

Question 16

1. You have observed the following returns on ABC’s stocks over the last five years:

3.8%, 8.1%, 4.8%, 10.2%, 8.9%

What is the geometric average returns on the stock over this five-year period.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Question 17

1. Suppose a stock had an initial price of \$96.2 per share, paid a dividend of \$6 per share during the year, and had an ending share price of \$104.92. What are the percentage returns?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Question 18

1. Suppose the real rate is 2.84% and the inflation rate is 6.24%. Solve for the nominal rate.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Question 19

1. Suppose the returns for Stock A for last six years was 4%, 7%, 8%, -2%, 9%, and 7%.
Compute the standard deviation of the returns.

## Time Value of Money

1. How many years it will take you to double your money if you can earn 5% each year, given that compounding is
quarterly? Note: Do not write “years” in your answer. Simply write the number in the answer box.
2. Consider a 10-year loan with monthly payments at 10%. If the loan amount is \$250,000, compute the Interest
paid during the 6th year.
3. The ABC Company is considering a new project which will require an initial cash investment of \$13,248. The
projected cash flows for years 1 through 4 are \$9,734, \$9,362, \$8,528, and \$5,772, respectively. If the
appropriate discount rate is 11%, compute the NPV of the project.
4. What is the future value of annual payments of \$5,016 for 14 years at 4 percent?
5. Assume interest rate of 13%. A company receives cash flows of \$969 at the end of year 5, \$385 at the end of
year 7, and \$389 at the end of year 10. Compute the future value of this cash flow stream.
6. If you can triple your money in 27 years, what is the implied rate of interest? Note: Do not put % sign in your
7. What is the future value of \$564 invested for 18 years at 12% if interest is compounded semi-annually? Note: Do
8. What is the effective rate of 10% compounded monthly?
9. Say, you deposit \$4,382 in a bank for 16 years. What is the amount you will have in the bank at the end of 16
years if interest of 5 % compounded monthly for first 7 years and interest of 8 % compounded quarterly for the
remaining years?
10. If you can double your money in 13 years, what is the implied annual rate of interest, given that compounded in
quarterly?
11. If you receive \$308 at the end of each year for the first three years and \$619 at the end of each year for the next
three years. What is the present value? Assume interest rate is 5%.
Hint: This is an uneven cash flow problem. Use the CF function and solve for NPV to get the answer.
12. What is the future value of quarterly payments of \$562 for 14 years at 6 percent?
13. What is the future value of \$11,866 for 9 years at 9 percent if interest is compounded semi-annually?
14. The ABC Company is considering a new project which will require an initial cash investment of \$5,753. The
project will produce no cash flows for the first 5 years. The projected cash flows for years 6 through 9 are
\$3,730, \$4,568, \$2,018, and \$3,118, respectively. If the appropriate discount rate is 12%, compute the NPV of
the project.
15. If the effective rate is 11%. What is the nominal rate if compounding is daily?
16. How many months it will take to grow your money from \$3,711 to \$6,515 if you can earn an interest of 19%
compounded monthly?
17. If you can double your money in 29 years, what is the implied annual rate of interest, given that compounded
semi-annually?
18. How much do you need to invest today in order to have \$5,268 at the end of 16 years if you are sure to earn an
interest at the rate of 5%?19. If you put \$700 in a savings account with a 10% nominal rate of interest compounded monthly, what will the
investment be worth in 21 months (round to the nearest dollar)?
1. A) \$827 / B) \$770 / C) \$833 D) \$828 E) \$1,176
20. What is the future value of \$2,348 invested for 15 years at 13% if interest is compounded quarterly?
21. Kelly starting setting aside funds 8 years ago to buy some new equipment for her firm. She has saved \$6,280
each quarter and earned an average rate of return of 4 percent. How much money does she currently have
saved for this purpose?
22. In order to buy a house, you take a loan of 100,000 at 7.5% for a period of 13 years. Compute the balance
remaining at the end of 5 years.
23. How many years it will take to grow your money from \$4,503 to \$7,232 if you can earn an interest of 17%
compounded monthly?
24. How much do you need to invest today in order to have \$3,763 at the end of 27 years if you are sure to earn an
interest at the rate of 11%, if interest is compounded quarterly?
25. How much do you need to invest today in order to have \$4,507 at the end of 28 years if you are sure to earn an
interest at the rate of 10%, if interest is compounded monthly?
26. What is the future value of \$1,103 invested for 24 years at 11% if interest is compounded semi-annually (twice a
year)?
27. Barrett Pharmaceuticals is considering a drug project that costs \$185,689 today and is expected to generate
end-of-year annual cash flows of \$11,781, forever. At what discount rate would Barrett be indifferent between
accepting and rejecting the project?
28. What should you be willing to pay in order to receive \$655 annually forever, if you require 6% per year on the
investment?
29. How many years it will take to grow your money from \$3,153 to \$8,775 if you can earn an interest of 6%
compounded quarterly?
30. Today, you are purchasing a \$1,746 13-year car loan at 7 percent. You will pay annually at the end of each year.
What is the amount of each payment?
31. Assume interest rate of 3%. Suppose that you receive \$91,917 at the end of each year for 4 years. Suppose that
this cash flow starts at the end of the fourth year. Compute the present value.
32. The Perpetual Life Insurance Co is trying to sell you an investment policy that will pay you and your heirs
\$10,113 per year forever. Suppose the Perpetual Life Insurance Co. told you the policy costs \$179,869. At what
interest rate would this be a fair deal?
33. Say, you deposit \$1,680 in a bank for 18 years. What is the amount you will have in the bank at the end of 18
years if interest of 4 % for first 8 years and interest of 10 % for the remaining years?
34. How many years it will take you to quadruple (means 4 times) your money if you can earn 14.08% each year?
35. Gertrude Carter and Co. has an outstanding loan that calls for equal annual payments of \$14,903 over the 10-
year life of the loan. The original loan amount was \$100,000 at an APR of 8 percent. How much of the third
payment is interest?
36. Assume interest rate of 3%. A company receives cash flows of \$86,130 at the end of years 4, 5, 6, 7, and 8, and
cash flows of \$280,548 at the end of year 10. Compute the future value of this cash flow stream.

## Time value of Money

Question 1

How many months it will take to grow your money from \$4,910 to \$7,731 if you can earn an interest of 11% compounded monthly? Note: Do not write “months” in your answer. Simply write the number in the answer box.

1 points

Question 2

The ABC Company is considering a new project which will require an initial cash investment of \$17,848. The projected cash flows for years 1 through 4 are \$6,879, \$8,426, \$9,661, and \$5,223, respectively. If the appropriate discount rate is 10%, compute the NPV of the project.

Enter your answer rounded off to two decimal points. Do not enter \$ in the answer box.

Question 3

Today, you are purchasing a \$3,807 14-year car loan at 5 percent. You will pay annually at the end of each year. What is the amount of each payment?

Question 4

Gertrude Carter and Co. has an outstanding loan that calls for equal annual payments of \$14,903 over the 10-year life of the loan. The original loan amount was \$100,000 at an APR of 8 percent. How much of the third payment is interest?

Do not enter the symbol \$ in your answer. Simply enter the answer rounded off to two decimal points.

Question 5

Assume interest rate of 5%. A company receives cash flows of \$117,708 at the end of years 4, 5, 6, 7, and 8, and cash flows of \$205,939 at the end of year 10. Compute the future value of this cash flow stream.

Do not enter the symbol \$ in your answer. Simply enter the answer rounded off to two decimal points.

Question 6

If you put \$700 in a savings account with a 10% nominal rate of interest compounded monthly, what will the investment be worth in 21 months (round to the nearest dollar)?

 a. \$770 b. \$833 c. \$828 d. \$827 e. \$1,176

Question 7

If you can triple your money in 29 years, what is the implied rate of interest? Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box..

Question 8

In order to buy a house, you take a loan of 100,000 at 7.5% for a period of 13 years. Compute the balance remaining at the end of 5 years.

Question 9

How much do you need to invest today in order to have \$2,569 at the end of 18 years if you are sure to earn an interest at the rate of 9%, if interest is compounded quarterly? Note: Do not put \$ sign in your answer. Simply write the number in the answer box.

Question 10

Say, you deposit \$1,493 in a bank for 17 years. What is the amount you will have in the bank at the end of 17 years if interest of 7 % for first 10 years and interest of 9 % for the remaining years? Note: Do not put \$ sign in your answer. Simply write the number in the answer box.

Question 11

Consider a 10-year loan with monthly payments at 10%. If the loan amount is \$250,000, compute the Interest paid during the 6th year.

Enter your answer rounded off to two decimal points. Do not enter \$ in the answer box.

Question 12

Barrett Pharmaceuticals is considering a drug project that costs \$192,894 today and is expected to generate end-of-year annual cash flows of \$14,018, forever. At what discount rate would Barrett be indifferent between accepting and rejecting the project?

Just enter the number in percentages up to 2 decimal points. Do not enter % in the answer box.

Question 13

What is the future value of annual payments of \$3,979 for 15 years at 7 percent?

Question 14

How much do you need to invest today in order to have \$2,277 at the end of 6 years if you are sure to earn an interest at the rate of 9%, if interest is compounded monthly? Note: Do not put \$ sign in your answer. Simply write the number in the answer box.

Question 15

If the effective rate is 12%. What is the nominal rate if compounding is daily.  Do not enter the symbol % in your answer. Simply enter the answer in percentages rounded off to two decimal points.

Question 16

What is the future value of \$10,360 for 14 years at 7 percent if interest is compounded semi-annually? Note: Do not enter “\$” in your answer. Simply write down the number that you get as your answer.

Question 17

How many years it will take to grow your money from \$4,503 to \$7,232 if you can earn an interest of 17% compounded monthly? Note: Do not write “years” in your answer. Simply write the number in the answer box.

Question 18

Assume interest rate of 14%. A company receives cash flows of \$576 at the end of year 5, \$393 at the end of year 7, and \$602 at the end of year 10. Compute the future value of this cash flow stream.

Do not enter the symbol \$ in your answer. Simply enter the answer rounded off to two decimal points.

Question 19

If you receive \$321 at the end of each year for the first three years and \$692 at the end of each year for the next three years. What is the present value? Assume interest rate is 11%.

Hint: This is an uneven cash flow problem. Use the CF function and solve for NPV to get the answer.

Just enter the number up to 2 decimal points. Do not enter \$ in the answer box.

Question 20

What should you be willing to pay in order to receive \$337 annually forever, if you require 7% per year on the investment?

Just enter the number up to 2 decimal points. Do not enter \$ in the answer box.

Question 21

What is the effective rate of 16% compounded monthly?

Do not enter the symbol % in your answer. Simply enter the answer in percentages rounded off to two decimal points.

Question 22

The Perpetual Life Insurance Co is trying to sell you an investment policy that will pay you and your heirs \$11,886 per year forever. Suppose the Perpetual Life Insurance Co. told you the policy costs \$154,591. At what interest rate would this be a fair deal? Just enter the number in percentages up to 2 decimal points. Do not enter % in the answer box.

Question 23

Kelly starting setting aside funds 10 years ago to buy some new equipment for her firm. She has saved \$6,880 each quarter and earned an average rate of return of 10 percent. How much money does she currently have saved for this purpose?

Question 24

What is the future value of \$3,487 invested for 10 years at 12% if interest is compounded semi-annually? Note: Do not put \$ sign in your answer. Simply write the number in the answer box.

Question 25

What is the future value of quarterly payments of \$965 for 5 years at 4 percent?

Question 26

How many years it will take you to quadruple (means 4 times) your money if you can earn 10.46% each year? Note: Do not write “years” in your answer. Simply write the number in the answer box.

Question 27

What is the future value of \$632 invested for 12 years at 10% if interest is compounded quarterly? Note: Do not put \$ sign in your answer. Simply write the number in the answer box.

Question 28

How many years it will take you to double your money if you can earn 10% each year, given that compounding is quarterly? Note: Do not write “years” in your answer. Simply write the number in the answer box.

Question 29

If you can double your money in 8 years, what is the implied annual rate of interest, given that compounded in quarterly? Note: give your answer in percentages. Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box.

Question 30

How much do you need to invest today in order to have \$12,465 at the end of 14 years if you are sure to earn an interest at the rate of 4%? Note: Do not put \$ sign in your answer. Simply write the number in the answer box.

Question 31

Assume interest rate of 3%. Suppose that you receive \$91,917 at the end of each year for 4 years. Suppose that this cash flow starts at the end of the fourth year. Compute the present value.

Do not enter the symbol \$ in your answer. Simply enter the answer rounded off to two decimal points.

Question 32

Say, you deposit \$4,143 in a bank for 19 years. What is the amount you will have in the bank at the end of 19 years if interest of 4 % compounded monthly for first 6 years and interest of 10 % compounded quarterly for the remaining years? Note: Do not put \$ sign in your answer. Simply write the number in the answer box.

Question 33

How many years it will take to grow your money from \$4,168 to \$8,282 if you can earn an interest of 6% compounded quarterly? Note: Do not write “years” in your answer. Simply write the number in the answer box.

Question 34

The ABC Company is considering a new project which will require an initial cash investment of \$6,291. The project will produce no cash flows for the first 5 years. The projected cash flows for years 6 through 9 are \$2,530, \$4,457, \$6,743, and \$4,256, respectively. If the appropriate discount rate is 10%, compute the NPV of the project.

Enter your answer rounded off to two decimal points. Do not enter \$ in the answer box.

Question 35

If you can double your money in 12 years, what is the implied annual rate of interest, given that compounded semi-annually? Note: give your answer in percentages. Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box.

Question 36

What is the future value of \$583 invested for 25 years at 7% if interest is compounded semi-annually (twice a year)? Note: Do not put \$ sign in your answer. Simply write the number in the answer box.

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