Please show work for questions 6-16

1. If a firm increased its current assets and decreased its current liabilities, the firm's net
working capital would
A. Stay constant
B. Decrease
C. Increase

2. A price-to-sales ratio of 8.5 indicates that investors are willing to pay

A. $8.50 for every $1 of sales
B. $1 for every $8.50 of sales

3. When a bond's coupon rate is higher than the yield to maturity, the bond is selling at
a . premium
b. discount
c. par

4. All else equal,_________has a higher present value than_________.

a. An annuity due, An ordinally annuity
b. An ordinally annuity , An annuity due
c. An ordinally annuity, An ordinally annuity
d. An annuity due, An annuity due

5. Portfolio diversification eliminates_________risks.

a. Market
b. Asset-specific
6. Suppose Orange Inc, had $167,989 in taxable income. Use the rates from the following
table to compute the company's averagetax rate. Write your answer in %. (For example,
If your answer is 22.53%, just input 20.53)

taxable income %
$ - $ 50,000 15%
$ 50,000 $ 75,000 25%
$ 75,000 $ 100,000 34%
$ 100,000 $ 335,000 39%

7. Based on the information given below, calculate the following ratios for Big Rock Candy
Mountain for fiscal year 2016.
(1) (1 pt) current ratio
(2) (1 pt) inventory turnover
(3) (1 pt) debt-to-equity ratio
(4) (2 pts) PE ratio

2016

Shares outstanding 15,000

Year-end Price $15

8. What is the future value of $1,017 invested for 5 years at 4 percent compounded quarterly?

9. Katie's Dinor borrowed $36,478 to refurbish its current facility. The firm has paid 8.6 percent
interest for 4 years, but the payments were made every month. What is the amount of
eachmonthly payment?
10. Consider Banana Co. has the following income statement and balance sheet data for FY
2018. In FY 2017, long-term liabilities = 500.
Use the following information, please compute x, when x = operating cash flows + CF to
creditors.

FY 2018

Sales 2,262

Cost of goods sold 1,655

Depreciation 90

Other operating expenses 298

Interest expenses 54

Tax rate 0.34

Current assets 761

Net fixed assets 1,118

Current liabilities 603

Long-term liabilities 494

11. Consider Peach Co. has the following income statement and balance sheet data for FY 2017
and 2018.
Use the following information, please compute CF to shareholders in 2018.

FY 2018 FY 2017
Current assets 768 600
Net fixed assets 1,118 1,000
 Current liabilities 603 500
Long-term liabilities 581 500
Net Income 60
Dividends 50

12. A stock has a beta of 1.4, the market premium is 7.6 percent, and the risk-free rate is 1.8
percent. What must the expected return on this stock be? Present your answer in %. (For
example, If your answer is 22.53%, just input 20.53)

13. Special Motors recently paid $2 as its annual dividend. Future dividends are projected at
$2.05 $2.23, and $2.35 over the next three years, respectively. After that, the dividend is
expected to decrease by 4.9% annually. What is one share of this stock worth at a rate of return
of 10.8%?

14. Blue River, Inc. bonds have a face value of $1,000. The bonds carry a 7.5 percent coupon,
pay interest semiannually, and mature in 12 years. What is the current price of these bonds if the
yield to maturity is 6.2 percent? Round your answer to two decimal places.

15. Jane Doe will retire in 25 years. Jane currently has $65,610 in account X and $41,421 in
account Y. Jane plans to add $9,434 at the end of each year to Account X and also add $6,656 to
Account Y at the end of each year. Account X earns 7.2 percent annually and Account Y earns a
return of 4.8 percent annually. When Jane retires, she will transfer the entire savings to a
retirement account that earns 3.6% a year, and will withdraw an equal monthlyamount of $x for
the next 20 years, leaving nothing behind. How much will she be able to withdraw every month?

16. You are given the following information for Moreno Co. Assume the company’s tax rate is
35%.

Debt: 6,000 8.3 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity,
selling for 107 percent of par; the bonds make semiannual payments. Preferred stock: 50,000
shares of 5 percent preferred stock with a current price of $98, and a par value of $100.
Common stock: 510,000 shares outstanding, selling for $75 per share; the beta is 1.0.
Market: 10 percent average market return and 2.5 percent risk-free rate.