25.Compute the original amount of principal if Nicole makes annual end-of-year payments of $5,043.71 on a four-year loan with an interest rate of 13 per cent.

a. $20,175

b. $24,450

c. $15,000

26.Which of the following would indicate an IMPROVEMENT in a companys financial position, holding other things constant?

a. The times-interest-earned ratio declines.

b. The inventory and total assets turnover ratios both decline.

c. The debt ratio increases.

d. The current and quick ratios both increase.

e. The profit margin declines.

d. $3,100

30.

Meor Omar decided he was tired of being a poor college student when he visited a local electronics store and experienced its finest home theatre system. He determined that he would invest today a portion of the remaining money he earned last summer cleaning animal cages at the veterinary clinic. He plans to invest the money into an international mutual fund for 3.5 years and expects to earn an average annual rate of return of 15%. If Meor Omar wants to have $4,000 in the account at the end of this time, how much must he invest today?

a. $2,453

b. $2,048

c. $2,591

d. $1,253

31.

Geronimo, Inc. is considering a project that has an initial outlay or cost of $220,000. The respective future cash inflows from its four-year project for years 1 through 4 are $50,000, $60,000, $70,000, and $80,000, respectively. Geronimo uses the internal rate of return method to evaluate projects. Will Geronimo accept the project if its hurdle rate is 10%?

a. Geronimo will not accept this project because its IRR is about 9.70%.

b. Geronimo will not accept this project because its IRR is about 6.50%.

c. Geronimo will not accept this project because its IRR is about 8.70%.

d. Geronimo will not accept this project because its IRR is about 4.60%.

32.Which of the following statements is CORRECT?

a. The debt ratio as it is generally calculated makes an adjustment for the use of assets leased under operating leases, so the debt ratios of firms that lease different percentages of their assets are still comparable.

b. A firms use of debt will have no effect on its profit margin.

c. If one firm has a higher debt ratio than another, we can be certain that the firm with the higher debt ratio will have the lower TIE ratio, as that ratio depends entirely on the amount of debt a firm uses.

d. If two firms differ only in their use of debti.e., they have identical assets, sales, operating costs, interest rates on their debt, and tax ratesbut one firm has a higher debt ratio, the firm that uses more debt will have a lower profit margin on sales and a lower return on assets.