2. Compute compound interest on 1000 invested at 5% for two years with annual compounding. 1 st...

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2. Compute compound interest on 1000 invested at 5% for two years with annual compounding.

1^st year interest is ________________ Principal now is _______________

2^nd year interest is ________________ Principal now is _______________

3. What will be the FV of $1000 in 5 years at interest rate of 5%?

4. You have $5000 but need $10000 three years later. To achieve this goal, interest rate should be how much?

5. The mortgage quoted rate (APR) is 10% annually. How much is the actual rate (EAR)?

6. What is the NPV of the following cash flows. The discount rate is 10%.

Year CF

1. 100

2. 150

3. 200

7. What is the NFV of the following cash flows. The discount rate is 5%.

Year CF

1. 100

2. 150

3. 200

8. At 10% interest, how long would it take to double your money?

9. You are borrowing $20,000 to buy a car. The terms of the loan call for monthly payments for 3 years at 6 percent interest (APR=3%). What is actual (effective) annual rate?

10. You are borrowing $20,000 to buy a car. The terms of the loan call for monthly payments for 3 years at 6 percent interest (APR=3%). How much shall you pay to the credit company each month?

11. You receive an offer to transfer your $5,000 balance from your current credit card, which charge an annual rate of 10%, to a new credit card charge a rate of 3%. How long does it take to payoff the debt with the new card by making your monthly payment of $100?

12. 3 year ago, you invested $1,000. Today it is worth $1,200.00. What rate of interest did you earn?

13. You agree to make 10 deposits of $1200 at the beginning of each month into a bank account. At the end of the 10^th month, you will have $15,000 in your account. If the bank compounds interest monthly, what is your monthly interest rate?

14. Some time ago, you purchased eleven acres of land costing $110,000. Today, that land is valued at $500,000. How long has she owned this land if the price of the land has been increasing at 15 percent per year?

15. What is the effective annual rate if a bank charges you 12 percent compounded quarterly?

16. The Pawn Shop loans money at an annual rate of 12 percent and compounds interest weekly. What is the actual rate being charged on these loans?

17. You just signed a consulting contract that will pay you $11000, 12,000, and $10,000 annually at the end of the next 3 years, respectively. What is the present value of these cash flows given a 5 percent discount rate?

Firm AAA 2020 2021

Sales $1000 $2000

COGs 500 600

Depreciation 50 50
Taxes 200 300

Accounts Receivable 300 400

Inventory 400 400

Net fixed assets 300 400

Current Liability 300 400

Long term debt 300 400

Common stock 300 400

Dividend paid in 2021 to investors is $200.

18. What is the taxable income of AAA Co. in 2021? (hint: taxable income is EBT)

19. Calculate the tax rate of AAA in 2021. (Hint: tax rate = tax / taxable income)

20. Accounts receivables have increased. Use or source of cash?

21. Inventories have increased. Use or source of cash?

22. Long term debt have increased. Use or source of cash?

23. Calculate the cash flow from operation.

24. Calculate cash flow from investment.

25. Calculate cash flow from financing.

26. A firm has total equity of $2000 and a debt-equity ratio of 2. What is the value of the total assets?

The Co. has sales = $50 million, total assets = $30 million, and total debt = $15 million. The profit margin = 20%. What is the return on equity (ROE)?