Question

19. Which one of the following is a working capital decision?

a. What debt-equity ratio is best suited to the firm?

b. What is the cost of debt financing?

c. Should the firm borrow money for five or for ten years?

d. How much cash should the firm keep in reserve?

25. City Plumbing has inventory of $287,800, equity of $538,800, total assets of $998,700, and sales of $1,027,400. What is the common-size percentage for the inventory account?

a. 28.02percent

b. 33.66 percent

c. 28.82 percent

d. 31.68 percent

Travis invests $7,500 today into a retirement account. He expects to earn 10.4 percent, compounded annually, on his money for the next 30years. Assume this is the only deposit he makes into the account.34. How much money will he have in his account at the end of 15years?

a. $33,828.66

b. $33,082.43

c. $32,982.22d. $34,802.9935.

How much money will he have in his account when he retires 30years from now?

a. $145,526.56

b. $146,026.96

c. $145,926.26

d. $144,926.26

How long will it take to double your savings if you earn 6.4 percent interest, compounded annually?(Hint: Use your calculator, not The Rule of 72)

a. 11.89 years

b. 11.39 years

c. 11.17 years

d. 10.58 years

Answer 1

Q19) D) How much cash should the firm keep in reserve?

Explanation: Working capital decision involves decision regarding short term period and working of the firm . So cash is the only short term capital in this case which would concern the firm.

Q25a) c) 28.82%

Explanation:

Common size inventory = inventory / assets

= 287,800 / 998,700

= 28.82%

Q25b) B) $33,082.43

Explanation: Using financial calculator to calculate the future value

Inputs: N= 15

I/y= 10.4%

Pv= -7,500

Pmt= 0

Fv= compute

We get, value at the end of 15 years as $33,082.43

Q25c) c) $145,926.26

Explanation:

Using financial calculator to calculate the future value

Inputs: N= 30

I/y= 10.4%

Pv= -7,500

Pmt= 0

Fv= compute

We get, value at the end of 30 years as $145,926.26

Q25d) c) 11.17 years

Explanation:

Using financial calculator to calculate the number of years

Assuming that the initial sum of money is $100 and it is to be doubled to 200.

Inputs: i/y= 6.4%

Pv= -100

Pmt= 0

Fv= 200

N= compute

We get, the number of years as 11.17 years