Question: URA, Incorporated, has operating income of $5

> Assume the interest rate on a one-year U.S. government debt security is currently 9.5 percent compared with a 7.5 percent on a foreign country’s comparable maturity debt security. If the U.S. dollar value of the foreign country’s currency is $1.50, what

> Assume inflation is expected to be 8 percent in New Zealand next year compared with 4 percent in France. If the New Zealand dollar value of a euro $0.400, what is the expected exchange rate one-year from now based on purchasing power parity?

> Assume inflation is expected to be 3 percent in the United States next year compared with 6 percent in Australia. If the U.S. dollar value of an Australian dollar is currently $0.500, what is the expected exchange rate one-year from now based on purchasi

> Assume one U.S. dollar ($US) can currently purchase 1.316 Swiss francs. However, it has been predicted that one $US soon will be exchangeable for 1.450 Swiss francs. a. Calculate the percentage change in the $US if the exchange rate change occurs. b. Det

> Assume the U.S. dollar ($US) value of the Australian dollar is $0.73 while the U.S. dollar value of the Hong Kong dollar is $0.13 a. Determine the number of Australian dollars that can be purchased with one $US. b. Determine the number of Hong Kong dolla

> Assume that the Danish krone (DK) has a current dollar ($US) value of $0.18 a. Determine the number of DK that can be purchased with one $US. b. Calculate the percentage change (appreciation or depreciation) in the Danish krone if it falls to $0.16. c. C

> 1. When required reserves are larger than the bank reserves of a depository institution, what is the difference called? a. Excess reserves b. Deficit reserves c. Excess vault cash d. Federal Reserve float 2. Which of the following transactions affe

> Exchange rate relationships between the U.S. dollar and the euro have been quite volatile. When the euro began trading at the beginning of 1999, it was valued at 1.17 U.S. dollars. By late-2000, a euro was worth only $.83 and peaked at $1.60 in mid-2008.

> You have been asked to assess the impact of possible changes in reserve requirement components on the dollar amount of reserves required. Assume the reserve percentages are currently set at 2 percent on the first $50 million of traction account amounts;

> Show how your answers in problem 6 would change if the fed lowered the cut-off between the 2 percent rate and the 8 percent rate from $40 million in transaction account balances down to $20 million. Data from problem 6: Assume that banks must hold a 2

> Assume that the Fed decides to increase the required reserve percentage on transaction accounts above $40 million from 8 percent to 10 percent. All other information remains the same as given in Problem 6, including the transaction account balances held

> Assume that banks must hold a 2 percent reserve percentage against transaction account balances up and including $40 million. For transaction accounts above $40 million, the required reserve percentage is 8 percent. Also assume that the Dell National Ban

> The Friendly National Bank holds $50 million in reserves at its Federal Reserve District Bank. The required reserves ratio is 12 percent. a. If the bank has $600 million in deposits, what amount of vault cash would be needed for the bank to be in complia

> A bank has $10 million in vault cash and $110 million in deposits. If total bank reserves were $15 million with $2 million considered to be excess reserves, what required reserves ratio is implied?

> A bank has $110 million in deposits and holds $10 million in vault cash. a. If the required reserves ratio is 10 percent, what dollar amount of reserves must be held at the Federal Reserve Bank? b. How would your answer in Part (a) change if the required

> Assume a Bank has $5 million in deposits and $1 million in vault cash. If the bank holds $1 million in excess reserves and the required reserves ratio is 8 percent, what level of deposits are being held?

> A new bank has vault cash of $1 million and $5 million in deposits held at its Federal Reserve District Bank. a. If the required reserves ratio is 8 percent, what dollar amount of deposits can the bank have? b. If the bank holds $65 million in deposits

> 1. The U.S. fractional reserve system requires that at each depository institution funds be held in reserve equal to a certain percentage of which one of the following? a. Deposit liabilities b. Stockholders’ equity c. Securities held d. Loans secure

> 1. A surplus economic unit is one that a. spends more money than it brings in. b. generates more money than it spends. c. produces an amount money equal to what it spends. d. borrows money from businesses or the government. 2. The savings-investmen

> Tenth National Bank has common stock of $2 million, retained earnings of $5 million, loan loss reserves of $3 million, and subordinated notes outstanding in the amount of $4 million. Total bank assets are $105 million. Calculate the common equity capital

> Use the data from Problem 7 for Second National Bank and calculate the common equity capital ratio assuming that stockholders’ equity was equal to common equity (i.e., there was no preferred stock). Data from Problem 7: Rearrange the following accounts

> Rearrange the following accounts to construct a bank balance sheet for the Second National Bank. What are the total amounts that make the bank’s balance sheet “balance”? Demand deposits:…………………………………………..$20 million Cash assets:……………………………………………………..$5

> A bank’s assets consist of: Cash: ………………………………………..$1.5 million Loans:……………………………………….$10 million Securities…………………………………$4.5 million Fixed assets…………………………………$2 million In addition, the bank’s common equity is $1.5 million. a. Calculate the common equ

> Following are selected balance sheet accounts for the Third State Bank: vault cash = $2 million; U.S. government securities = $5 million; demand deposits = $13 million; non transactional accounts = $20 million; cash items in process of collection = $4 mi

> ATM Banc has the following liabilities and equity categories: Deposits…………………………………………………$9 million Other liabilities……………………………………….$4 million Stockholders’ equity…………………………………………….? Total liabilities and stockholders’ equity ……………….? a. What would be

> ABE Banc has the following asset categories: Cash………………………………………$1 million Securities……………………………..$4 million Loans…………………………………………………? Other assets …………………………$2 million Total assets…………………………………………? a. What would be the bank’s total assets if loans wer

> Assume that you can borrow $175,000 for one year from a local commercial bank. a. The bank loan officer offers you the loan if you agree to pay $16,000 in interest plus repay the $175,000 at the end of one year. b. As an alternative you could get a one-

> This problem focuses on bank capital management and various capital ratio measures. Following are recent balance sheet accounts for Prime First National Bank. All amounts are in millions of dollars. a. Calculate the common equity capital ratio. How cou

> Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts: Cash…………………………………………………..= $5 million Government securities………………………..= $7 million Mortgage loans………………………………….= $30 million Other loans

> 1. The largest annual government deficit occurred in which of the following fiscal years? a. 1969 b. 2001 c. 2009 d. 2015 2. What, approximately, is the amount of the national debt today (2016)? a. $1 trillion b. $6 trillion c. $12 trillion d.

> The following three one-year “discount” loans are available to you: Loan A: $120,000 at a 7 percent discount rate Loan B: $110,000 at a 6 percent discount rate Loan C: $130,000 at a 6.5 percent discount rate a. Determine the dollar amount of interest you

> The following problem requires a basic knowledge about probabilities and the calculation of expected values. In addition, the problem is more easily solved using Excel spreadsheet software. a. Calculate the dollar amount of the money supply under each

> The One Product economy which produces and sells only personal computers (PCs), expects that it can sell 500 more or 12,500 PCs next year. Nominal GDP was $20,000,000 this year and the money supply was $7,000,000. The central bank for the One Product eco

> The following information was gathered for the XYZ economy: velocity of money = 3.8 times; average price level = $85; and real output = 10,000 units. a. What is the nominal GDP for the XYZ economy? b. What is the size of the money supply for the XYZ econ

> Using the data in Problem 8, along with the monetarists’ view of the relationship between money supply and GDP, answer the following: a. If the M1 money supply increases by 10 percent and the M1 velocity of money does not change, what is the expected val

> Assume that a country estimates its M1 money supply at $20 million. A broader measure of the money supply, M2, is $50 million. The country’s gross domestic product (GDP) is $100 million. Production or real output for the country is 500,000 units or produ

> Assume that the real output (RO) for a country is expected to be 2.4 million products. a. If the price level (PL) is $250 per product, what will be the amount of the gross domestic product (GDP)? b. Now assume that the GDP is projected to be $8 million n

> A country’s gross domestic product (GDP) is $20 billion and its money supply (MS) is $5 billion. a. What is the country’s velocity of money (VM)? b. If the MS stays at the same level next year while the velocity of money “turns over” 4.5 times, what woul

> The balance sheets for the Genatron Manufacturing Corporation for the years 2016 and 2017 are listed in the text. a. Calculate the weighted average cost of capital based on book value weights. Assume an after-tax cost of new debt of 8.63 percent and a co

> The Nutrex Corporation wants to calculate its weighted average cost of capital. Its target capital structure weights are 40 percent long-term debt and 60 percent common equity. The before-tax cost of debt is estimated to be 10 percent and the company is

> 1. Examples of automatic stabilizer programs that act on a continuing basis to stabilize disposable income and economic activity include which one of the following? a. Unemployment insurance program b. Welfare payments c. Pay-as-you-go progressive inc

> The income statements for Genatron Manufacturing for 2016 and 2017 are listed in the text. Assuming one-half of the general and administrative expenses are fixed costs, estimate Genatron’s degree of operating leverage, degree of financial leverage, and d

> A firm has sales of $10 million, variable costs of $4 million, fixed expenses of $1.5 million, interest costs of $2 million and has a 30 percent average tax rate. a. Compute its DOL, DFL, and DCL. b. What will be the expected level of EBIT and net income

> Redo Problem 4, assuming that the less leveraged capital structure will result in a borrowing cost of 10% and a common stock price of $40. Data from Problem 4: Faulkner’s Fine Fries, Inc. (FFF) is thinking about reducing its debt burd

> Faulkner’s Fine Fries, Inc. (FFF) is thinking about reducing its debt burden. Given the information below and an expected EBIT of $50 million (plus or minus 10 percent) next year, should FFF change their capital structure? CURRENT

> Stern’s Stews, Inc., is considering a new capital structure. Its current and proposed capital structure follows: Stern’s Stews’ president expects next year’s EBIT to be $20 million

> Champion Telecommunications is restructuring. Currently Champion has no debt outstanding. After it restructures, debt will be $5 million. The rate offered to bondholders is 10 percent. Champion currently has 700,000 shares outstanding at a market price o

> Big 10+1 Corp. intends to raise $5 million by one of two financing plans: Plan A: Sell 1,250,000 shares at $4 per share net to the firm. Plan B: Issue $5 million in ten year debentures with a 9 percent coupon rate. The firm expects an EBIT level of $800,

> Company A1 intends to raise $3 million by either of two financing plans: Plan A: Sell 100,000 shares of stock at $30 net to firm Plan B: Issue $3 million in long term bonds with a 10 percent coupon The firm expects an EBIT of $1 million. Currently A1 has

> Here's a recent income statement from TC1 Telecommunications Services, Inc. (numbers are in millions) a. Compute TC1's degree of financial, operating, and combined leverage if one-half of the costs of good sold are variable costs and one-half are fixed c

> 1. Which of the following is not a way a government raises funds to pay for its activities? a. Levies taxes b. Borrows c. Prints money for its own use d. Issues common stock 2. Which of the following is a responsibility of the U.S. Treasury? a. Co

> Using the income statements from the Mount Lewis Copy Centers for 2016 and 2017 in Problem 17, find the percentage change in sales, EBIT, and net income. Use them to compute the degree of operating leverage, financial leverage, and combined leverage. Da

> Income statements for Mount Lewis Copy Centers for 2016 and 2017 appear below (in the text). a. Compute and interpret the degree of operating leverage, degree of financial leverage, and degree of combined leverage in 2016. Assume the components of the co

> The following information is from the financial statements of Bagel’s Biscuits (in text) a. Find Bagel’s internal growth rate. b. Compute Bagel’s sustainable growth rate.

> Below are items from recent financial statements from Moss and Mole Manufacturing (listed in text). a. Find M&MM's internal growth rate. b. Find their sustainable growth rate.

> Using the same notation used in the previous problem, now assume that the firm will raise some funds externally in order to keep the firm's debt-to-equity (D/E) ratio constant. a. What will this year's net income equal? b. How much will be added to stoc

> Derive equation 18-8 for the internal growth rate. Let S = last year's sales revenue; A = last year's total assets; D = last year's total liabilities; E = last year's stockholder's equity; NI/S =the firm's (presumably constant) profit margin, the ratio o

> Through library or internet resources, find information regarding the sources of long-term financing for AT&T. What are the current market prices for their outstanding bonds and stock? Estimate their current market value weights. Estimate the cost of eac

> Using various internet resources and information contained in this text to estimate the cost of debt, cost of retained earnings, the cost of new equity, and the weighted average cost of capital for the following firms: Walgreens, Microsoft, and ExxonMobi

> The Basic Biotech Corporation wants to determine its weighted average cost of capital. Its target capital structure weights are 50 percent long-term debt and 50 percent common equity. The before-tax cost of debt is estimated to be 10 percent and the comp

> AQ&Q has EBIT of $2 million, total assets of $10 million, stockholders’ equity of $4 million, and pretax interest expense of 10 percent. a. What is AQ&Q’s indifference level of EBIT? b. Given its current situation, might it benefit from increasing or dec

> 1. Which of the following groups is not a policy maker actively involved in achieving the nation’s economic policy objectives? a. Federal Reserve System b. The President c. Supreme Court d. Congress 2. Policy makers engage in which of the following

> Compute operating cash flows for the following: a. A project that is expected to have sales of $10,000, expenses of $5,000, depreciation of $200, an investment of $50 in net working capital and a 20 percent tax rate. b. A project has the simplified proje

> A project is estimated to generate sales revenue of $10 million with expenses of $9 million. No change in net working capital is expected. Marginal profits will be taxed at a 35% rate. If the project's operating cash flow is $1 million, what is the proje

> AA Auto Parts Company has a corporate tax rate of 34 percent and depreciation of $19,180. Compute its depreciation tax shield.

> The Sanders Electric Company is evaluating two projects for possible inclusion in the firm’s capital budget. Project M will require a $37,000 investment while project O’s investment will be $46,000. After-tax cash infl

> For the following projects, compute NPV, IRR, MIRR, profitability index, and payback. If these projects are mutually exclusive, which one(s) should be done? If they are independent, which one(s) should be undertaken? а. b. с. d. Year o - 1,000 -1,50

> Find the IRR and MIRR of a project if it has estimated cash flows of $5,500 annually for seven years if its year zero investment is $25,000.

> Find the IRR of a project that returns $17,000 three years from now if it costs $12,000.

> The BioTek Corporation has a basic cost of capital of 15 percent and is considering investing in either or both of the following projects. Project HiTek will require an investment of $453,000, while Project LoTek’s investment will be $2

> Find the NPV and PI of an annuity that pays $500 per year for eight years and costs $2,500. Assume a discount rate of 6 percent.

> Assume the financial manager of the Sanders Electric Company in Problem 6 believes that Project M is comparable in risk to the firm’s other assets. In contrast, there is greater uncertainty concerning Project O’s after-tax cash inflows. Sanders Electric

> 1. Which of the following are national policy objectives in the United States? a. Economic growth b. High employment c. Price stability d. All of choices are correct. 2. Which of the following is not considered to be a U.S. policy objective or goal

> Project R requires an investment of $45,000 and is expected to produce after-tax cash inflows of $15,000 per year for five years. The cost of capital is 10 percent. a. Determine the payback period, the net present value, and the profitability index for P

> Sensitivity analysis involves changing one variable at a time in a capital budgeting situation and seeing how NPV changes. Perform sensitivity analysis on the each of the following variables from problem 17 to determine its effect on NPV. a) Sales can be

> The ice cream shop described in the text has been a smash success. Customers from the next college town are pleading with you to open one closer to them. Based on your operating experience and knowledge of local real estate, you believe that opening a ne

> Suppose the Quick Towing Company purchases a new tow truck. The old truck had a book value of $1,000 and was sold for $1,420. If Quick Towing is in the 34 percent marginal tax bracket, what is the tax liability on the sale of the truck? What is the after

> The No-Shoplift Security Company is interested in bidding on a contract to provide a new security system for a large department store chain. The new security system would be phased into 10 stores per year for five years. No-Shoplift can purchase the hard

> Casey's Baseball Bats is planning to begin exporting their product to the Asian market. They estimate up-front expenses of $1 million this year (year 0) and $3 million next year (year 1). Operating cash flows in years 2, 3, and 4 will be (in dollars) $10

> Bart and Morticia, owners of the prestigious Gomez-Addams Office Towers, are concerned about high heating and cooling costs and client complaints of temperature variation within the building. They commissioned an engineering study by Frasco-Prew Associat

> Preston Industries' current sales volume is $100 million a year. Preston is examining the advantages of EDI (electronic data interchange). The technology will allow Preston to electronically communicate with suppliers and customers, send and receive purc

> Lisowski Laptops is examining the possibility of manufacturing and selling a notebook computer that is compatible with both PCs and MacIntosh systems and that can receive television signals. Its estimated selling price is $2,500. Variable costs (supplies

> Hammond's Fish Market just purchased a $30,000 fork lift truck. It has a five-year useful life. The firm’s tax rate is 25 percent. a. If the fork lift is straight-line depreciated, what is the firm’s tax savings from depreciation? b. What will be its boo

> 1. Which is generally true in countries where central banks are relatively independent from their governments? a. Higher inflation rates and lower economic growth rates b. Higher inflation rates and higher economic growth rates c. Lower inflation rate

> Given the information below, compute annualized returns Asset Purchase Price Current Price Income Received Time Period $ 20 S 26 $ 2 75 weeks 3 тonths A B 15 18 0.40 150 3.50 130 2 years 8 months D 3.00 0.20

> Given the information in the text, compute annualized returns. Asset Income Price Change Initial Price Time Period $29 15 months B 10 40 11 months C 50 70 30 7 years D 3 -8 20 24 months

> Rework Problem 2 assuming Bank A has reserve requirements that are 15 percent of deposits. a. Prepare a simple balance sheet of assets and liabilities for the bank immediately after the deposit is received. b. Assume Bank A makes a loan in the amount th

> Assume that Bank A receives a primary deposit of $100,000 and that it must keep reserves of 10 percent against deposits. a. Prepare a simple balance sheet of assets and liabilities for the bank immediately after the deposit is received. b. Assume Bank A

> Assume that Banc One receives a primary deposit of $1 million. The bank must keep reserves of 20 percent against its deposits. Prepare a simple balance sheet of assets and liabilities for Banc One immediately after the deposit is received.

> ABBIX has a complex financial system with the following relationships. The ratio of required reserves to total deposits is 15 percent, and the ratio of non checkable deposits to checkable deposits is 40 percent. In addition, currency held by the nonbank

> The COMPLEX financial system has these relationships: the ratio of reserves to total deposits is 12 percent and the ratio of non checkable deposits to checkable deposits is 40 percent. In addition, currency held by the nonbank public amounts to 15 percen

> Rework Problem 8, assuming that the cash held by the public drops to $500,000 with an equal amount becoming excess reserves and the required reserves ratio drops to 12 percent. Data from Problem 8: The BASIC financial system has a required reserves rat

> The BASIC financial system has a required reserves ratio of 15 percent, initial excess reserves are $5 million, cash held by the public is $1 million and is expected to stay at that level, and there are no other leakages or adjustments in the system. a.

> Rework Problem 6 assuming the reserve ratio is 14 percent. Data from Problem 6: Assume a financial system has a monetary base of $25 million. The required reserves ratio is 10 percent and there are no leakages in the system. a. What is the size of the

> 1. Which of the following is considered to be the most important services function provided by the Reserve Banks? a. Payments mechanism for transferring money b. Net settlement facilities c. Safekeeping and transfer of securities d. Fiscal agent for

> Assume a financial system has a monetary base of $25 million. The required reserves ratio is 10 percent and there are no leakages in the system. a. What is the size of the money multiplier? b. What will be the system’s money supply?

> The SIMPLEX financial system is characterized by a required reserves ratio of 11 percent; initial excess reserves are $1 million; and there are no currency or other leakages. a. What would be the maximum amount of checkable deposits after deposit expans

> Assume that there are two banks, A and Z, in the banking system. Bank A receives a primary deposit of $600,000 and it must keep reserves of 12 percent against deposits. Bank A makes a loan in the amount that can be safely lent. a. Show what Bank A’s bala

> Financial markets may be categorized as: (1) debt securities markets, (2) equity securities markets, (3) derivative securities markets, and (4) foreign exchange markets. Indicate in which of these markets the following securities trade:

> The U.S. financial system is comprised of: (1) policy makers, (2) a monetary system, (3) financial institutions, and (4) financial markets. Indicate which of these components is associated with each of the following “roles”: