Question: Prepare a statement of cash flows from

> What is the accumulated sum of each of the following streams of payments? a. $500 a year for 10 years compounded annually at 5 percent b. $100 a year for 5 years compounded annually at 10 percent c. $35 a year for 7 years compounded annually at 7 percent

> How many years will the following take? a. $500 to grow to $1,039.50 if invested at 5 percent compounded annually b. $35 to grow to $53.87 if invested at 9 percent compounded annually c. $100 to grow to $298.60 if invested at 20 percent compounded annual

> Selma and Patty Bouvier are twins, and both work at the Springfield DMV. They decide to save for retirement, which is 35 years away. They’ll both receive an 8 percent annual return on their investment over the next 35 years. Selma invests $2,000 per year

> In 2016 Bill Gates was worth about $82 billion. Let’s see what Bill Gates can do with his money in the following problems. a. I’ll take Manhattan? Manhattan’s native tribe sold Manhattan Island to Peter Minuit for $24 in 1626. Now, 390 years later in 201

> Roger Sterling has decided to buy an ad agency and is going to finance the purchase with seller financing—that is, a loan from the current owners of the agency. The loan will be for $2 million financed at an APR of 7 percent compounded monthly. This loan

> Don Draper has signed a contract that will pay him $80,000 at the beginning of each year for the next 6 years, plus an additional $100,000 at the end of year 6. If 8 percent is the appropriate discount rate, what is the present value of this contract?

> Why is preferred stock frequently convertible? Why is it callable?

> This Mini Case is available in My Finance Lab. Below are the financial statements for two firms, Time Warner and Walt Disney, for 2012 and 2013. a. How did Time Warner’s profit margins change from 2012 to 2013? To what would you attribu

> Don Draper has signed a contract that will pay him $80,000 at the end of each year for the next 6 years, plus an additional $100,000 at the end of year 6. If 8 percent is the appropriate discount rate, what is the present value of this contract?

> Mil house, 22, is about to begin his career as a rocket scientist for a NASA contractor. Being a rocket scientist, Mil house knows that he should begin saving for retirement immediately. Part of his inspiration came from reading an article on Social Secu

> Upon graduating from college 35 years ago, Dr. Nick Riviera was already thinking of retirement. Since then, he has made deposits into his retirement fund on a quarterly basis in the amount of $300. Nick has just completed his final payment and is at last

> The state lottery’s million-dollar payout provides for $1 million to be paid over 19 years in 20 payments of $50,000. The first $50,000 payment is made immediately, and the 19 remaining $50,000 payments occur at the end of each of the next 19 years. If 1

> You are trying to plan for retirement in 10 years, and currently you have $100,000 in a savings account and $300,000 in stocks. In addition, you plan on adding to your savings by depositing $10,000 per year in your savings account at the end of each of t

> You would like to have $50,000 in 15 years. To accumulate this amount you plan to deposit each year an equal sum in the bank, which will earn 7 percent interest compounded annually. Your first payment will be made at the end of the year. a. How much must

> How much do you have to deposit today so that beginning 11 years from now you can withdraw $10,000 a year for the next 5 years (periods 11 through 15) plus an additional amount of $20,000 in that last year (period 15)? Assume an interest rate of 6 percen

> Bart Simpson, age 10, wants to be able to buy a really cool new car when he turns 16. His really cool car costs $15,000 today, and its cost is expected to increase 3 percent annually. Bart wants to make one deposit today (he can sell his mint-condition o

> The Kumar Corporation is planning on issuing bonds that pay no interest but can be converted into $1,000 at maturity, 7 years from their purchase. To price these bonds competitively with other bonds of equal risk, it is determined that they should yield

> You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: Assuming a 20 percent discount rate, find the present value of each investment. INVESTMENT END OF YEAR A B 1 $10,000 $10,000 2 10,

> Why would a preferred stockholder want the stock to have a cumulative dividend feature and protective provisions?

> You are offered $1,000 today, $10,000 in 12 years, or $25,000 in 25 years. Assuming that you can earn 11 percent on your money, which offer should you choose?

> To what amount will the following investments accumulate? a. $5,000 invested for 10 years at 10 percent compounded annually b. $8,000 invested for 7 years at 8 percent compounded annually c. $775 invested for 12 years at 12 percent compounded annually d.

> Should we have bet the kids’ college fund at the dog track? Let’s look at one specific case of a college professor (let’s call him Prof. ME) with two young children. Two years ago, Prof. ME invested $160,000 hoping to have $420,000 available 12 years lat

> Dennis Rodman has a $5,000 debt balance on his Visa card that charges an APR of 12.9 percent compounded monthly. Dennis’s current minimum monthly payment is 3 percent of his debt balance, or $150. How many months (round up) will it take Dennis to pay off

> Hank Schrader plans to invest $1,000 at the end of each quarter for 4 years into an account with an APR of 6.4 percent compounded quarterly. He will use this money as a down payment on a new home at the end of the 4 years. How large will his down payment

> Ford’s current incentives for customers looking to buy a Mustang include either financing at an APR of 4.9 percent compounded monthly for 60 months or $1,000 cash back. Let’s assume Suzie Student wants to buy the premium Mustang convertible, which costs

> Bowflex’s television ads say you can get a fitness machine that sells for $999 for $33 a month for 36 months. What APR are you paying on this Bowflex loan?

> The financial statements and industry norms are shown below for Pamplin, Inc.: a. Compute the financial ratios for Pamplin for 2014 and for 2015 to compare both against the industry norms. b. How liquid is the firm? c. Are its managers generating an ade

> The Tabor Sales Company had a gross profit margin (gross profits, sales) of 30 percent and sales of $9 million last year. Seventy-five percent of the firm’s sales are on credit, and the remainder are cash sales. Tabor’s current assets equal $1.5 million;

> The D. A. Winston Corporation earned an operating profit margin of 10 percent based on sales of $10 million and total assets of $5 million last year. a. What was Winston’s total asset turnover ratio? b. During the coming year, the company president has s

> Because preferred stock dividends in arrears must be paid before common stock dividends, should they be considered a liability and appear on the right-hand side of the balance sheet?

> The balance sheet and income statement for the A. Thiel Mfg. Company are as follows: Balance Sheet………………………………………………………. ($000) Cash …………………………………………….………………………...$ 500 Accounts receivable…………………………………………………. 2,000 Inventories ……………………………………………………………..

> The Allen Marble Company has a target current ratio of 2.0 but has experienced some difficulties financing its expanding sales in the past few months. At present, the firm has current assets of $2.5 million and a current ratio of 2.5. If Allen expands it

> Chang, Inc.’s balance sheet shows a stockholders’ equity-book value (total common equity) of $750,500. The firm’s earnings per share is $3, resulting in a price/ earnings ratio of 12.25X. There are 50,000 shares of common stock outstanding. What is the p

> Last year, Stevens, Inc. had sales of $400,000 with a cost of goods sold of $112,000. The firm’s operating expenses were $130,000, and its increase in retained earnings was $58,000. There are currently 22,000 common stock shares outstanding and the firm

> The Malia Corporation had sales in 2015 of $65 million, total assets of $42 million, and total liabilities of $20 million. The interest rate on the company’s debt is 6 percent, and its tax rate is 30 percent. The operating profit margin was 12 pe

> Use the information from the balance sheet and income statement below to calculate the following ratios: Current ratio…………………………………….Days in receivable

> Artz, Inc.’s financial statements for 2015 are shown below: Sales…………………………………………………………

> Drew Concrete uses Economic Value Added as a financial performance measure. Drew has $240 million in assets, and the firm has financed its assets with 37 percent equity and 63 percent debt with an interest rate of 6 percent. The firm’s opportunit

> Emma’s Electronics Incorporated has total assets of $63 million and total debt of $42 million. The company also has operating profits of $21 million with interest expenses of $6 million. a. What is Emma’s debt ratio? b. What is Emma’s times interest earn

> K. Johnson, Inc.’s managers want to evaluate the firm’s prior-year performance in terms of its contribution to shareholder value. This past year, the firm earned an operating return on investment of 12 percent, compared to an industry norm of 11 percent.

> Why is preferred stock referred to as a hybrid security? It is often said to combine the worst features of common stock and bonds. What is meant by this statement?

> The T. P. Jarmon Company manufactures and sells a line of exclusive sportswear. The firm’s sales were $600,000 for the year just ended, and its total assets exceeded $400,000. The company was started by Mr. Jarmon just 10 ye

> The annual sales for Salco, Inc. were $4.5 million last year. All sales are on credit. The firm’s end-of-year balance sheet was as follows: The firm’s income statement for the year was as follows: Sa

> Prepare an income statement and a balance sheet from the following scrambled list of items. What is the firm’s net working capital and debt ratio? Sales……………………………………………………………………..$550,000 Accumulated depreciation………………………………………..190,000 Cash…………………………

> Prepare a balance sheet and income statement for the Warner Company from the following scrambled list of items. a. Prepare a common-sized income statement and common-sized balance sheet. Interpret your findings. Depreciation expense……………………………………………………

> Prepare a balance sheet from the following information. What is the net working capital and debt ratio? Cash…………………………………………………………..$ 50,000 Accounts receivable……………….………………………. 42,700 Accounts payable……………………………………………. 23,000 Short-term notes payable…

> Prepare an income statement and a common sized income statement from the following information. Sales…………………………………………………………..$525,000 Cost of goods sold………………………………….………200,000 General and administrative expenses……………….62,000 Depreciation expenses……………

> Based on the information for the T. P. Jarmon Company for the year ended December 31, 2015 (see page 96): a. How much is the firm’s net working capital, and what is the debt ratio? b. Complete a statement of cash flows for the period. I

> a. How much is the firm’s net working capital, and what is the debt ratio for 2014 and 2015? b. Complete a common-sized income statement, a common-sized balance sheet, and a statement of cash flows for 2015. Interpret your results.

> Prepare a statement of cash flows for Abrahams Manufacturing Company for the year ended December 31, 2015. Interpret your results. Abrahams Manufacturing Company Income Statement for the Year Ended 12/31/2015 2015 Sales...............................

> What is the purpose of holding inventory? Name several types of inventory and describe their purpose.

> Interpret the following information regarding Maness Corporation’s statement of cash flows. Cash flow from operations Net income……………………………………………………………………$ 370 Depreciation expense………………………………………………………….60 Profits before depreciation……………………………………………….

> Sandersen, Inc. sells minicomputers. During the past year, the company’s sales were $3 million. The cost of its merchandise sold came to $2 million, and cash operating expenses were $400,000; depreciation expense was $100,000, and the firm paid $150,000

> Sales for L. B. Menielle, Inc. during the past year amounted to $5 million. The firm provides parts and supplies for oil field service companies. Gross profits for the year were $3 million. Operating expenses totaled $1 million. The interest income from

> The William B. Waugh Corporation is a regional Toyota dealer. The firm sells new and used trucks and is actively involved in the parts business. During the most recent year, the company generated sales of $3 million. The combined cost of goods sold and t

> Currently you have $50,000 that you would like to invest for 2 years and are considering buying a government security maturing in 1 year that pays 3% annually. If you do this, you will also have to purchase another 1-year security at the end of the first

> If yields on Treasury securities were currently as follows: TERM…………………………………….YIELD 6 months…………………………………………….1.0% 1 year…………………………………………………..1.7% 2 years…………………………………………………2.1% 3 years………………………………………………..2.4% 4 years…………………………………………………2.7% 5 years………

> You want to invest your savings of $20,000 in government securities for the next 2 years. Currently, you can invest either in a security that pays interest of 8% per year for the next 2 years or in a security that matures in 1 year but pays only 6% inter

> You’re looking at some corporate bonds issued by Ford, and you are trying to determine what the nominal interest rate should be on them. You have determined that the real risk-free interest rate is 3.0%, and this rate is expected to continue on into the

> You’ve just taken a job at a investment-banking firm and been given the job of calculating the appropriate nominal interest rate for a number of different Treasury bonds with different maturity dates. The real risk-free interest rate that you have been t

> Given the following information, prepare a statement of cash flows. Dividend………………………………………....$25 Increase in common stock…………..………27 Increase in accounts receivable……………65 Increase in inventories…………………………..5 Operating income………………………………..215 Increas

> What are the risk–return trade-off associated with adopting a more liberal trade credit policy?

> At present, 20-year Treasury bonds are yielding 5.1%, while some 20-year corporate bonds that you are interested in are yielding 9.1%. Assuming that the maturity-risk premium on both bonds is the same and that the liquidity-risk premium on the corporate

> Given the following information, prepare a statement of cash flows. Increase in accounts receivable………………………………..$25 Increase in inventories……………………………………………….30 Operating income………………………………………………………..75 Interest expense…………………………………………………………25 Increas

> You are considering investing money in Treasury bills and wondering what the real risk-free rate of interest is. Currently, Treasury bills are yielding 4.5% and the future inflation rate is expected to be 2.1% per year. Ignoring the cross product between

> The CFO of your firm has asked you for an approximate answer to this question: What was the increase in real purchasing power associated with both 3-month Treasury bills and 30-year Treasury bonds? Assume that the current 3-month Treasury bill rate is 4.

> Prepare a balance sheet and income statement for Belmond, Inc. from the following information. Inventory………………………………………………………………$ 6,500 Common stock………………………………………………………..45,000 Cash………………………………………………………………………...16,550 Operating expenses………………………………………

> Prepare a balance sheet and a common-sized balance sheet from the following information. Cash……………………………..……………………………$30,000 Account receivable……………………………………..…63,800 Accounts payable……………………………………………52,500 Short-term notes payable…………………………………11,000 I

> You’re considering an investment that you expect will produce an 8% return next year, and you expect that your real rate of return on this investment will be 6%. What do you expect inflation to be next year?

> At present, the real risk-free rate of interest is 2%, while inflation is expected to be 2% for the next 2 years. If a 2-year Treasury note yields 4.5%, what is the maturity-risk premium for this 2-year Treasury note?

> At present, 10-year Treasury bonds are yielding 4% while a 10-year corporate bond is yielding 6.8%. If the liquidity-risk premium on the corporate bond is 0.4%, what is the corporate bond’s default-risk premium?

> Suppose 1 year ago, Miller Company had inventory in Britain valued at 1.5 million Swiss francs. The exchange rate for dollars to Swiss francs was 1 franc = 1.15 dollars. Today, the exchange rate is 1 Swiss franc = 1.06 U.S. dollars. The inventory in Swit

> If a credit manager experienced no bad-debt losses over the past year, would this be an indication of proper credit management? Why or why not?

> You own $10,000. The dollar rate in Tokyo is 216.6743. The yen rate in New York is given in the preceding table. Are arbitrage profits possible? Set up an arbitrage scheme with your capital. What is the gain (loss) in dollars? COUNTRY CONTRACT $/FOR

> Compute the indirect quote for the spot and forward Canadian dollar, yen, and Swiss franc contracts. COUNTRY CONTRACT S/FOREIGN CURRENCY Canada dollar Spot 0.8437 30-day 0.8417 90-day 0.8395 Japan yen Spot 0.004684 30-day 0.004717 90-day 0.004781 Sw

> A McDonald’s Big Mac costs 2.44 yuan in China but costs $4.20 in the United States. Assuming that purchasing-power parity (PPP) holds, how many Chinese yuan are required to purchase 1 U.S. dollar?

> Suppose 90-day investments in Europe have a 5 percent annualized return and a 1.25 percent quarterly (90-day) return. In the United States, 90-day investments of similar risk have a 7 percent annualized return and a 1.75 percent quarterly return. In toda

> Calculate the effective cost of the following trade credit terms when payment is made on the net due date: a. 2/10, net 30 b. 3/15, net 30 c. 3/15, net 45 d. 2/15, net 60

> On February 3, 2016, the Burlington Western Company plans a commercial paper issue of $25 million. The firm has never used commercial paper before but has been assured by the firm placing the issue that it will have no difficulty raising the funds. The c

> You plan to borrow $20,000 from the bank to pay for inventories for a gift shop you have just opened. The bank offers to lend you the money at 10 percent annual interest for the 6 months the funds will be needed. a. Calculate the effective annual rate of

> The Marlow Sales and Distribution Co. needs $1.5 million for the 3-month period ending September 30, 2015. The firm has explored two possible sources of credit. a. Marlow has arranged with its bank for a $1.5 million loan secured by its accounts receivab

> The R. Morin Construction Company needs to borrow $100,000 to help finance the cost of a new $150,000 hydraulic crane used in the firm’s commercial construction business. The crane will pay for itself in 1 year, and the firm is considering the following

> Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry a rate of 8 percent per annum with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum dem

> What factors determine the size of the investment a firm has in its accounts receivable? Which of these factors are under the control of the financial manager?

> Historical data for the sales, accounts receivable, inventories, and accounts payable for the Crimson Mfg. Company follow: a. Calculate Crimson’s days of sales outstanding and days of sales in inventory for each of the 5 years. What h

> A popular theory for managing risk to the firm that arises out of its management of working capital (that is, current assets and current liabilities) involves following the principle of self-liquidating debt. How would this principle be applied in each o

> Jimmy Hale is the owner and operator of the grain elevator in Brownfield, Texas, where he has lived for most of his 62 years. The rains during the spring have been the best in a decade, and Mr. Hale is expecting a bumper wheat crop. This has prompted him

> A factor has agreed to lend the JVC Corporation working capital on the following terms: JVC’s receivables average $100,000 per month and have a 90-day average collection period. (Note that JVC’s credit terms call for payment in 90 days, and accounts rece

> MDM, Inc. is considering factoring its receivables. The firm has credit sales of $400,000 per month and has an average receivables balance of $800,000 with 60-day credit terms. The factor has offered to extend credit equal to 90 percent of the receivable

> The Michelin Warehousing and Transportation Company (WTC) needs $300,000 to finance an anticipated expansion in receivables due to increased sales. WTC’s credit terms are net 60, and its average monthly credit sales are $200,000. In general, the firm’s c

> Tri-State Enterprises plans to issue commercial paper for the first time in the firm’s 35-year history. The firm plans to issue $500,000 in 180-day maturity notes. The paper will carry a 10 1/2 percent rate with discounted interest and will cost Tri-Stat

> On July 1, 2015, the Southwest Forging Corporation arranged for a line of credit with the First National Bank (FNB) of Dallas. The terms of the agreement call for a $100,000 maximum loan with interest set at 1 percent over prime. In addition, the firm ha

> Compute the cost of the trade credit terms in Problem 15-3 using the compounding formula, or effective annual rate. Data from Problem 15-3: Historical data for the sales, accounts receivable, inventories, and accounts payable for the Crimson Mfg. Compan

> CL Marshall Liquors owns and operates a chain of beer and wine shops throughout the Dallas-Fort Worth metroplex. The rapidly expanding population of the area has resulted in the firm requiring a growing amount of funds. Historically, the firm has reinves

> Distinguish between the concepts of financial risk and interest rate risk as these terms are commonly used in discussions of cash management.

> Fishing Charter, Inc. estimates that it invests $0.30 in assets for each dollar of new sales. However, $0.05 in profits are produced by each dollar of additional sales, of which $0.01 can be reinvested in the firm. If sales rise by $500,000 next year fro

> The most recent balance sheet for the Armadillo Dog Biscuit Co., Inc. is shown in the corresponding table. The company is about to embark on an advertising campaign, which is expected to raise sales from the current level of $5 million to $7 million by t

> The balance sheet of the Boyd Trucking Company (BTC) shows that BTC had sales for the year ended December 31, 2015, of $25 million. The firm follows a policy of paying all net earnings out to its common stockholders in cash dividends. Thus, BTC generates

> Which of the following accounts would most likely vary directly with the level of a firm’s sales? Discuss each briefly. YES NO YES NO Notes payable Plant and equipment Cash Marketable securities | Accounts payable Inventories ||

> Use the following industry-average ratios to construct a pro forma balance sheet for Phoebe’s Cat Foods, Inc. Total asset turnover Average collection period (assume 365-day year) Fixed asset turnover | Inventory turnover (based on