A-

Asset Return	Liabilities & Equity Return
Asset A $10,000 30%	Liability $1,000 16%
Asset B 2,000 12%	Liability D (2,500) ?
	Equity B 13,500 26%

Calculate the return on Liability D as the weighted average of the returns on the other financial instruments? What is the weight attached to Asset A? . Is Liability D really a liability? Explain.

B-

WK: working capital; RE: retained earnings; EBIT: operating income; MVE; market value of equity; TA: total assets.

Consider the following financial statements of FCB company (albeit, truncated).

Current assets $21,398

Current Liabilities $ 10,924

Total assets $37,074

Total liabilities $ 16,209

Retained earnings $ 15,998

EBIT $2,888

Number of shares outstanding 1,600

Price per share $ ??

Sales $ 15,072

Required:

FCBs Z-score is 3.5. Find FCBs stock price per share

C-

Assume that a company establishes a DB pension plan. The employee has a salary in the coming year of $60,000 and is expected to work for 3 more years before retiring. The assumed discount rate is 10%, and the assumed annual compensation increase is 4%

Current salary $60,000

Years until retirement 3

Annual compensation increases 4%

Discount rate 10%

Final years estimated salary $60,000*(1.04)²= $64,896

Benefit 2%

The plan will pay a lump sum pension benefit equal to 2% of the employees final salary for each year of service beyond the date of establishment.

Construct the pension table. Use the format below.

The Pension Table

Year	1	2	3
Estimated annual salary
Benefits attributed to:
Prior years
Current year
Total benefit
Opening Obligation
Interest (10%)
Current service cost
Closing Obligation