 # Assignment 1 Principles of Finance (FIN101) Assignment Questions: (Marks: 15) 1. A company had cash and marketable securities worth \$200,000 accounts payables worth \$51,000, inventory of \$1,501,500, accounts receivables of \$5,288,128, short-term notes payable worth \$220,000, other current liabilities of 100,000, and other current assets of \$121,800. Calculate the company net working capital and describe how managers manage the firm working capital. (2 Marks) 2. Your parents have given you \$1,500 a year before your graduation so that you can take a trip when you graduate. You wisely decide to invest the money in a bank CD that pays 7% interest. You know that the trip costs \$1600 right now and that inflation for the year is predicted to be 3%. Will you have enough money in a year to purchase the trip? Show your calculations. (2 Marks) 3. If the following financial information related to XYZ Company. Total Revenues last year \$970, depreciation expenses \$50, costs of goods sold \$450, and interest expenses \$55. At the end of the year, current assets were \$121 and current liabilities were \$107. The company has an average tax rate of 35%. Calculate the net income for XYZ Company by setting up an income statement. (2 Marks) 4. Calculate the common-size balance sheet from the following information for the company: (2 Marks) Cash 50,000 Accts/Pay 25,800 Acct/Rec 60,000 Accrued expenses 30,000 Inventories 200,500 Short-term N/P 9,700 Total Current assets 310,500 Current liabilities 65,500 Net fixed assets 132,000 Long-term debt 150,000 Total assets 442,500 Total liabilities 215,500 Owner’s equity 227,000 Total liabilities and owners’ equity 442,500 5. Ten years ago, Amanda Cortez invested \$20,000 in an account paying an annual interest rate of 5%. What is the value of the investment today? What is the interest on interest earned on this investment? (2 Marks) 6. You have just won a lottery that promises an annual payment of \$120000 beginning immediately. You will receive a total of 15 payments. If you can invest the cash flow in an investment that is paying 8% annually, what is the present value of this annuity? (2 Marks) 7. XXX company has forecast a rate of return of 20% if the economy booms (30% probability); a rate of return of 19% if the economy in in a growth phase (40% probability); a rate of return of 2.50% if the economy in in decline (20% probability); and a rate of return of -10% if the economy in a depression (10% probability). What is the company standard deviation of returns? (3 Marks)

Assignment 1
Principles of Finance (FIN101)

Assignment Questions: (Marks: 15)

1. A company had cash and marketable securities worth \$200,000 accounts payables worth \$51,000, inventory of \$1,501,500, accounts receivables of \$5,288,128, short-term notes payable worth \$220,000, other current liabilities of 100,000, and other current assets of \$121,800. Calculate the company net working capital and describe how managers manage the firm working capital. (2 Marks)

2. Your parents have given you \$1,500 a year before your graduation so that you can take a trip when you graduate. You wisely decide to invest the money in a bank CD that pays 7% interest. You know that the trip costs \$1600 right now and that inflation for the year is predicted to be 3%. Will you have enough money in a year to purchase the trip? Show your calculations. (2 Marks)

3. If the following financial information related to XYZ Company. Total Revenues last year \$970, depreciation expenses \$50, costs of goods sold \$450, and interest expenses \$55. At the end of the year, current assets were \$121 and current liabilities were \$107. The company has an average tax rate of 35%. Calculate the net income for XYZ Company by setting up an income statement. (2 Marks)

4. Calculate the common-size balance sheet from the following information for the company: (2 Marks)

Cash 50,000 Accts/Pay 25,800
Acct/Rec 60,000 Accrued expenses 30,000
Inventories 200,500 Short-term N/P 9,700
Total Current assets 310,500 Current liabilities 65,500
Net fixed assets 132,000 Long-term debt 150,000
Total assets 442,500 Total liabilities 215,500
Owner’s equity 227,000
Total liabilities and owners’ equity 442,500

5. Ten years ago, Amanda Cortez invested \$20,000 in an account paying an annual interest rate of 5%. What is the value of the investment today? What is the interest on interest earned on this investment? (2 Marks)

6. You have just won a lottery that promises an annual payment of \$120000 beginning immediately. You will receive a total of 15 payments. If you can invest the cash flow in an investment that is paying 8% annually, what is the present value of this annuity? (2 Marks)

7. XXX company has forecast a rate of return of 20% if the economy booms (30% probability); a rate of return of 19% if the economy in in a growth phase (40% probability); a rate of return of 2.50% if the economy in in decline (20% probability); and a rate of return of -10% if the economy in a depression (10% probability). What is the company standard deviation of returns? (3 Marks)