Time Value of Money
"Suppose you deposit $2,000 in an account paying 10% annual interest. How much money will be in your account in 5 years?"
$3,221.02
"Wrongdoing Co. has the following amounts in their accounts: Cash of $20,000. Marketable Securities of $5,000. Accounts Receivable of $8,000. Current Liabilities of $30,000.
What is Wrongdoing Co.'s Quick Ratio?"
1.10
"What is the arithmetic average return for a stock with annual returns of 20%, 18%, -12%, 46%, and 7%?"
15.80%
"A company just paid a dividend of $2.50 per share. Dividends are expected to grow by 6% each year. What is the expected dividend for this company?"
$2.65
"Given a NPV of $2,000 for an investment project, should the company reject or accept the project?"
Accept
"If you start TODAY depositing $150 per month, and continue to do so each month for the next 20 years, in an account that pays 10% interest compounded monthly, how much will you have in 20 years?"
$113,905.33
"Homebuy Goods has the following amounts in their accounts: Beginning Total Assets of $50,000. Ending Total Assets of $68,000. Net Income of $70,000.
What is Homebuy Goods return on assets?"
ROA = 1.19
"If you own 300 shares of Alaska Air at $46.38, 350 shares of Best Buy at $57.76, and 400 shares of Ford Motor at $7.21, what are the portfolio weights of each stock?"
Alaska: 0.38
Best Buy: 0.55
Ford: 0.08
"A stock just paid a dividend of $1.50, which is expected to grow by 7% indefinitely. If the required return on the company’s stock is 12%, what should the price be today?"
$32.10
"Given the following cash flows (years 0 - 4), what is the payback period?"
-5,000; 2,000; 2,000; 2,000; 2,000
2.5 years
"Your client obtained financing in the form of a $100,000 amortizing loan with payments of $955.65 at the end of each month for 15 years. What is the APR being paid?"
APR = 8%
Partial Credit for Monthly Rate = 0.67%"Tonsagames has the following amounts in their accounts: Beginning Inventory of $67,950. Ending Inventory of $56,284. COGS of $100,000.
What is Tonsagames' Days Sales in Inventory Ratio?"
226.73 days
"What is the standard deviation for a stock with annual returns of 20%, 18%, -12%, 46%, and 7%?"
0.21
"An investor is considering purchasing a 20-year bond with a face value of $1,500 that pays annual coupon payments. The bond offers a 5% coupon rate, and the market interest rate (required rate of return) is 10% per year. What is the value of the bond?"
$1,500
"Given the following cash flows (years 0 - 4) and a rate of 6%, what is the net present value?"
-5,000; 2,000; 2,000; 2,000; 2,000
$1,930.21
"You graduate and owe $20,000 on your credit card, which charges 1.5% monthly interest. You plan on paying only the minimum payment of $150 until it is paid off. How many months will it take you to get out from under this debt?"
73.79
"Accounting World has the following amounts in their accounts: Total Short Term Debt of $40,000. Total Long Term Debt of $60,000. Common Stock of $60,000. Retained Earnings of $70,000.
What is Accounting World's Debt-to-Equity ratio?"
0.77
"Assume that the risk-free rate is 5 percent, and that the market risk premium is 7 percent. If a stock has a required rate of return of 13.75 percent, what is its beta?"
1.25
"Perry Products’s just paid a dividend of $1.20 per share. The dividends are expected to grow at a 6% rate indefinitely. The price of the stock is $15.60. What is required return?"
14.15%
"Given the following cash flows (years 0 - 4), what is the internal rate of return?"
-5,000; 2,000; 2,000; 2,000; 2,000
21.86%
"You need to borrow some money today from your father, and because you’re going to rapidly advance in your job, you can make payments like this:
1st year: $1,000, 2nd year: $2,000, 3rd year: $3000, 4th year: $4000,
5th year: $5000.
Your dad says that he’s getting 4% on his CDs, compounded annually, and you’ll need to pay him the same rate. How much can you borrow?"
$13,006.49
"Given a profit margin, the ROE of a company, the total asset turnover, what ratio could you find in addition to these?
Hint: (Think of the top level equation)
Equity Multiplier
"You recently purchased a stock that is expected to earn 12% in a booming economy, 8% in a normal economy and lose 5% in a recessionary economy. There is a 15% probability of a boom, a 75% chance of a normal economy, and a 10% chance of a recession. What is your expected rate of return on this stock?
7.30%
"Perry Product's stock price is currently $17.85 per share. The dividends are expected to grow at a 4% rate indefinitely. The required return is 12%. What is the value per share of the most recent dividend paid by Perry Products?"
$1.37
"Given the following cash flows (years 0 - 4)and a rate of 10%, what is the profitability index?"
-5,000; 2,000; 2,000; 2,000; 2,000
1.27