In the Wall Bricks, Inc.’s balance sheet lists net fixed asset as $18 million Answer
1. (7 points) In the Wall Bricks, Inc.’s balance sheet lists net fixed asset as $18 million. The fixed assets could currently be sold for $14 million. Wall Bricks’ current balance sheet shows current liabilities of $7 million and current assets of $10 million. If all the current accounts were liquidated today, the company would receive $2 million cash after paying the $7 million in liabilities. What is the book value of Wall Bricks’ assets today? What is the market value of these assets?
2. (4 points) Last year a firm had an ROA of 8% and a dividend payout ratio of 40%. What is the internal growth rate?
3. (4 points) Last year a firm had an ROE of 6% and a dividend payout ratio of 80%. What is the sustainable growth rate?
4. (3 points) What is the future value in 3 years of $1,000 deposited today, earning a 4% interest rate annually?
5. (3 points) Approximately, how many years does it take to double a $2000 investment when interest rates are 6% per year? Years:
6. (3 points) A stock investor deposited $1000 four years ago in a non-dividend paying stock. Today the stock is valued at $814. What annual rate of return has this investor earned?
7. (8 points) A friend wants to retire in 30 years when he is 65. At age 35, he can invest $300/month that earns 6% each year. But he is thinking of waiting 15 years when he is age 50, and then investing $900/month to catch up, earning the same 6% per year. He feels that by investing three times as much for half as many years (15 instead of 30 years) he will have more. What is the future value of each of these options at age 65, and under which scenario would he accumulate more money?
8. (4 points) Compute the present value of a one-time payment of $1,000 paid in four years using the following discount rates: 1.0% in year 1, 2.0% in year 2, 4% in year 3, and 3% in year 4.
9. (5 points) TV’s R Yours is advertising a deal, in which you buy a flat screen TV for $4,769 (including tax) with one year before you need to pay (no interest is incurred if you pay by the end of the one year). How much would you need to deposit at the end of each month in a savings account earning 1.2% APR, compounded monthly, to be able to pay the $4,769 bill in one year? Monthly Deposit:
10. (8 points) Instead, you opt to purchase a 10-Inch 4K Ultra HD 120Hz Smart LED TV for $149,980 (yes, it’s really there) by getting a loan for $120,980 and paying a $29,000 down payment. You can get a 10-year loan with a 3.6% interest rate.
A. What would be your monthly payment?
B. In 4 years, when a newer, cheaper but nicer TV is available, what would be the loan balance?
11. (3 points) If the present value of an ordinary, 10 year annuity is $20,000 and interest rates are 5%, what is the present value of an annuity due with the same length of life, present values and interest rate?
12. (4 points) A credit card is offered with monthly payments and a 21.99% APR. What is the loan’s effective annual rate (EAR)? EAR:
13. (5 points) Calculate the price of a $1,000 bond, offering a 12% coupon payment with 15 years left to maturity and a market interest rate of 10%. (Assume interest payments are semiannual.) Is this a discount or premium bond?
14. (4 points) On July 25, 2014, the Dow Jones Industrial Average opened $17,083.80 and closed at $16,960.57. What was the effective annual rate return (in percent) of the stock market that day?
15. (4 points) Financial analysts forecast GDY Inc.’s growth for the future to be 3%. GDY’s recent annual dividend was $2.00. What is the value of GDY stock when the required return is 11%?
16. (5 points) URN Inc. recently paid a $5.00 annual dividend. The dividend is expected to grow at a 4% rate. At a current stock price of $52, what is the return shareholders are expecting?
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