Student query about time value of money

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1. At age 25 you invest $2,000 that earns 6 percent each year. At age 35 you invest $2,000 that earns 9 percent per year. In which case would you have more money at age 60?

2. You are evaluating the balance sheet for Blue Jays Corporation. From the balance sheet
you find the following balances: Cash and marketable securities = $200,000, Accounts receivable = $800,000, Inventory = $1,000,000, Accrued wages and taxes = $250,000, Accounts payable = $400,000, and Notes payable = $300,000. What are Blue Jay's Current ratio, Quick ratio, and Cash ratio, respectively?

3. Jack and Jill Corporation's year-end 2009 balance sheet lists current assets of $250,000, fixed assets of $800,000, current liabilities of $195,000, and long-term debt of $300,000. What is Jack and Jill's total stockholders' equity?

4. Assume that you are saving for your retirement and want to do so using an annuity saving plan that is you will deposit the same amount of funds into your saving account each month. Clearly the length of time you are saving is very important in accumulating your wealth. What other factor(s) also affect your wealth?

6. Suppose that when Apple invests in the resources necessary to create new technology products,
it expects to earn a 20% rate of return. Suppose also that when it invests its cash in bank accounts it earns just 1%. Given this, what rate of return should investors expect if they pay $200 to acquire one share of Apple?

7. What role do you think market efficiency (or inefficiency) played in the 10 percent fall of JPMorgan's share price in a single day?

8. Assume that the $1 billion cost of bringing a new drug to market is spread out evenly over 10 years, and then 10 years remain for Eli Lilly to recover the investment. How much cash would a new drug have to generate in the last 10 years to justify the $1 billion spent in the first 10 years?

Reference no: EM1327816

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