Question

If your company acquires a large long-term debt, what is the corresponding change to the balance...

If your company acquires a large long-term debt, what is the corresponding change to the balance sheet?

A. Assets (cash) decrease and liabilities (LT debt) increase.

B. Assets (cash) increase and liabilities (LT debt) increase.

C. Assets (cash) increase and liabilities (LT debt) decrease.

D. Assets (cash) decrease and liabilities (LT debt) decrease.

You invest all the money you earned during your summer sales job (a total of $45,000) into the stock of a company that produces fat and carb-free Cheetos. The company stock is expected to earn a 14% annual return; however, 5 years later it is only worth $20,000. Turns out there wasn't as much demand for fat and carb-free Cheetos as you had hoped. What is the annual rate of return on your investment?

A. -10%

B. -15%

C. -20%

D. -25%

You invest $6,000 per year for 20 years. Earning 8% annual return, how much money do you have at the end of the 20 years?

A. $437,625

B. $324,545

C. $122,688

D. $274,572

You are trying to choose between two investments:

A - Invest $2,400 per year for 10 years, earning an 8% annual rate of interest. OR,

B - Invest $200 per month for 10 years, earning 8% annual rate of interest.

Which of the following is most correct?

A. There is no way to tell which investment has the higher future value

B. Investment A has the higher future value.

C. Investment B has the higher future value.

D. Investments A and B have identical future values.

Homework Answers

Answer #1

QUESTION 1 - Option B

Since, new long term debt is increasing, the liabilities side (particularly the Long term liability on balance sheet) would increase. Whenever the liabilities increase, there is a corresponding increase in an asset as well (unless no other liability is decreasing). SO, when the long term debt increases, assets (in particular cash) also increase. (You get a loan amount from bank, so you get cash, but that cash is a liability)

QUESTION 2 - Option B

We will use the time value of money concept to find the rate of return.

FV = PV * (1 + r)n

20000 = 45000 * (1 + r)5

r = -14.99% = -15%

QUESTION 3 - Option D

Again using TVM function, to calculate the future value of an annuity, the formula is:

FV = 274,571.8

Hence, option D is answer

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume that you will retire in 30 years. You plan to be retired for a total...
Assume that you will retire in 30 years. You plan to be retired for a total of 30 years. You wish to withdraw the equivalent of $50,000 per year (in TODAY'S dollars) from your retirement fund each year that you are retired (ASSUME that there will NOT be any adjustments for inflation DURING your retirement. You will withdraw the same dollar amount every year that you are retired). The expected inflation rate for the next 30 years is 3%. You...
Suppose your company is financed 20% with debt and 80% with common stock. a. If the...
Suppose your company is financed 20% with debt and 80% with common stock. a. If the cost of new borrowing will be 5% and the cost of equity is 12%, what is the cost of capital to your company if the applicable tax rate is 30%? b. If you were to invest in a project that has a zero NPV, what rate of return would you be earning on the project? c. If you were to invest in a project...
Please provide excel functions only Given the following information for Bajor Co.: Debt: Bajor’s long-term debt...
Please provide excel functions only Given the following information for Bajor Co.: Debt: Bajor’s long-term debt capital consists of bonds with 6.250 percent coupon rate (semiannual coupon payments), 9 years time-to-maturity, and current price of 106.61 percent of its par value (i.e., price = 106.61 relative to full amount redemption par of 100). Preferred stock: Bajor has not issued any preferred stocks. Common stock (equity): Bajor’s equity capital consists of common stocks with the most recent annual dividend of $0.92...
Which of the following increases cash Issuance of long term debt Acquisition of property, plant, and...
Which of the following increases cash Issuance of long term debt Acquisition of property, plant, and equipment Payment of dividends Decrease in short term debt None of the above The taxes payable account increased from the beginning of the accounting period to the end of the accounting period. This impacts cash flow through a, Decrease Increase Has no effect None of the above Smith company issued long term debt of 220, paid dividends of 10, issued capital stock of 100....
You are currently in debt $10,000 to your bank for getting a loan to pay for...
You are currently in debt $10,000 to your bank for getting a loan to pay for your house. The bank charges you 5% interest annually on the debt outstanding. You have $5000 of cash, which you are either going to invest in the stock market, or to pay to the bank to lower your debt. You esteem that if you invest in the stock market, the $5000 investment has 10% chance to drop to $4,000 60% chance to increase to...
Double your wealth. Kant Miss Company is promising its investors that it will double their money...
Double your wealth. Kant Miss Company is promising its investors that it will double their money every 5 years. What annual rate is Kant Miss​ promising? Is this investment a good​ deal? If you invest ​$300 now and Kant Miss is able to deliver on its​ promise, how long will it take your investment to reach ​$34,000​? Part 1) Using the Rule of​ 72, what annual rate is Kant Miss​ promising? (Round to the nearest whole​ percentage.) Part 2) Using...
Increase Assets (Decrease) Cash and Cash equivalents 120,000 Available -for-sale securities 300,000 Inventory 80,000 Long -term...
Increase Assets (Decrease) Cash and Cash equivalents 120,000 Available -for-sale securities 300,000 Inventory 80,000 Long -term Investments -100,000 Plant Asset 700,000 Accumulated Depreciation 0 TOTAL 1,100,000 Liabilities and Stockholder's Equity Accounts payable and accrued liabilities -5,000 Dividends Payable 160,000 Short term bank debt 325,000 Long term debt 110,000 Common stock 10 par 100,000 Additional paid in Capital 120,000 Retained earnings 290,000 TOTAL 1,100,000 The following additional information relates to 2010: *Net income was 790,00 * Cash dividends of 500,000 were...
Your company, showed long-term debt of 1.7$ million, and the December 31,2006 balance sheet showed long...
Your company, showed long-term debt of 1.7$ million, and the December 31,2006 balance sheet showed long term debt of 1.9$ million. The 2006 income statement showed an interest expense of 650,000$. What is the firm's cash flow to creditors in 2006? The december 31,2005 balance sheet showed 180,000$ in the common account and 3.7$ million in the additional paid-in surplus account. The december 31,2006 balance sheet showed 195,000$ in the common account and 3.95$ million in addtional paid in surplus...
1) Shorting the length of time a company takes to collect out standing balances would? A)...
1) Shorting the length of time a company takes to collect out standing balances would? A) Increase the average collection period B) Decrease the average collection period c) Decrease receivables turnover D)Increase inventory turnover 2) Asset utilization ratios include all but which of the following? A) Receivables Turnover B) Inventory turnover C) Average collection period D) Return on assets 3) If a company's current assets increase, what might we assume about their inventory levels? A) It increased B) It decreased...
2018 2017 Balance Sheet: Current Assets Current Liabilities Net Fixed Assets Long-Term Debt Common Stock Income...
2018 2017 Balance Sheet: Current Assets Current Liabilities Net Fixed Assets Long-Term Debt Common Stock Income Statement/Other: Depreciation Expense EBIT Interest Expense Taxes Net Income Dividends $ 5,000     2,000   10,000   11,000     7,500 $ 1,000     4,000     2,000        500      1,500        600 $ 7,000     4,500     8,000     9,500     7,400 Calculate the following Cash Flow from Assets Questions: 1. Operating Cash Flow 2. Net Capital Spending 3. Changes in Net Working Capital 4. Cash...