Assessment Tool Part II Spring I, 2013 Financial Management Foundations FIN 599

I. Time Value of Money:

1. What is the present value of $10,000 to be received in 8 years? The interest rate is 7%. (Round your answer to the nearest dollar.) a. $5,820. b. $5,835. c. $17,182. d. $6,009. 2. At an interest rate of 7% per year, how long will it take your investment to double in value? a. 9.81 years. b. 10.24 years. c. 10.39 years. d. 11.67 years. 3. You investment tripled in value in 8 years. What is the rate of return that you earned on that investment? a. 9.05%. b. 11.61%. c. 14.72%. d. none of the above. 4. Norma Jean is thirty years old. She decided to invest $1,000 a year (at the end of each year) for retirement. How much will she have by the time she retires at age 60 if the interest rate is 5%? a. $84,345.67. b. $94,460.79. c. $66,438.85. d. None of the above. 5. If you invest $5,000 today at interest rate of 5% compounded semiannually, what will be the value of your investment after five years? a. $5,657.04 b. $6,381.41 c. $6,400.42
Assessment Tool Financial Management Foundations FIN 599 Last Update July 2011 Page 1 of 3

d. none of the above.

II. Corporate Financial Analysis: 6. The Smith Corporation has operating income (EBIT) of $750,000. Smith Corp is 100 percent equity financed, and it faces a 40% tax rate. Assume that the firm has no amortization expense. The companys earnings before taxes (EBT) are .. , and its net income is . a. $450,000; and $650,000 respectively. b. $650,000; and $450,000 respectively. c. $750,000; and $450,000 respectively. d. None of the above. 7. The income statement for Morgan Company is as follows (in millions of dollars): Morgan Company Income statement For the Year Ended December 31, 2010 Net Sales $3,000 Operating Costs except depreciation and amortization $2,616 Gross Profit Depreciation and amortization $100 EBIT or operating profit Interest expenses $84 Taxable income (EBT) $200 Taxes (40%) Net Income Using the previous information, Morgan companys gross profit is , and its operating profit is .. a. $284 and $384 respectively. b. $384 and $284 respectively. c. $200 and 284 respectively. d. none of the above. 8. Using the information in question #7, Morgan Companys taxes are . and its net income is a. $80 and $120 respectively. b. $200 and $120 respectively. c. $80 and $200 respectively. d. none of the above.

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9. The balance sheet for Morgan Company is as follows (in millions of dollars): Morgan Company Balance Sheet As of December 31, 2010 Assets Cash Accounts receivable Inventory Total Current Assets Net plant and equipment Total Assets Liabilities and Stockholders Equity Accounts payable Notes payable Accruals Total Current Liabilities Long-term liabilities Total Liabilities Common Stock (50,000,000 shares) Retained earnings Total liabilities and stockholders equity $10 375 615 1,000

$60 110 140 750 $1,060 130 810

Using the previous information, Morgan Companys current assets are , its current liabilities are and its total liabilities and stockholders equity are .. a. $1,000; $310 and $2,000 respectively. b. $2,000; $1,060 and $2,000 respectively. c. $1,000; $750 and $1,060 respectively. d. none of the above.

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