Question
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
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. 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? 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 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
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