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ASSIGNMENT 1- 60 MARKS 1. What are the four main areas of finance? Give a brief explanation of each. 10 Marks 2. Use the information
ASSIGNMENT 1- 60 MARKS
- 1. What are the four main areas of finance? Give a brief explanation of each. 10 Marks
- 2. Use the information below for the Michigan Auto Corporation (MAC) to answer the following questions.
Balance Sheet Accounts of Michigan Auto Corporation (MAC) Corporation
Account | Balance 12/31/2017 |
Accumulated depreciation | $7,650 |
Accounts payable | $6,875 |
Accounts receivable | $8,000 |
Cash | $3,750 |
Common stock | $15,625 |
Inventory | $11,250 |
Long-Term debt | $17,750 |
Plant, property, and equipment | $37,000 |
Retained earnings | $12,100 |
- a) Refer to the Balance Sheet Accounts of MAC Corporation. Calculate the value of total assets for the year-end. 5 Marks
- b) Refer to the Balance Sheet Accounts of MAC Corporation. What is the value of net working capital at the year-end? 5 Marks
- c) Refer to the Balance Sheet Accounts of MAC Corporation. Calculate the value of current assets for the year-end. 5 Marks
- d) Refer to the Balance Sheet Accounts of MAC Corporation. What is the value of equity for the year-end? 5 Marks
- 3. Roseanne wants to borrow $40,000 for a period of 5 years.
The lenders offer her a choice of three payment structures:
- a) Pay all of the interest (10% per year) and principal in one lump sum at the end of 5 years; 8 Marks
- b) Pay interest at the rate of 10% per year for 4 years and then a final payment of interest and principal at the end of the 5th year; 8 Marks
- c) Pay five equal payments at the end of each year inclusive of interest and part of the principal. 8 Marks
- d) Under which of the three options will Roseanne pay the least interest and why? Calculate the total amount of the payments and the amount of interest paid under each alternative.
6 Marks
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