PART III. Solve the following problems.

8.If the interest rate this year is 8 percent and the interest rate next year will be 10 percent, what is the present value of a payment of $1 to be received in 2 years? (Hint: use 4 decimal places for your calculations.)

A. $1.1886. B. $1.8417. C. $0.9562. D. $0.7854. E. None of the above.

9.A person plans to retire in 10 years and, through annual savings, wants to build her wealth to $100,000 by that time. Money can be invested to yield interest of 14 percent per year. How much will she set aside at the end of each of the next 10 years in order to achieve her objective? (Hint: use 2 decimal places for your calculations.)

A. $5,866.22. B. $3,225.67. C. $5,186.72. D. $4,879.44. E. None of the above.

10.What is the present value of a four-period annuity of $100 per year that begins two years from today if the discount rate is 9 percent? (Hint: use 4 decimal places for your calculations.)

A. $297.24. B. $323.86. C. $356.85. D. $388.97. E. None of the above.

11.You invest $1,000 for 3 years in an account that earns 7 percent in- terest compounded annually. How much interest is earned in the third year? (Hint: use 4 decimal places for your calculations.)

A. $66.223.

B. $93.675.

C. $80.143. D. $74.449. E. None of the above.

12.A company has announced $50,000 in net income after paying taxes of $26,000 and interest of $20,000. The company has $600,000 of assets and its shareholders equity is 60 percent of assets. Calculate the com- panys return on equity (ROE) if the company intends to pay $17,000 of net income as dividends. (Hint: Use 4 decimal points for your cal- culations.) A. 13.88%. B. 12.24%. C. 15.66%. D. 10.77%. E. None of the above.

The following information concerns questions 13 -14.

A corporation had sales of $10,000 in 2020. The cost of goods sold was $6,500, general and administrative expenses were $1,000, and in- terest expenses were $0.00. Non-cash net working capital increased $200 and capital expenditures were $900. Total depreciation expense was $1,000. The firms tax rate was 35%.

13.Given the above information, what is the firms cash flow from oper- ating activities?

A. $975. B. $1,750. C. $1,575. D. $1,975. E. None of the above.

14.Given the above information, what was the firms cash flow from assets (or free cash flow)?

A. $795.

B. $750. C. $550. D. $875. E. None of the above.

15.Calculate cash flow (inflow or outflow) from financing activities given the following information:

Acquisition of business operations = $925 Disposal of property = $615 Disposal of intangible asset = $175 Interest received = $90

Proceeds of share issue = $1,400 Repayment of loan = $205 Dividends paid = $300 Business acquisitions = $38 Increase in short-term borrowing = $23 Interest paid = $120

A. Cash outflow from financing activities of $180.

B. Cash outflow from financing activities of $65.

C. Cash inflow from financing activities of $1,395.

D. Cash inflow from financing activities of $798.

E. None of the above.