# Student

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#### Essay > Words: 1580 > Rating: Excellent > Buy full access at \$1

Student

Institution

1

Total assets are \$1000, fixed assets are \$700, long-term debt is \$250, and short-term debt is

\$300. What is the amount of net working capital?

Current AssetsCurrent Liabilities = Working Capital

Therefore 1000-700-300= \$ 0

3)

Your parents are giving you \$100 a month for four years while you are in college. At a 6% discount rate, what are these payments worth to you when you first start college?

(100% – 6%) of regular earnings = 94% at this point we fill the details as follows:

0.94 X \$100 = \$ 94 therefore at 6% discount the earning will be \$94.

\$94 X 48 months = \$4512

.4)

(4)The great, great grandparents of one of your classmates sold their factory to the government 104 years ago for \$150,000. If these proceeds had been invested at 6%, how much would this legacy be worth today? Assume annual compounding.

When we assume compounding interest formula to calculate the worthiness of the factory after 104 years :

nt

A= P 1+ r/n

where P=principal amount, r = annual rate of interest, t = the number of years,  A = amount accumulated after n n years and n= the number of times the interest is compounded per year.

A= 4150000(1+6/1) 104

= \$ 1,086,000

4 An investment project has the cash flow stream of\$ -3250, \$80, \$200, \$75, and \$90. The cost of capital is 12%. What is the discounted payback period?

Discounted Payback Period = A +

B

C

Where,
A = Last period with a negative discounted cumulative cash flow;
B = Absolute value of discounted cumulative cash flow at the end of the period A;
C = Discounted cash flow during the period after A.

Therefore the discounted payback period is 3 years

5- An investment cost \$12,000 with expected cash flows of \$4,000 for 4 years. The discount rate is 15.2382%. The NPV is ___\$634.89___ and the IRR is __12.60%____ for the project.

=-\$634.89; 12.60%

7)  Thornley Machines is considering a 3-year project with an initial cost of \$618,000. The project will not directly produce any sales but will reduce operating costs by \$265,000 a year. The equipment is depreciated straight-line to a zero book value over the life of the project. At the end of the project the equipment will be sold for an estimated \$60,000. The tax rate is 34%. The project will require \$23,000 in extra inventory for spare parts and accessories. Should this project be implemented if Thornley’s requires a 9% rate of return? Why or why not?

=No; The NPV is -\$2,646.00. if a project has a negative NPV, then the project is not viable and an investor is not advised to undertake the project.

8)

A project will produce operating cash flows of \$45,000 a year for four years. During the life of the project, inventory will be lowered by \$30,000 and accounts receivable will increase by \$15,000. Accounts payable will decrease by \$10,000. The project requires the purchase of equipment at an initial cost of \$120,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating a \$25,000 after-tax cash flow. At the end of the project, net working capital will return to its normal level. What is the net present value of this project given a required return of 14%?

=

\$27,958.66

9) What are the arithmetic and geometric average returns for a stock with annual returns of 5%, 8%, -3%, and 16%?

An arithmetic average is the sum of a series of numbers divided by the count of that series of numbers.

(0.05+0.08+-0.03+0.16)/4 =0.065

=6.5%; 9.21%

10) A year ago, you purchased 300 shares of IXC Technologies, Inc. stock at a price of \$10.05 per share. The stock pays an annual dividend of \$.10 per share. Today, you sold all of your shares for \$29.32 per share. What is your total dollar return on this investment?

300 shares X \$ 10.05 = \$ 3015, the total amou.............

#### Type: Essay || Words: 1580 Rating || Excellent

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