Question 1: ABC corporation shows the following information on its 2020 income

statement: sales= $267,000, costs= $148,000, other expenses=$8,200; depreciation

expense=$17,600; interest expense=$12400, taxes=$32,620, dividends=$15,500. Firm also

issued $6,400 in new equity during 2020 and redeemed $4,900 in outstanding long-term debt.

a. What is the 2020 operating cash flow?

b. What is the 2020 cash flow to creditors? Cash flow to stockholders?

c. If net fixed assets increased by $25,000 during the year, how does NWC change?

Question 2: A firm has the following marginal tax rate information:

a. Why do you think the marginal tax rate jumps up from 34% to 39% at a taxable

income of $100,001 and then falls back to a 34% marginal rate at a taxable income of

$335,001?

b. Compute the average tax rate for a corporation with exactly $335,001 in taxable

income. Does this confirm your explanation in part (a)? What is the average tax rate

for a corporation with exactly $18,333,334 in taxable income? Is the same thing

happening here?

Question 3: You have just made your first $5000 contribution to your retirement account.

Assuming you earn a return of 10% per year and make no additional contributions.

a. what will your account be worth when you retire in 45 years?

 b. What will your account be worth if you wait 10 years before contributing?

Question 4: You expect to receive $15,000 at graduation in two years. You plan on investing

it at 9% until you have $75000. How long will you wait from now?

Question 5: Find the missing EAR and APR in each of the following cases:

APR Number of Times Couponed EAR

??? Semi annually 12.4%
7% Quarterly ???
??? Monthly 11.7%
10% Infinite ????

Question 6: Beginning three months from now, you want to be able to withdraw $2,500 each

quarter from your bank account to cover college expense over the next four years. If the

account pays 0.47% interest per quarter, how much do you need to have in your bank account

today to meet your expense needs over the next four years?

Question 7: Suppose you are going to receive $13,500 per year for five years. The interest

rate is 8.4%

a. What is the present value of the payments if they are in the form of an ordinary

annuity? What is the present value if the payments are an annuity due?

b. Suppose you plan to invest the payments for five years. What is the future value if the

payments are an ordinary annuity? What if the payments are annuity due?

c. Which has the highest present value (future value), the ordinary annuity or annuity

due?

Question 8: Prepare an amortization schedule for a five-year loan of $65,000. The interest

rate is 7% per year and the loan calls for equal annual payments. How much interest is paid in

the third year? How much total interest is paid over the life of the loan.
Question 9: Hoang Long joint stock company issued fixed rate bonds bearing interest at 11%

pa. The bonds have a par value of VND 1,000,000 and will mature after 9 years. Interest are

payable annually. If the yield to maturity (YTM) of the bonds is 10%, what is the present

value of the bond?

Question 10:

a. What is the relationship between the price of a bond and its YTM?

b. Explain why some bonds sell at a premium over par value while other bonds sell at a

discount. What do you know about the relationship between the coupon rate and the

YTM for premium bonds? What about for discount bonds? For bond selling at par

value.