Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $55,000 has today. He wants all his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 6% per year from today forward. He currently has $50,000 saved and expects to earn a return on his savings of 7% per year with annual compounding. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet How much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to meet his retirement goal? (Note: Neither the amount he saves nor the amount he withdraws upon retirement is a growing annuity.) Do not round intermediate calculations. Round your answer to the nearest dollar.

Required Annuity Payments Father's current age 50 Number of years until retirement 10 Number of years living in retirement 25 1st retirement payment, same purchasing power today as $55,000 Inflation rate 6.00% Current savings at t = 0 $50,000 Percentage return earned 7.00% Step 1. Calculate retirement payments, beginning at t = 10 Formulas Fixed retirement payments #N/A Step 2. Calculate the value of current savings at t = 10 Value of current savings, 10 years from today #N/A Step 3. Calculate the value of the annuity due of retirement payments at t = 10 Value of annuity due #N/A Step 4. Calculate the net amount that must be accumulated at t = 10 to receive desired retirement payments Net amount needed in 10 years #N/A Step 5. Calculate the value of annual deposit needed to meet desired retirement goal Value of annual deposit to meet retirement goal #N/A View comments (1)

Du Pont System of Ratio Analysis

1a) List the intuitive interpretations (names of the five components of the Return on Equity in the Du Pont System of Ration Analysis.

b) State whether a firms tax burden ratio will be higher or lower if it pays less taxes relative to pretax profit and give reason for your answer.

c) State whether a firms interest-burden ratio will be higher or lower if it pays more Interest relative to Earnings Before Interest and Taxes and give the reason for your answer.

• Suppose that Michael wants to have $250,000 saved by the time he has reached age 30. He is currently 21 and has no money in invested. Michael thinks that he can earn an annual return of 7% on his investments compounded monthly.
  • How much does he need to invest each month to reach his goal?
  • If his investments were compounded annually and not monthly, how much short was he on reaching his goal?

Calculate a​ one-year holding period return​ (HPR) for the following two investment​ alternatives: Which investment would you​ prefer, assuming they are of equal​ risk? Explain. The HPR for investment X is nothing​%. ​ (Enter as a percentage and round to two decimal​ places.)

Question 1

Comparative statement data for Whispering Company and Metlock Company, two competitors, appear below. All statement of financial position data are as of December 31, 2017, and December 31, 2016.

Prepare a vertical analysis of the 2017 income statement data for Whispering Company and Metlock Company in columnar form. (Round percentages to 1 decimal place, e.g. 12.1%. Enter all percentages as positive numbers.)

You just won the $87 million Ultimate Lotto jackpot. Your winnings will be paid as $2,900,000 per year for the next 30 years. If the appropriate interest rate is 6.2 percent, what is the value of your windfall?

You are an investor who bought 100 shares of a company at $35 per share with a stock on margin of 60%. The stock is now trading at $50 per share, and the initial margin require- ments has been lowered to 50%. You now want to buy 300 more shares of the stock. What is the minimum amount of equity that you will have to put up in this transaction?

Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly.

Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with two years to maturity has a coupon rate of 3%. The yield to maturity (YTM) of the bond is 11.00%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note:

$859,794.00

$730,824.90

$541,670.22

$1,031,752.80

Based on your calculations and understanding of semiannual coupon bonds, complete the following statements: • Assuming that interest rates remain constant, the T-note’s price is expected to_______ .

• The T-note described is selling at a_________.

• When valuing a semiannual coupon bond, the time period variable (N) used to calculate the price of a bond reflects the number of_________ periods remaining in the bond’s life.

JPJ Corp has sales of $ 1.05 ​million, accounts receivable of $ 52,000​, total assets of $ 5.13 million​ (of which $ 2.76 million are fixed​ assets), inventory of $ 154,000​, and cost of goods sold of $ 603,000. What is​ JPJ's accounts receivable​ days? Fixed asset​ turnover? Total asset​ turnover? Inventory​ turnover?

Relative Valuation Methods with Price Multiples:

1. Price-to-Sales Ratio
2. Price-to-Cash Flow Ratio
3. Price-to-Book Ratio

What are the benefits and disadvantages of these methods?

Would you ever use any of them as stand alone valuation methods of a target company?

Using the information provided in the following table, find the value of each asset.

In December 2015​, Apple had cash of $37.98 billion, current assets of $76.66 billion, and current liabilities of $76.12 billion. It also had inventories of $2.45 billion.

a. What was​ Apple's current​ ratio?

b. What was​ Apple's quick​ ratio?

c. In January 2016​, ​Hewlett-Packard had a quick ratio of 0.66 and a current ratio of 0.90

What can you say about the asset liquidity of Apple relative to​Hewlett-Packard?

The 2015 income statement for Egyptian Noise Blasters shows that depreciation expense is $82 million, NOPAT is $245 million. At the end of the year, the balance of gross fixed assets was $660 million. The change in net operating working capital during the year was $72 million. Egyptian’s free cash flow for the year was $190 million.

Calculate the beginning-of-year balance for gross fixed assets. (Enter your answer in millions of dollars.)

The 2013 balance sheet of Maria's Tennis Shop, Inc., showed long-term debt of $1.9 million, and the 2014 balance sheet showed long-term debt of $2.6 million. The 2014 income statement showed an interest expense of $655,000. During 2014, Maria’s Tennis Shop, Inc., had a cash flow to stockholders for the year of $321,000. Suppose you also know that the firm’s net capital spending for 2014 was $855,000, and that the firm reduced its net working capital investment by $76,000 What was the firm’s 2014 operating cash flow, or OCF?