Solved by a verified expert :Part 1
1. Given the
following selected information on Cicalese’sCholocate, Inc. calculate cash flow
from operating activities for the year 20X1
Dec
31, 20X0Dec 31, 20X1
EAT $600,
000 $740, 000
Depreciation Exp. 100,
000 140, 000
Dividends 400,
000 550, 000
Accounts Receivable 1,
500, 000 2, 000, 000
Inventory 3,
500, 000 2, 000, 000
Accts Payable/Accr. 350,
000 500, 000
Long-Term Debt 2,
300, 000 2, 500, 000
Common Stock 2,
200, 000 2, 500, 000
Retained Earnings 6,
150, 000 6, 350, 000
Solution: EAT + Depreciation + A/R + Inventory + AP accruals
For B/S items such as inventory, A/R etc., you have to take
the change over the year when you compute cash flows.
2. You
purchased a piece of property for $30, 000 nine years ago and sold it today for
$83, 190. What was the annual rate of return on your investment?
3. The First
National Bank has agreed to lend you $30, 000 today, but you must repay $42,
135 in 3 years. What rate is the bank charging you?
Part 2
1. If you
were to borrow $8600 over five years at 0.12 compounded monthly, what would be
your monthly payment?
2. Your
uncle promises to give you $600 per quarter for the next five years. How much
is his promise worth right now if the interest rate is 0.07 compounded
quarterly?
3. Christopher
Electronics bought new machinery for $5,060,000 million. This is expected to
result in additional cash flows of $1,210,000 million over the next 7 years.
What is the payback period for this project? Their acceptance period is five
years.
4. You have
invested in stocks J and M. From the following information, determine the beta
for your portfolio.
Return Investment Beta
Stock J 0.11 100,000 1.13
Stock M 0.10 300,000 0.60
