Question

4. The Mycroft Inquiries Group has a price-earnings ratio of 17.5, net income of $194,000, a book value per share of $22.22, and 70,000 shares of stock outstanding. What is its market to book ratio?

5. Moriarity Ltd has adopted a policy whereby it will maintain a constant debt-equity ratio. Given this, what is its maximum growth rate if it has net income of $9,600, total equity of $66,000, total assets of $150,000 and a 30% dividend payout ratio?

6. McCann’s Pizza forecasts sales of $1,000,000 in 2020. The owner, Bryan McCann, will re-invest 40% of 2020 net income into buying a new pizza oven, and will keep the remaining 60% as a dividend. McCann would like to earn $100,000 as dividend. What net profit margin is required for McCann to invest in the oven and make his target dividend?

7. Please fill in the blanks in the following table:

Present Future Interest Time to

Value Value Rate Maturity

$20,000 145,020.51 6% 34 years

88,802.39 $200,000 7% 12 years

$55,000 $111,419.91 4% 18 years

$90,000 $207,408.40 11% 8 Years

8. Occasionally, pieces of art sell for fantastic prices. For example, Vincent Van Gogh’s painting, “Sunflowers”, sold at auction in 1987 for $36 million. Its original price, in 1889, was $125. Suppose the painting been in one family for the entire period. What was their average annually compounded rate of return?

9. Suppose you have invested the following sums on the last day of each year in a mutual fund with front-end loads of 4% and management fees of 0.4%. The fund earned 11% per year. How much will you have at the end of year 10?

Year Cash Flow

0 $1600

1 $2500

2 $3000

10. If you invested $100,000 today in exchange for a 10%, 15 year annuity, what annual cash flow will you receive?

11. You are car shopping.

a. You have $20,000 you can use as a down payment. Your bank is offering 3.6% (Annual Percentage Rate) financing over 3 years. After constructing your budget, you determine that you can afford monthly car payments of $1250. What is the most you can spend on the car?

b. Unfortunately, from the perspective of your budget, you have your eyes on a Tesla roadster that costs a mere $90,229. You banker says, ok, but your APR is going to be 4.4%. How long will it take you to pay off the car assuming your payment remains the same at $1250 per month?

12. What is the present value of $3,300 per year received annually at the end of years 14 to 66 and the interest rate is 8%?

13. A father wants to create a trust fund for his daughter. He would like the fund to distribute $20,000 per year for 20 years. The father will set aside all of the funds for the trust today in an account that pays 8% APR on average. The first withdrawal from the trust will be in exactly 25 years. The funds in the trust will remain in the investment account as they are withdrawn. How much should the father set aside today?

Answer #1

Question 1

Please note i have answered first question as per policy. Thanks.

A father wants to create a trust fund
for his daughter. He would like the fund to distribute $20,000 per
year for 20 years. The father will set aside all of the funds for
the trust today in an account that pays 8% APR on average. The
first withdrawal from the trust will be in exactly 25 years. The
funds in the trust will remain in the investment account as they
are withdrawn. How much should the father set aside...

A car’s price is currently $20,000 and is expected to rise by
6% a year. If the interest rate is 9%, how much do you need to put
aside today to buy the car one year from now? Show your
calculations!
19,449.54
B. 18,348.62
C. 20,566.04
D. 18,867.93
What is the annually compounded rate of interest (EAR) on an
account with an APR of 10% and monthly compounding? Show
your calculations!
10.00%
B. 10.47%
C. 10.52%
D. 11.05%
What is...

Earnings per Share, Price-Earnings Ratio, Dividend Yield
The following information was taken from the financial
statements of Tolbert Inc. for December 31 of the current fiscal
year:
Common stock, $25 par value (no change during the year)
$4,500,000
Preferred $8 stock, $100 par (no change during the year)
2,000,000
The net income was $376,000 and the declared dividends on the
common stock were $45,000 for the current year. The market price of
the common stock is $9.00 per share.
For...

The Hastings Sugar Corporation has the following pattern of net
income each year, and associated capital expenditure projects. The
firm can earn a higher return on the projects than the stockholders
could earn if the funds were paid out in the form of dividends.
Year
Net Income
Profitable Capital
Expenditure
1
$
11
million
$
8
million
2
23
million
11
million
3
9
million
7
million
4
14
million
8
million
5
22
million
9
million
The Hastings Corporation...

In 4 years, you will start receiving monthly payments of $1000
from a trust fund that one of your great parents set up for you.
The first payment will be made at the very end of year 4 and the
payments will last for 33 years. You plan to deposit the money you
receive every month into a special account right away that pays
6.80% APR with quarterly compounding.
Today the account mentioned above has a balance of
$13000.
Assuming...

The Hastings Sugar Corporation has the following pattern of net
income each year, and associated capital expenditure projects. The
firm can earn a higher return on the projects than the stockholders
could earn if the funds were paid out in the form of dividends.
Year Net Income Profitable Capital Expenditure 1 $14 million $ 8
million 2 18 million 11 million 3 9 million 6 million 4 20 million
8 million 5 23 million 9 million The Hastings Corporation has...

The Hastings Sugar Corporation has the following pattern of net
income each year, and associated capital expenditure projects. The
firm can earn a higher return on the projects than the stockholders
could earn if the funds were paid out in the form of dividends.
Year
Net Income
Profitable Capital
Expenditure
1
$
14
million
$
8
million
2
18
million
11
million
3
9
million
6
million
4
20
million
8
million
5
23
million
9
million
The Hastings Corporation...

a. You bought a car 5 years ago for $30,000. This type of car is
known to depreciate at a compounded annual rate of
8% per year (given normal mileage and wear-and-tear). If your car
depreciated at this rate, how much is it worth today? (Hint: let r
= -0.08 and solve for FV).
c. If you deposit $1000 today in an account earning 10% APR
compounded annually, and you deposit another $1000 next year (at
same rate), and finally...

You are planning to make an investment in a fund that has 5
years to maturity and just made a dividend payment of $10 per
share. Future payments are expected to increase at a rate of 8% per
year over the next 5 years, which is your expected holding period
for the investment. If your required rate of return is 11% p.a.,
how much would you be willing to pay for each share of the fund in
which you intend...

The Hastings Sugar Corporation has the following pattern of net
income each year, and associated capital expenditure projects. The
firm can earn a higher return on the projects than the stockholders
could earn if the funds were paid out in the form of dividends.
Year
Net Income
Profitable Capital
Expenditure
1
$
12
million
$
7
million
2
15
million
12
million
3
11
million
7
million
4
15
million
7
million
5
15
million
8
million
The Hastings Corporation...

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