A family friend, Mr. Burn Out availed of the early retirement scheme offered by his employer. He said that he was already tired of the same routine of spending eight full hours in an office doing the same thing for the last twenty years.
Mr. Burn Out plans to get into the field of entrepreneurship. He would invest part of his retirement pay in a business that would deal with the sale of medical supplies to local clinics and hospitals.
When Mr. Burn Out learned that you are an accountant, he confessed that he is excited with his planned investment project, but very much afraid because he cannot afford to fail and lose his hard-earned retirement pay.
You advised that a Feasibility Study be prepared for his planned investment project. The study, you said, would determine the viability of his proposed business undertaking. it would cover key areas, such as marketing, production or purchasing, and finance, among others. You emphasized that the financial aspect is the most critical of them all.
Mr. Burn Out requested you to prepare a feasibility study for his proposed business. You immediately started and gathered the following relevant data.
1. Projected sales for the first year of operations are $288,000, spread evenly during the year. All sales will be on account with an average collection period of one month.
2. The cost ratio will be 60% of sales.
3. At the end of the first year, the acid-test ratio will be 1:1, while the current ratio will be 2:1.
4. Once the business is underway, purchases will replace the stock sold each month. The average payment period for accounts payable arising from the purchases of merchandise will be two (2) months.
5. Mr. Burn Out will open an account with the nearest bank and deposit $260,000 to start the business.
6. Various fixed assets will be acquired for cash at a total cost of $240,000. These fixed assets will be depreciated at the rate of 10% per year using the straight-line method.
7. Operating expenses, other than depreciation, are estimated at $70,000 per year. There will be no accruals and prepayment at year-end.
8. Mr. Burn Out will make drawings in excess of the amount necessary to meet the above plans.
Question: As of the end of the first year of operations, the projected total current assets is?
In: Accounting
in one year, you will make an initial deposit in the amount of $1,000 in a new savings account. You plan to make additional deposits in the same amount of $1,000 for 19 years after the initial deposit. There will only be these 20 deposits and no withdrawals made to your account. Assume the interest rate you will earn is 5% per year. How much will your account be worth in 20 years?
In: Finance
In one year, you will make an initial deposit in the amount of $5,000 in a new savings account. You plan to make additional deposits in the same amount of $5,000 for 11 years after the initial deposit. There will only be these 12 deposits and no withdrawals made to your account. Assume the interest rate you will earn is 4% per year. How much will your account be worth in 12 years?
In: Finance
You will be paying $11,000 a year in tuition expenses at the end of the next two years. Bonds currently yield 9%.
a. What is the present value and duration of your obligation?
b. What maturity zero-coupon bond would immunize your obligation?
c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 10%. What happens to your net position, that is an increase or decrease in value, to the difference between the value of the bond and that of your tuition obligation?
d. What if rates fall immediately to 8%? What happens to your net position, that is an increase or decrease in value, and by how much?
Round duration to 4 decimal places and all other answers to 2 decimal places.
In: Finance
Consider a perpetuity with the first cash flow at the end of year 1. If the invested funds of the perpetuity could earn 11% per year and the perpetuity paid $467 per year, what is the present value of the perpetuity? (round to the nearest dollar)
In: Finance
Imagine that you here that the expectation for the next year is that the U.S. dollar is going to strengthen against the Euro over the next five to ten years. You believe in the theory of purchasing power parity, having this in mind explain whether you expect inflation in the United States to be higher or lower on average compared with that in the Euro zone over the abovementioned period.
In: Finance
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Gilmore, Inc., had equity of $155,000 at the beginning of the year. At the end of the year, the company had total assets of $310,000. During the year, the company sold no new equity. Net income for the year was $33,000 and dividends were $4,200. |
| a. |
What is the sustainable growth rate for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | What is the sustainable growth rate if you use the formula ROE × b and beginning of period equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| c. | What is the sustainable growth rate if you use end of period equity in this formula? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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In: Finance
Imagine that you here that the expectation for the next year is that the U.S. dollar is going to strengthen against the Euro over the next five to ten years. You believe in the theory of purchasing power parity, having this in mind explain whether you expect inflation in the United States to be higher or lower on average compared with that in the Euro zone over the abovementioned period.
In: Finance
An investment will pay $292,600 at the end of next year for an investment of $190,000 at the start of the year. If the market interest rate is 10% over the same period, should this investment be made?
A. Yes, because the investment will yield $75,240 more than putting the money in a bank.
B. No, because the investment will yield $83,600 less than putting the money in a bank.
C. Yes, because the investment will yield $66,880 more than putting the money in a bank.
D. Yes, because the investment will yield $83,600 more than putting the money in a bank.
In: Finance
Consider a mutual fund with $300 million in assets at the start of the year and 12 million shares outstanding. If the gross return on assets is 18% and the total expense ratio is 2% of the year-end value, then the rate of return on the fund is %.
Please enter your answer with TWO decimal points.
In: Finance