Reference no: EM132210485

Questions -

Q1. You invest $1,000 in a certificate of deposit that matures after ten years and pays 5 percent interest, which is compounded annually until the certificate matures.

a. How much interest will you earn if the interest is left to accumulate?

b. How much interest will you earn if the interest is withdrawn each year?

c. Why are the answers to A and B different?

Q2. Holly wants to have $200,000 to send a recently born child to college. She sets up a 529 plan and wants to know how much she must invest at the end of each year for the next 18 years if the funds can earn 5 percent. If she can earn 7 percent, how much less will she have to invest each year?

Q3. A widow currently has a $93,000 investment that yields 6 percent annually. Can she withdraw $14,000 for the next ten years? Would your answer be different if the yield were 9 percent?

Q4. An investment will generate $10,000 a year for 25 years. If you can earn 10 percent on your funds and the investment costs $100,000, should you buy it? Would your answer be different if you could earn only 7 percent?

Q5. You are 25 years old and inherit $65,000 from your grandmother. If you wish to purchase a $100,000 boat to celebrate your 30th birthday, what compound annual rate of return must you earn?

Q6. An investment offers to pay you $10,000 a year for five years. If it costs $33,520, what will be your rate of return on the investment?

Q7. Fill in the blanks ( ) with the correct entries.

Q8. Given the following information, compute the current and quick ratios:

Q9. If a firm has sales of $25,689,000 a year, and the average collection period for the industry is 45 days, what should this firm's accounts receivable be if the firm is comparable to the industry?

Q10. A firm with sales of $500,000 has average inventory of $200,000. The industry average for inventory turnover is four times a year. What would be the reduction in inventory if this firm were to achieve a turnover com- parable to the industry average?

Q11. Jersey Mining earns $9.50 a share, sells for $90, and pays a $6 per share dividend. The stock is split two for one and a $3 per share cash dividend is declared.

a. What will be the new price of the stock?

b. If the firm's total earnings do not change, what is the payout ratio before and after the stock split?

Q12. Firm A had the following selected items on its balance sheet:

How would each of these accounts appear after:

a. a cash dividend of $1 per share?

b. a 5 percent stock dividend (fair market value is $100 per share)?

c. a one-for-two reverse split?

Q13. Jackson Enterprises has the following capital (equity) accounts:

The board of directors has declared a 20 percent stock dividend on January 1 and a $0.25 cash dividend on March 1. What changes occur in the capital accounts after each transaction if the price of the stock is $4?

Q14. What effect will a two-for-one stock split have on the following items found on a firm's financial statements?

a. earnings per share $4.20

b. total equity $10,000,000

c. long-term debt $4,300,000

d. additional paid-in capital $1,534,000

e. number of shares outstanding 1,000,000

f. earnings $4,200,000

Q15. You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firm's financial statements:

What does your analysis indicate about the firm's capacity to pay preferred stock dividends?