1

(i)From the list below determine how much is net working capital:

Cash $120

A/R 50

Sales 200

Rent expense 50

A/P 80

Interest payable 15

Capital 300

Select one:

a. $70

b. $90

c. $75

d. $85

(ii)

Assume ABC Company just paid a dividend of $1.00. ABC is planning to increase its dividend by 3% per year from now on. If the market requires a return of 22% on assets of this risk, how much should the stock be selling for?

Select one:

a. $10.42

b. $5.42

c. $5.00

d. $7.42

(iii)

Assume ABC Company wants to maintain the minimum cash balance end of each month of $20,000.

ABC has the following projected cash flows for July 2021:

Beginning balance $15,000

Expected cash disbursements $18,000

Expected cash receipts $15,000

How much cash ABC needs to borrow in order to keep the target cash balance of $20,000 end of July?

Select one:

a. $17,000

b. $12,000

c. $8,000

d. no need to borrow money from the bank

(iii)

If a corporate bond is quoted at 95 that means it is trading at 95% of face value. In the case where the face value is $1000, the cost to buy each bond is $955.

Select one:

True

False