Question: Explain what the efficient frontier is and

> Rick’s Travel Service has asked you to help piece together financial information on the firm for the most current year. Managers give you the following information: sales are $8.2 million, total debt is $2.1 million, debt ratio is 40 percent, and ROE is

> Calculate the times interest earned ratio for LaTonya’s Flop Shops, Inc., using the following information. Sales are $1.5 million, cost of goods sold is $600,000, depreciation expense is $150,000, other operating expenses is $300,000, addition to retaine

> Suppose that Wall-E Corp. currently has the following balance sheet, and that sales for the year just ended were $7 million. The firm also has a profit margin of 27 percent, a retention ratio of 20 percent, and expects sales of $9 million next year. Fixe

> Tiggie’s Dog Toys, Inc., reported a debt-to-equity ratio of 1.75 times at the end of 2018. If the firm’s total assets at year-end were $25 million, how much of their assets are financed with debt and how much with equity?

> Annual dividends of ATTA Corp grew from $0.96 in 2005 to $1.76 in 2017. What was the annual growth rate?

> Use the following information to complete the balance sheet below. Sales are $8.8 million, capital intensity ratio is 2.10 times, debt ratio is 55 percent, and fixed asset turnover ratio is 1.2 times.

> Mandesa, Inc., has current liabilities of $8 million, current ratio of 2 times, inventory turnover ratio of 12 times, average collection period of 30 days, and credit sales of $64 million. Calculate the value of cash and marketable securities.

> In 2018, Jake’s Jamming Music, Inc. announced an ROA of 8.56 percent, ROE of 14.5 percent, and profit margin of 20.5 percent. The firm had total assets of $9.5 million at year-end 2018. Calculate the 2018 values of net income available to common stockhol

> Maggie’s Skunk Removal Corp.’s 2018 income statement listed net sales = $12.5 million, gross profit of $6.9 million, EBIT = $5.6 million, net income available to common stockholders = $3.2 million, and common stock dividends = $1.2 million. The 2018 year

> You are considering investing in Annie’s Eatery. You have been able to locate the following information on the firm: Total assets are $40 million, accounts receivable are $6.0 million, ACP is 30 days, net income is $4.75 million, debt-to-equity is 1.5 ti

> Listed below are the 2018 financial statements for Garners’ Platoon Mental Health Care, Inc. Spread the balance sheet and income statement. Calculate the financial ratios for the firm, including the internal and sustainable growth rates

> Would you prefer to have an investment earning 5 percent for 40 years or an investment earning 10 percent for 20 years? Explain.

> A $1,000 investment has doubled to $2,000 in 8 years because of a 9 percent rate of return. How much longer will it take for the investment to reach $4,000 if it continues to earn a 9 percent rate?

> Without making any computations, indicate which of each pair has a higher interest rate? a. $100 doubles to $200 in 5 years or 7 years. b. $500 increases in 4 years to $750 or to $800. c. $300 increases to $450 in 2 years or increases to $500 in 3 years.

> Suppose that Psy Ops Industries currently has the following balance sheet, and that sales for the year just ended were $5 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8 million next year

> A firm is expected to pay a dividend of $2.05 next year and $2.35 the following year. Financial analysts believe the stock will be at their price target of $110 in two years. Compute the value of this stock with a required return of 12 percent.

> What do you think about the following statement. “I am going to receive $100 two years from now and $200 three years from now, so I am getting a $300 future value.” How could the two cash flows be compared or combined?

> How are present values affected by changes in interest rates?

> How are the present value and future value related?

> List and describe the purpose of each part of a time line with an initial cash inflow and a future cash outflow. Which cash flows should be negative and which positive? Why?

> Show how the Rule of 72 can be used to approximate the number of years to quadruple an investment.

> Oil prices have increased a great deal in the last decade. The table below shows the average oil price for each year since 1949. Many companies use oil products as a resource in their own business operations (like airline firms and manufacturers of plast

> Consider that you are the marketing manager of a firm. You need to have approximately 1 additional salesperson for every $10 million in sales. You currently have $50 million in sales and have 5 employees handling the sales accounts. In order to plan ahea

> What kind of returns might you expect in the stock market? One way to measure how the stock market has performed is to examine the rate of return of the S&P 500 Index. To see historical prices of the S&P 500 Index, go to Yahoo! Finance (finance.yahoo.com

> What annual rate of return is earned on a $5,000 investment when it grows to $9,500 in five years?

> What annual rate of return is earned on a $1,000 investment when it grows to $1,800 in six years?

> A firm is expected to pay a dividend of $1.35 next year and $1.50 the following year. Financial analysts believe the stock will be at their price target of $68 in two years. Compute the value of this stock with a required return of 10 percent.

> Suppose a firm has had the historic sales figures shown as follows. What would be the forecast for next year’s sales using regression to estimate a trend? //

> What is the value in year 15 of a $250 cash flow made in year 3 if interest rates are 11 percent?

> What is the value in year 10 of a $1,000 cash flow made in year 3 if interest rates are 9 percent?

> What is the value in year 4 of a $1,000 cash flow made in year 6 if interest rates are 8 percent?

> What is the value in year 3 of a $700 cash flow made in year 6 if interest rates are 10 percent?

> How many years (and months) will it take $2 million to grow to $5 million with an annual interest rate of 7 percent?

> Which cash flow would you rather pay, $425 today or $500 in two years if interest rates are 10 percent? Why?

> What would be more valuable, receiving $500 today or receiving $625 in three years if interest rates are 7 percent? Why?

> Consider a $5,000 deposit earning 10 percent interest per year for 10 years. What is the future value, how much total interest is earned on the original deposit, and how much is interest earned on interest?

> Consider a $2,000 deposit earning 8 percent interest per year for five years. What is the future value, and how much total interest is earned on the original deposit vs. how much is interest earned on interest?

> JP Morgan Chase Co. (JPM) has earnings per share of $3.53 and a P/E ratio of 13.81. What is the price of the stock?

> How long will it take $2,000 to reach $5,000 when it grows at 10 percent per year?

> Suppose a firm has had the historic sales figures shown as follows. What would be the forecast for next year’s sales using the average approach? Year: 2012 2013 2014 2015 2016 Sales $2,500,000 $3.750,000 $2.400,000 $2,000,000 $2,600

> Determine the interest rate earned on a $2,300 deposit when $2,900 is paid back in one year.

> Determine the interest rate earned on a $1,400 deposit when $1,800 is paid back in one year.

> Approximately what interest rate is earned when an investment doubles over 12 years?

> Approximately what interest rate is needed to double an investment over five years?

> Approximately how many years does it take to double a $500 investment when interest rates are 10 percent per year?

> Approximately how many years does it take to double a $100 investment when interest rates are 7 percent per year?

> Compute the present value of $5,000 paid in two years using the following discount rates: 8 percent in the first year and 7 percent in the second year.

> Compute the present value of $1,000 paid in three years using the following discount rates: 6 percent in the first year, 7 percent in the second year, and 8 percent in the third year.

> HiLo, Inc., doesn’t face any taxes and has $150 million in assets, currently financed entirely with equity. Equity is worth $7 per share, and book value of equity is equal to market value of equity. Also, let’s assume

> Compute the present value of an $850 payment made in 10 years when the discount rate is 12 percent.

> What is the present value of a $1,500 payment made in nine years when the discount rate is 8 percent?

> Suppose a firm has had the historic sales figures shown as follows. What would be the forecast for next year’s sales using the average approach? Year: 2012 2013 2014 2015 2016 Sales $1,500,000 $1,750,000 $1,400,000 $2,000,000 $1,600

> What is the present value of a $200 payment in one year when the discount rate is 7 percent?

> What is the present value of a $350 payment in one year when the discount rate is 10 percent?

> A deposit of $750 earns interest rates of 9 percent in the first year and 12 percent in the second year. What would be the second year future value?

> Compute the value in 25 years of a $1,000 deposit earning 10 percent per year.

> How much would be in your savings account in eleven years after depositing $150 today if the bank pays 8 percent per year?

> What is the future value of $400 deposited for one year earning an interest rate of 9 percent per year?

> What is the future value of $500 deposited for one year earning a 8 percent interest rate annually.

> Ultra Petroleum (UPL) has earnings per share of $1.56 and a P/E ratio of 32.48. What’s the stock price?

> Show the time line for a $400 cash outflow today, a $518 cash inflow in year 3, and a 9 percent interest rate.

> Show the time line for a $500 cash inflow today, a $605 cash outflow in year 2, and a 10 percent interest rate.

> A deposit of $350 earns the following interest rates: • 8 percent in the first year, • 6 percent in the second year, and • 5.5 percent in the third year. What would be the third year future value?

> Suppose a firm has had the historic sales figures shown as follows. What would be the forecast for next year’s sales using the naïve approach? Year: 2012 2013 2014 2015 2016 Sales $2.500,000 $3.750,000 $2,400,000 $2,000

> You own $10,000 of Denny’s Corp stock that has a beta of 2.9. You also own $15,000 of Qwest Communications (beta = 1.5) and $5,000 of Southwest Airlines (beta = 0.7). Assume that the market return will be 11.5 percent and the risk-free rate is 4.5 percen

> At age 30 you invest $1,000 that earns 8 percent each year. At age 40 you invest $1,000 that earns 12 percent per year. In which case would you have more money at age 60?

> You are scheduled to receive a $500 cash flow in one year, a $1,000 cash flow in two years, and pay an $800 payment in three years. If interest rates are 10 percent per year, what is the combined present value of these cash flows?

> Ten years ago, Hailey invested $3,000 and locked in an 8 percent annual interest rate for 30 years (end 20 years from now). Aidan can make a 20-year investment today and lock in a 10 percent interest rate. How much money should he invest now in order to

> Ten years ago, Hailey invested $2,000 and locked in a 9 percent annual interest rate for 30 years (end 20 years from now). Aidan can make a 20-year investment today and lock in a 10 percent interest rate. How much money should he invest now in order to h

> What annual rate of return is implied on a $2,500 loan taken next year when $3,500 must be repaid in year 4?

> A preferred stock from Hecla Mining Co. (HLPRB) pays $3.50 in annual dividends. If the required return on the preferred stock is 6.8 percent, what is the value of the stock?

> What annual rate of return is earned on a $4,000 investment made in year 2 when it grows to $6,500 by the end of year seven?

> You invested $3,000 in the stock market one year ago. Today, the investment is valued at $3,750. What return did you earn? What return would you suffer next year for your investment to be valued at the original $3,000?

> You invested $2,000 in the stock market one year ago. Today, the investment is valued at $1,500. What return did you earn? What return would you need to get next year to break even overall?

> At age 25 you invest $1,500 that earns 8 percent each year. At age 40 you invest $1,500 that earns 11 percent per year. In which case would you have more money at age 65?

> People have had a fascination with gold for thousands of years. Archaeologists have discovered gold jewelry in Southern Iraq dating to 3000 BC and gold ornaments in Peru dating to 1200 BC. The ancient Egyptians were masters in the use of gold for jewelry

> Suppose a firm has had the historic sales figures shown as follows. What would be the forecast for next year’s sales using the naïve approach? Year: 2012 2013 2014 2015 2016 Sales $1.500,000 $1.750,000 $1,400,000 $2,000

> How can you add a cash flow in year 2 and a cash flow in year 4 in year 7?

> The interest on your home mortgage is tax deductible. Why are the early years of the mortgage more helpful in reducing taxes than in the later years?

> Would you rather pay $10,000 for a 5-year $2,500 annuity or a 10-year $1,250 annuity? Why?

> Use the idea of compound interest to explain why EAR is larger than APR.

> A preferred stock from Duquesne Light Company (DQUPRA) pays $3.55 in annual dividends. If the required return on the preferred stock is 6.7 percent, what’s the value of the stock?

> Explain why you use the same adjustment factor, (1 + i), when you adjust annuity due payments for both future value and present value.

> When you discount multiple cash flows, how does the future period that a cash flow is paid affect its present value and its contribution to the value of all the cash flows?

> People can become millionaires in their retirement years quite easily if they start saving early in employer 401(k) or 403(b) programs (or even if their employers don’t offer such programs). Demonstrate the growth of a $250 monthly contribution for 40 ye

> Since perpetuity payments continue forever, how can a present value be computed? Why isn’t the present value infinite?

> How can you use the present value of an annuity concept to determine the price of a house you can afford?

> How can you use the concepts illustrated in computing the number of payments in an annuity to figure how to pay off a credit card balance? How does the magnitude of the payment impact the number of months?

> Suppose that Gyp Sum Industries currently has the following balance sheet, and that sales for the year just ended were $10 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8 million next yea

> Given a certain amount of savings, how much can I spend annually during retirement? Your annual income is estimated to be $70,000. Information entered 1. Savings Amount saved…………………………………… ………………………$1,000,000  Rate of return……………………………………. …………………………

> When paying off a home mortgage, extra principle payments can have a dramatic impact on the time needed to pay off the mortgage. (a) Create an amortization schedule for a $200,000, 3-year mortgage with a 6% APR. (b) After the 5th year, add an extra $100

> Consider a person who begins contributing to a retirement plan at age 25 and contributes for 40 years until retirement at age 65. For the first ten years, she contributes $3,000 per year. She increases the contribution rate to $5,000 per year in years 11

> You would like to sell 100 shares of Echo Global Logistics, Inc. (ECHO). The current ask and bid quotes are $15.33 and $15.28, respectively. You place a limit sell-order at $15.31. If the trade executes, how much money do you receive from the buyer?

> Consider Gavin, a new freshman who has just received a Stafford student loan and started college. He plans to obtain the maximum loan from Stafford at the beginning of each year. Although Gavin does not have to make any payments while he is in school, th

> Phoebe realizes that she has charged too much on her credit card and has racked up $6,000 in debt. If she can pay $200 each month and the card charges 18 percent APR (compounded monthly), how long will it take her to pay off the debt?

> Joey realizes that he has charged too much on his credit card and has racked up $5,000 in debt. If he can pay $150 each month and the card charges 17 percent APR (compounded monthly), how long will it take him to pay off the debt?

> To borrow $800, you are offered an add-on interest loan at 7 percent. Three loan payments are to be made, one at four months, another at eight months, and the last one at the end of the year. Compute the three equal payments.

> To borrow $500, you are offered an add-on interest loan at 8 percent. Two loan payments are to be made, one at six months and the other at the end of the year. Compute the two equal payments.

> What annual interest rate would you need to earn if you wanted a $600 per month contribution to grow to $45,000 in six years?

> What annual interest rate would you need to earn if you wanted a $1,000 per month contribution to grow to $75,000 in six years?