1.You're trying to save to buy a new $170,000 Ferrari. You have $40,000 today that can be invested at your bank. The bank pays 5.3 percent annual interest on its accounts. How long will it be before you have enough to buy the car? If you believe your mutual fund can achieve 12 percent annual rate of return and you want to buy the car in 9 years on the day you turn 30, how much must you invest today?

2.You are scheduled to receive $20,000 in two years. When you receive it, you will invest it for six more years at 8.4 percent per year. How much will you have in eight years?

3.You expect to receive $10,000 at graduation in two years. You plan on investing it at 11 percent until you have $75,000. How long will you wait from now?

4.The most recent financial statements for Moose Tours, Inc., follow. Sales for 2021 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales. If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 20 percent growth rate in sales?

MOOSE TOURS, INC.

2020 Income Statement

Sales

$929,000

Costs

723,000

Other expenses

19,000

Earnings before interest and taxes

$187,000

Interest paid

14,000

Taxable income

$173,000

Taxes

60,550

Net income

$112,450

Dividends

$33,735

Addition to retained earnings

78,715

MOOSE TOURS, INC.

Balance Sheet as of December 31, 2020

Assets

Liabilities and Owners' Equity

Current assets

Current liabilities

Cash

$ 25,300

Accounts payable

$ 68,000

Accounts receivable

40,700

Notes payable

17,000

Inventory

86,900

Total

$ 85,000

Total

$152,900

Long-term debt

$158,000

Fixed assets

Owners' equity

Net plant & equipment

413,000

Common stock & Paid-in surplus

$140,000

Retained earnings

182,900

Total

$322,900

Total assets

$565,900

Total liabilities & owners' equity

$565,900