Question

question 25

During 2016, XYZ Corporation reported net income of $200 and paid dividends of $60. XYZ's December 31, 2015 statement of financial position reported the following items: common stock = $220, capital surplus = $180, retained earnings = $300. What is the value of the retained earnings account for the December 31, 2016 statement of financial position?

Select one:

a. $540

b. $160

c. $460

d. $400

e. $440

Question 26

You need to borrow $18,000 to buy a truck. The current loan rate is 9% compounded monthly and you want to pay the loan off in equal monthly payments over five years. What is the size of your monthly payment?

Select one:

a. $381.56

b. $378.03

c. $373.65

d. $382.45

e. $455.66

Question 27

Determining when a supplier should be paid is a working capital decision.

Select one:

True

False

Question 28

A firm has an ROE of 27.5% and an ROA of 9%. What is the internal growth rate if the firm has a 40% dividend payout ratio?

Select one:

a. 7.76%

b. 8.81%

c. 5.71%

d. 8.46%

e. 4.71%

Answer 1

25) Addition to retained earnings in 2016 = Net income - Dividends = $200 - $60 = $140

Retained earnings value for year ending December 2016 = $300 + $140 = $440

26)

'

27) True.

Payment to suppliers is also known as accounts payable which is part of the working capital. Deciding to pay earlier or late affects the cash required to day to day working capital.

28) Internal growth rate = [ ROA x (1 - payout) ] / [ 1 - ROA x (1 - payout) ]

or, Internal growth rate = [ 0.09 x (1 - 0.40) ] / [ 1 - 0.09 x (1 - 0.40) ] = 5.71%