I need this assignment completed. Please put a check where the answer is. Also, last couple questions, you must work the problem out. Thanks.

Drexel University Bennett S. LeBow College of Business Corporate Financial Management FIN 601 MIDTERM - SUMMER 2016-2017 INSTRUCTIONS This exam must be submitted online by the date and time indicated online. You must submit this Word document (not a pdf file) as an attachment. First, save this document to your computer. When you are finished with the exam, upload it to the assignment tab. Note that after uploading it, you will not be able to change anything, so don't upload it until you are comfortable with your answers. Do not submit any Excel files or other supporting documents. Make sure that your name appears below, and in the name of the file that you upload (e.g., Nelling.doc). The exam is open book and notes, and you are allowed to refer to any of the course videos or notes. You are not allowed to use any information on the web other than what is available in the FIN 601 course shell. You can use Excel or a calculator for calculations. You must do your own work. You can consult with your instructor for brief clarifications of issues regarding the problems. You cannot consult with any of your classmates, co-workers, friends, etc. In addition, you should not discuss the exam with anyone until after the solution and grades have been posted. The exam consists of twenty multiple-choice questions (worth 2 points each) and one problem worth 10 points, so the total possible score is 50. For the multiple choice questions, there is no partial credit, so you do not need to show your work, and you are welcome to guess. For the problem, you should show your work to get partial credit if you do not get the correct answer. ! Type your name: ________________________________ To answer the multiple choice questions, type an X in the blank next to the correct answer, as in the following example: Sample Question. Two plus two is equal to what number? a. _____ 2 b. _____ 3 c. __X__ 4 d. _____ 5 e. _____ 6 1. A firm has $1,600 in retained earnings on its 2015 balance sheet. In 2016, it reported a net loss of $400 (i.e., net income was negative $400) and paid a dividend of $200. What will be the amount of retained earnings on its 2016 balance sheet? a. _____ $1,200 b. _____ $1,000 c. _____ $1,800 d. _____ $1,600 e. _____ $2,200 2. Over the most recent year, a company's cash increased by $100, accounts receivable increased by $120, inventory decreased by $80, and accounts payable increased by $50. What was the change in net working capital? a. _____ increase of $90 b. _____ decrease of $90 c. _____ increase of $190 d. _____ decrease of $190 e. _____ decrease of $10 3. In 2016, a company spent $5,000 on new machinery, recorded depreciation expense of $800, sold old machinery valued at $300, and reported net fixed assets of $11,400 on the year-end balance sheet. What was the amount of net fixed assets at the end of 2015? a. _____ $15,300 b. _____ $16,900 c. _____ $6,900 d. _____ $5,300 e. _____ $7,500 4. A company has sales of $2,000,000. Labor and material expense is $900,000, and depreciation is $300,000. Selling, general, and administrative expense is $200,000. Interest expense is $100,000 and the tax rate is 40%. What is the level of operating income? a. _____ $300,000 b. _____ $360,000 c. _____ $500,000 d. _____ $600,000 e. _____ $800,000 5. Toronto Technology has sales of $5,000, net income of $600, total liabilities of $800, and equity of $1,200. The firm has $400 in accounts payable. On the common-size statement, what is the value of accounts payable? a. _____ 8.0 percent b. _____ 16.7 percent c. _____ 20.0 percent d. _____ 50.0 percent e. _____ 66.7 percent 6. At the end of 2015, the current ratio for Company A was 0.5, and the current ratio for Company B was 2.0. For both companies, accounts receivable, inventory, and accounts payable did not change during 2016. During 2016, Company A issued some long-term debt and put the proceeds in its cash account; Company B used some existing cash to repurchase stock. What will happen to the current ratios for these two companies at the end of 2016? a. _____ Company A's current ratio will be higher than 0.5; Company B's current ratio will be higher than 2.0 b. _____ Company A's current ratio will be lower than 0.5; Company B's current ratio will be higher than 2.0 c. _____ Company A's current ratio will be higher than 0.5; Company B's current ratio will be lower than 2.0 d. _____ Company A's current ratio will be lower than 0.5; Company B's current ratio will be lower than 2.0 e. _____ Company A's current ratio will be remain at 0.5; Company B's current ratio will remain at 2.0 7. In general, which of the following trends is most consistent with \"good\" financial performance for a company? a. _____ decreasing net profit margin and increasing total asset turnover b. _____ increasing inventory turnover and increasing operating profit margin c. _____ decreasing gross profit margin and increasing debt/equity ratio d. _____ decreasing current ratio and increasing debt/(total assets) e. _____ decreasing quick ratio and decreasing debt/equity ratio 8. Kramerica Corporation has a return on equity of 12 percent. The equity multiplier is 1.20. The profit margin is 10 percent. Sales are $5,000. What is the amount of total assets? a. _____ $2,500 b. _____ $5,000 c. _____ $500 d. _____ $600 e. _____ $6,000 9. Samir needs $8,000 in five years to buy a car, and $50,000 in ten years for a down payment on a house. He plans to make a single deposit of money into an account today to achieve these goals. How much does he need to deposit, if his money will earn 6% per year? a. _____ $100,248 b. _____ $401,703 c. _____ $28,604 d. _____ $58,000 e. _____ $33,898 10. Consider a growing annuity that runs for 40 years, with the first deposit occurring one year from today. The annual growth in deposits is 3%, and the money is placed in an investment account earning an annual return of 8%. If you want this account to have a balance of $5,000,000 in 40 years, what has to be the amount of the first deposit? a. _____ $125,000 b. _____ $27,539 c. _____ $13,541 d. _____ $16,928 e. _____ $45,893 11. Youngsoo plans to borrow $24,000 to buy a car. The loan will involve monthly payments over five years, at an interest rate of 12% per year (1% per month). What will be the amount of each payment? a. _____ $294 b. _____ $457 c. _____ $534 d. _____ $600 e. _____ $2883 The following information is relevant for Questions 12 - 16: Solar Inc. 2015 Income Statement Sales 8,000 COGS (6,000) Operating income 2,000 Interest expense (400) Taxable income 1,600 Taxes (40%) (640) 960 Net Income 96 Dividends Solar Inc. 2015 Balance Sheet Cash 600 A/P A/R 800 Notes payable Inventory 2,400 Total current assets 3,800 Fixed assets Total 6,200 10,000 1,000 600 Total current liabilities 1,600 Long-term debt 2,400 Common stock 2,000 Retained earnings 4,000 Total equity 6,000 Total 10,000 The following assumptions are relevant for the forecasted income statement and balance sheet for 2016. (Use a 360day year in financial ratio calculations when necessary.) sales grow by 15% operating margin will be 30% interest expense for the coming year will be $400 the retention ratio will be 80% cash will be 10% of sales accounts receivable turnover will be 12 inventory period will be 60 days fixed asset turnover will be 1 accounts payable period will be 30 days 12. For 2016, the forecasted level of cost of goods sold is: a. _____ $2,760 b. _____ $6,000 c. _____ $6,440 d. _____ $6,900 13. For 2016, the forecasted level of dividends is: a. _____ $110 b. _____ $283 c. _____ $455 d. _____ $1,133 14. For 2016, the forecasted level of accounts receivable is: a. _____ $695 b. _____ $767 c. _____ $864 d. _____ $920 15. For 2016, the forecasted level of inventory is: a. _____ $1,073 b. _____ $1,211 c. _____ $1,533 d. _____ $2,400 16. For 2016, the forecasted level of fixed assets is: a. _____ $5,600 b. _____ $6,200 c. _____ $8,000 d. _____ $9,200 The following information is relevant for Questions 17 - 20: Yuck Yuck Brands Common-size Financial Statements Income Statement Sales Balance Sheet 100% Cash 4% 8% Cost of goods sold 70% Accounts receivable Administrative expense 11% Inventory 18% Interest expense 4% Fixed assets 70% Income tax expense 6% Total assets 100% Net income 9% Accounts payable 20% Long-term debt 30% Common equity 50% Total Sales $10,000 17. The gross profit margin is: a. _____ 9% b. _____ 15% c. _____ 19% d. _____ 30% 18. The interest coverage ratio (times interest earned) is: a. _____ 2.75 b. _____ 4.75 c. _____ 5.33 d. _____ 7.50 19. The total liabilities to total assets ratio is: a. _____ 0.20 b. _____ 0.30 c. _____ 0.50 d. _____ 1.00 Total assets 100% $4,000 20. The total asset turnover is: a. _____ 0.40 b. _____ 1.00 c. _____ 1.75 d. _____ 2.50 Total score on multiple choice questions: ________ / 40 Problem 1 (10 points) _____ (NOTE: You must show your work on this problem.) Anne Bankroll is reviewing her investment portfolio of stocks and bonds. Her recent account statements indicate the following: Date Value of bonds Value of stocks 31 December 2015 $12,560 $28,784 31 December 2016 $12,903 $31,137 (a) During 2016, the rate of inflation was 1.2%. Calculate the return (i.e., the percentage increase in value) on Anne's total portfolio in i. Nominal terms (3 points) ii. Real terms (2 points) (b) Anne is attempting to determine the value of one her stocks. The company does not currently pay dividends. However, the company announced that it expects to pay a dividend of $0.50 per share in two years. The dividend is likely to increase by 20% annually for the next five years (in other words, from Year 3 to Year 7). After Year 7, the growth in dividends is expected to be 4% per year, forever. Investors in this company require a return of 9%. Estimate the current value per share. (5 points)