Section 2 Calculation Questions (65 marks total) - Write down your detailed solutions (either typed or hand-written). . Providing only the final answer receives a partial mark. If you use the financial calculator, to get the full mark, write down the proper formula, all the calculator inputs (ex: PV. FV, N, ...), and then the final answer. Excel solutions are not acceptable and receive no mark. Keep at least 4 decimals throughout the solution, then round your final answer to 2 decimals (unless mentioned otherwise). Write the question number beside each solution. If you are submitting the scan/photo of your handwriting for these questions, please make sure it is properly lit and clearly readable. If I cannot read it, I cannot mark it! 2. Calculate the cash balance given the following information: Decrease in AR 31000 Increase in Inventory 64000 Increase in AP 45000 Decrease in Taxes Payable 8000 Repaid Long Term Debt 88000 Issued Common Shares Issued Dividends 171000 25000 3. What was the sales volume in the current quarter if beginning accounts receivable, at $5,500, was $1,000 higher than ending, and $25,000 was collected? 4. Jack and Emma each have invested $120,000 in an investment account. No other contributions will be made to their investment account. Both have the same goal, they each want their account to reach $2,800,000 at which time each will retire. Jack has his money invested in risk-free securities with an expected return of 11% compounded monthly. Emma has her money invested in a stock fund with an expected return of 13% compounded quarterly. How many years after Emma retires will Jack retire? (keep four digits throughout the solution and round to two decimals at the end)? 5. You expect to receive $147,000 at graduation in three years. You plan on investing it at 10% until you have $256,000. How long will you wait from now? (round your final answer to 2 decimals) 6. What would your payment be on an 8-year, $110,000 loan at 12% interest compounded semi-annually, assuming the payments are made annually? (round your final answer to 2 decimals) 7. An insurance company is offering a new policy to its customers. Typically, the policy is bought by a parent or grandparent for a child at the child's birth. The details of the policy are as follows: The purchaser (say, the parent) makes the following six payments to the insurance company: 1st birthday 2nd birthday 3rd birthday 4th birthday 5th birthday 500 600 700 800 900 6th birthday 1000 After the child's 6th birthday, no more payments are made. When the child reaches age 60, he or she receives $1,500,000. If the relevant interest rate is 14% for the first six years and 12% for all subsequent years, is the policy worth buying? Why? (round your final answer to 2 decimals) 8. Suppose that today you buy an 6% annual coupon bond for $1,050. a. The bond has 15 years to maturity and $1000 face value. What rate of return do you expect to earn on your investment? (round your final answer to 2 decimals) b. Six years from now, the YTM on your bond has declined by 1.35%, and you decide to sell. What price will your bond sell for? (round your final answer to 2 decimals) 9. Max Co. issued 10-year bonds a year ago at a coupon rate of 5%. The bonds make semi-annual payments. If the face value is $1000 and YTM on these bonds is 8%, what is the current price of the bond? (round your final answer to 2 decimals) 10. The semi-annual, 5-year bonds of Kia, Inc. are selling at par and have an annual yield of 6.78%. What is the amount of each interest payment on a $1,100 Kia bond? (round your final answer to 2 decimals) 11. Galaxy Inc. just announced that they are increasing the annual dividend to $1.25 and establishing a policy whereby the dividend will increase by 2.3% annually thereafter. How much will one share of this stock be worth six years from now if the required rate of return is 12%? (round your final answer to 2 decimals) 12. Halo Industries issued dividends totaling $1.05 last year. For the next two years, it expects dividends to increase by 45% annually and then remain constant thereafter. How much is one share of Halo Industries stock worth today if you require a 7% rate of return? (round your final answer to 2 decimals) 13. If you insulate your office for $1,300, you will save $150 a year in heating expenses, and these savings will last forever. a. What is the NPV of the investment when the cost of capital is 9%? b. What is the IRR of the investment? c. What is the payback period on this investment? d. What is the discounted payback period when the cost of capital is 9%? 14. You are operating an old machine that is expected to produce a cash inflow of $4,200 each of the next 3 years before it fails. You can replace it now with a new machine that costs $18,000 but is much more efficient and will provide a cash flow of $10,000 a year for 8 years. Should you replace your equipment now? Why? The discount rate is 15%. (round your final answer to 2 decimals) 15. Using the following information, calculate the Net income. (round your final answer to 2 decimals) 8950 3250 sales total assets debt to equity ratio return on equity 1.2 11% 16. Calculate the sustainable growth rate for a firm with a 5% profit margin, an asset turnover of 1.75, a total debt to asset ratio of 45%, and a plowback ratio of 35%. Assuming that the ROE remains constant, how large can the sustainable growth rate become? (round your final answer to 2 decimals) 17. Calculate the value of Accounts Receivable, given the following information: Input Avg inventory Avg AP 7000 3500 Sales 125000 COGS 95000 Cash conversion cycle 51.47 inventory period 26.89 payables period 13.45 18. A discount bank loan has a quoted annual rate of 5%. a. What is the effective rate of interest if the loan is for 1 year and is paid off in 1 payment at the end of the year? (round your final answer to 4 decimals) b. What is the effective rate of interest if the loan is for 1 month? (round your final answer to 4 decimals) 19. Show the breakdown of stock price between a firm's assets that are already in place and its present value of growth opportunities, assuming: next year's expected earnings equal $5.00, 13 percent required rate of return, 17 percent return on equity, 55 percent plowback ratio. (round your final answer to 2 decimals) 20. If the indirect exchange rate between Yen and U.S. Dollars is 15.3/1, then what is the direct exchange rate between these currencies? (round your final answer to 5 decimals) 21. You can purchase a truck today for $25,000. This truck provides benefits equal to $2,300 a year and has a life span of 10 years. These trucks are expected to decrease in price by 15% per year. Suppose the discount rate is 11%. Should you purchase the truck today or wait? When is the best time to buy it? Why? (round your final answer to 2 decimals)