Suppose, you are the financial manager of Wal-Mart who will submit a report on this year’s (2014) financial transactions to the company’s CFO Charles Holley. You want to verify that the following estimates prepared by your staff are correct.

Your department will set aside a lump sum fund this year in order to pay for a planned purchase of a $140,000-equipment in 2020. How much should be deposited this year to pay for this purchase if the current market interest rate is 3.50 percent on an annual basis?

Staff Estimate: $80,000

Wal-Mart just bought an investment property for $10 million that it will sell in 2020. The return on this investment (i.e., interest rate, growth rate, etc.) is 4.5 percent per year. At what price can this property be sold in 2020?

Staff Estimate: $12 million

The CFO likes to know the annual growth rate in sales for five high-volume stores in Dallas over the last five years, from 2009 to 2014. Total annual sales in these five stores were $150 million in 2009 and $195 million in 2014. What is the growth rate in sales?

Staff Estimate: 8.5%

Based on the growth rate estimate in transaction 4, present your sales forecast for a new high-volume store for the year 2020. Current sales for the new high-volume store are $32 million.

Staff Estimate: $45 million

The property division of Wal-Mart wants to determine the value (this year’s value) of a property in Pearland, Texas. This property generates an annual income of $2 million. It is expected that this annual income of this property will continue through year 2020 at which time it will sold for a market value of $25 million. Wal-Mart can invest its income at 3.50 percent annually. What is the value of this property this year?

Staff Estimate: $16 million

Your department will deposit $1.50 million profit every year in an account paying 5.50 percent interest. How much fund will you accumulate at the end of 2020?

Staff Estimate: $15 million

Wal-Mart borrowed $200 million this year from Chase at 3.80 percent annual rate. This loan will be repaid in annual payments until 2020. How much will Wal-Mart pay annually to pay off this loan?

Staff Estimate: $21 million pmt per year

Wal-Mart needs to retire a $30 million loan in 2020. To retire, it plans to make equal annual payments into a fund (called Sinking Fund) paying an annual return of 2.75 percent. What is the annual payment into the fund?

In 2004, Wal-Mart invested $25 million in various financial securities. These investments are generating annual income of $2 million. The market value of these investments this year is $30 million. What is the overall return on investment in these financial securities so far?

Answer rating: 100% (QA)

February 11 2015 To Charles Holley From Mubarak Ahmed Subject TREATMENT OF FINANCIAL TRANSACTIONS De... View the full answer