principle of finance
mazzen19
FIN500_Assignment_Mod04.docxModule 4 Critical Thinking Assignment:
Financial Ratios and Basics of Time Value of Money (TVM)
*Complete the problems from Module 3 and Module 4 in an Excel spreadsheet. Be sure to show your work to receive credit; no hard keys.
Problem 4-1: Compound Interest
To what amount will the following investments accumulate?
a. 4,500 SAR invested for 8 years at 10% compounded annually
b. 10,000 SAR invested for 10 years at 10% compounded annually
c. 8,000 SAR invested for 7 years at 12% compounded annually
d. 20,000 SAR invested for 6 years at 5% compounded annually
Problem 4-2: Future value calculations
You are hoping to purchase a house in the future and recently received an inheritance of 100,000 SAR.
You like to use your inheritance for a down payment for the house.
a. If you use your inheritance in an account that generates 6% returns compounded annually, how many years will it take before your money grows to 750,000SAR?
b. If you let your money grow for 15 years at 8%, how much will you have in your account?
Problem 4-3: Present value calculations
What is the present value of the following future amounts?
a. 15,500 SAR received from 5 years from now at 8%.
b. 105,500 SAR received from 10 years from now at 10%
c. 35,500 SAR received from 15 years from now at 12%.
d. 10,500 SAR received from 8 years from now at 7%.
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Problem 4-4 Financial Ratios |
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The Balance Sheet and the Income Statement for ABC Manufacturing Corporation are as follows: |
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DATA (All amounts in SAR unless otherwise indicated, all sales are on credit and no hard keys.) |
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Balance Sheet: |
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ABC Corporation Balance Sheet |
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2019 |
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Cash |
310 |
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Accounts receivable |
685 |
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Inventories |
600 |
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Other current assets |
105 |
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Total current assets |
1,700 |
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Gross fixed assets |
3,750 |
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Accumulated depreciation |
-1,500 |
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Net fixed assets |
2,250 |
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Total assets |
3,950 |
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LIABILITIES (DEBT) AND EQUITY |
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Accounts payable |
350 |
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Short-term notes payable |
250 |
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Total current liabilities |
600 |
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Long-term debt |
950 |
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Total liabilities |
1,550 |
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Common stock (par & paid in capital) |
1,050 |
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Retained earnings |
1,475 |
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Total common equity |
2,400 |
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Total liabilities and equity |
3,950 |
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ABC Corporation Income Statement |
2019 |
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Sales |
6,000 |
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Cost of goods sold |
-3,700 |
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Gross profits |
2,300 |
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Operating expenses: |
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Selling and G&A expenses |
-820 |
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Depreciation expenses |
-340 |
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Total operating expenses |
-1,160 |
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Operating income (earnings before interest and taxes) |
1,140 |
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Interest expense |
-200 |
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Earnings before taxes |
940 |
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Income taxes |
-230 |
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Net Income |
710 |
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Number of shares (thousands) |
160 |
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Dividends (thousands) |
120 |
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Market price per share |
40 |
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Calculate the following ratios: |
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Current ratio |
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Acid-test ratio |
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Days in receivables |
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Days in inventories |
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Operating return on assets |
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Operating profit margin |
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Total asset turnover |
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Fixed asset turnover |
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Debt ratio |
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Times interest earned |
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Return on equity |
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Earnings per share |
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Dividends per share |
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Price/Earnings |
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Book value per share |
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Market/Book |
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Problem 4-5: Present value of annuity calculations
What is the present value of a 5-year annuity that pays 800SAR, given a 8% discount rate?
Problem 4-6: Future value of annuity calculations
Find the future value at the end of year 5 of an annuity that pays 800SAR
per year for 5 years compounded at 8% annually. What would be the future value of this annuity?
Problem 4-7: Annuity Payments
You want to have 1,000,000SAR in 30 years by making equal end-of-the-year deposits into a tax-deferred account paying 7.75% annually. What annual amount should you deposit?
