1. Use the Balance Sheet and Income Statement for U.S. Corporation to do the following questions i) Explain the meaning of each ratio in your own words 3 ii) Calculate each ratio for 2018. (15 points) a) Current Ratio Explanation: Calculation: b) Total Debt Ratio Explanation: Calculation: c) Times interest earned Explanation: Calculation: d) Receivables turnover Explanation: Calculation: e) Return on assets Explanation: Calculation: 2. You estimate that you will need $15,000 in four years (four years from now) to get married. If the interest rate is 5% annually, how much do you need to put in an account today (now), so that you will have $15,000 in four years time? (10 points) 3. Suppose you put $1000 in an account today and you need to have $6727.5 in the future. If the bank pays 10%, how many years (n) will it take you to have $6727.5? (10 points) 4 4. If you buy a bicycle for $1000 and sell it for $1276.3 after 5 years. What is your rate of return? (calculate your interest rate in %) (10 points) 5. You need $3000 annually (every year=annuity) for 3 years to give to European University of Lefke to graduate. How much money should your dad deposit today in a bank paying 5% so that you will have the needed $3000 annual payments? (10 points) 6. a) Find the amount to which $100 will grow at an interest rate of 16% compounded semiannually for 4 years (future value). b) Find the present value of $300 due in the future if interest rate is 16% nominal rate quarterly compounded for 4 years. (10 points) a) b) 7. Suppose you wish to start up your coffee shop. You need to borrow $50,000 today. You intend to pay back $50,000 in equal payments, every year for 25 years. If the annual interest rate is 7%, how much do you need to pay the bank every year (annuities) for 25 years? (10 points) 5 8. Your uncle offered you to give you the following. Interest rate is 5% per year. Would you prefer Option A or Option B? Show calculations (15 points) Option A 0 1 2 3 4 5 ? $100 $100 $100 $100 $100 Option B 0 1 2 3 4 5 600 50 50 9. Current Accounts 2015: Current Assets= 4,400; Current Liabilities = 1,500 2014: Current Assets = 3,500; Current Liabilities = 1,200 Fixed Assets and Depreciation 2015: Net Fixed Assets = 3,400; 2014: Net Fixed Assets = 3,100 Depreciation Expense = 400 Long-term Debt and Equity (Retained Earnings not given) 2015: Long-term Debt = 4,000; Common stock & Additional paid in capital = 400 2014: Long-term Debt = 3,950; Common stock & Additional paid in capital = 400 Income Statement Earnings Before Interest and Taxes= 2,000; Taxes = 300 Interest Expense = 350; Dividends = 500 Use the information above to calculate (15 points) a) Operating cash flow b) Net capital spending c) Changes in net working capital 6 d) Cash flow to creditors e) Cash flow to stockholders f) Cash flow from assets

2 Assets U.S. CORPORATION 2018 Balance Sheets ($ in millions) Liabilities and Owners' Equity 2018 2017 Current liabilities 150 Accounts payable 300 650 Notes payable 210 2017 2018 110 500 320 150 Current assets Cash Accounts receivable Inventory Total Total $510 $470 600 $1210 612 $1412 Long-term debt $200 $250 Fixed Assets Net plant and equipment $1700 $1800 Owners' equity 700 740 Common stock and paid-in paid-in surplus Retained earnings Total 1500 $2200 1752 $2492 Total assets $2910 $2910 $3212 $3212 Total liabilities and owners' equity U.S. CORPORATION 2018 Income Statement ($ in millions) Net Sales Cost of Goods Sold Depreciation Earnings before interest and taxes (EBIT) Interest paid Taxable income Taxes (34%) Net income Dividends Addition to retained earnings $1800 900 80 $820 90 $730 248 $482 230 252