Assignment help for Financial Statement

HW I: Show your approach to each problem (formulas, variables, etc.) You can use Excel sheet formulas to show the work or use the Finance calculator terms. For the ABC answers: choose the correct answer and delete the rest.

1. (a) How large a retirement "nest egg" will I need at retirement to provide a $60,000 per year income for 30 years? Assume a once-per-year, end-of-year withdrawal, and a 6% annual return on the invested funds; further assume that the nest egg would be fully exhausted at the end of the 30th year. (This last point is not a "special wrinkle" in this problem; that is what our normal techniques normally provide for.)

(b) Recalculate for part (a), based on monthly withdrawals totaling $60,000 per year (i.e. $5,000 per month) with the same annual rate-of-return, how large your nest egg must be. (If you are not comfortable with the use of a calculator, just show the set-up of the problem including the formula you would use; define the knowns and unknowns in the context of this formula.)

2. How long will it take me to pay off a $100,000 loan carrying an 8% interest rate if I make annual, end-of-year payments of $13,270. (Round to nearest whole year.)

3. How much will be owed as a lump-sum pay-off on a 30-year, 6% mortgage with an initial principal of $200,000 after you have made 10 years of payments? Hint: First, calculate your monthly payment for this loan. (Again, just show a detailed problem set-up as described for Problem 1(b) if you are not comfortable using the calculator.)

4. A firm had the following accounts and financial data for 2010. (All amounts in $ Thous.)

Sales Revenue


Cost of goods sold


Accounts Receivable


Preferred stock dividends


Interest expense


Tax rate


Total oper. expenses


Number of shares of common


Accounts payable


 stocks outstanding


Note: Total Operating Expenses do not include COGS.

The firm's earnings available to common shareholders for 2010 (rounded to nearest thousand $) were _________.

(a)  -$224

(b)  $195

(c)  $302

(d)  $516

5. $100 is received at the beginning of year 1, $200 is received at the beginning of year 2, and $300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, their combined future value at the end of year 3 is _________.

6. (a) If I have $100,000 in my IRA on 1 January 2011 that will remain invested and want to have $1,000,000 invested by 31 December 2030, how much do I have to make as an annual, end-of-year contribution through 2030 beginning on 12/31/2011? I am assuming a conservative 6% return on invested funds. (note that the value of n here = 20)

(b) Recalculate the required calculation from Part (a) if you make monthly contributions over the same period. (Again, just show the set up if you are not comfortable with the calculator approach.)

7. A balloon mortgage is a loan which is repaid via a combination of monthly payments and a single, large lump-sum payment of the remaining amount due along with the last monthly payment. What would the balloon payment be in five years to satisfy a 10%, $100,000 equipment loan if I have made 60 monthly payments of $1,500 each? (At least show the step-by-step approach to solve this problem even if you can't use the calculator for the solution.)

8. What is the yield to maturity, to the nearest percent, for the following bond: current price is $950, coupon rate is 11 percent, $1,000 par value, interest paid annually, eight years to maturity?

(a)  11 percent

(b)  12 percent

(c)  13 percent

(d)  14 percent

9. What is the current price of a $1,000 par value bond maturing in 12 years with a coupon rate of 9 percent, paid annually, that has a YTM of 11 percent? (choose the closest value; you may have some small rounding error.)

(a)  $604

(b)  $870

(c)  $1,000

(d)  $1,073

10. Lincoln Corp. has two bonds outstanding. One (Bond A) is a 10-year original term bond with five years to maturity and a 7% annual coupon rate. The second (Bond B) is a five-year original term with two years remaining and also pays a 7% annual coupon. These bonds both carry the same credit rating and each have a par value of $1,000. The market's required rate-of-return for these bonds is currently 8%. Which of the following should be true:

            (a) Bond A's premium will be greater than Bond B's premium;

            (b) Bond A and B should carry the same premium;

            (c) Bond A's discount should be greater than Bond B's discount;

            (d) Bond A's discount should be less than Bond B's discount.

11. The _________ summarizes the firm's funds flow over a given period of time.

(a)  income statement

(b)  balance sheet

(c)  statement of cash flows

(d)  statement of retained earnings




   Related Questions in Corporate Finance

  • Q : Case Study 2 You have joined Zurich

    You have joined Zurich Pvt. Ltd as a Finance manager. You are given the following information: Zurich Pvt Ltd. is a diversified manufacturing firm dealing with electrical appliances. In 2012, the firm reported an operating income of Rs. 857.60 million and faced a tax rate of 35% on income. The firm

  • Q : How present value of tax shields be

    I have two valuations of the company that we set as an objective. Within one of them, the present value of tax shields (D Kd T) computed using Ku (required return to unlevered equity) and, in one, by using Kd (required return to debt). The second valuation is too high

  • Q : Problem on arbitrage opportunity John

    John Chan considers purchasing a six-month stock futures contract on the shares of Li & Fung Limited. Shares of Li & Fung Limited are now presently trading at $50 per share and it is predicted that Li & Fung Limited will pay a dividend of $1 per share in o

  • Q : Understand and interpret financial

    Our purpose this week: learning how to understand and interpret financial statements.


    The class should discuss all of the questions listed below as they rel

  • Q : Which taxes do I have to use for

    Which taxes do I have to utilize when calculating Free Cash Flow (FCF) – is this the medium tax rate or the marginal tax rate of the leveraged company?

  • Q : What is Regular supply of working

    Regular supply of working capital: The working capital requirement (WCR) estimation helps to ensure that the supply of raw material, which is essential to production, is uninterrupted. Therefore, the firm will be able to get sufficient credits and fun

  • Q : Who explained market-neutral delta

    Who explained market-neutral delta hedging?

  • Q : Explain the definition of WACC An

    An investment bank computed my WACC. The report is as: “the definition of the WACC is defined as WACC = RF + βu (RM – RF); here RF being the risk-free rate and βu the unleveraged beta and RM the market risk rate.” It is differ from what we

  • Q : Problem on maintaining dividend Jackson

    Jackson Company has 6 million shares of common stock selling at $55 each. It also has $120 million in long-term bonds with coupon 7%, selling at 90. The tax rate of Jackson is 33%. Next year its EBIT is expected to be $25 million with a standard deviation of $7 millio

  • Q : Explain new methodology of standard

    Explain new methodology of standard market practice.