1) There exists a special kind of bond investment called a zero coupon bond. A zero coupon bond pays the owner of the bond $1,000 at the time the bond matures but does not pay any other amounts throughout the life of the bond. If you bought a zero coupon bond for $258.42, held the bond until it matured in 20 years and then cashed it in; what annual rate of return would you realize on the bond?
2) The WML Hat Co. uses accrual accounting in recording transactions and producing financial statements. WML sold $10,000 worth of hats in November 2011 and $20,000 in December 2011. All of WML's customers purchase on credit and pay their bill the month following their purchase. Given this scenario, how much in Sales did WML record in December 2011?
a. $10,000
b. $20,000
c. $30,000
d. Cannot determine with information provided
3) You can invest money today in a 5-year note that pays 8% annually. You have a choice of receiving $10,000 now or receive $15,000 in 5 years. Which choice would be more financially advantageous to you and why?
4) BAGS Inc. has the following financials for the fiscal year ended December 2011:
Sales $10,000 Current Assets $25,000
COGS $4,000 Net Fixed Assets $15,000
Other Oper. Expense $1,000 Total Assets $40,000
Depreciation $1,000
EBIT $4,000 Current Liab. $17,000
Interest $1,000 L-T Debt $3,000
EBT $3,000 Common Stock $7,000
Tax (33.33%) $1,000 Retained Earnings $13,000
Net Income $2,000 Total Liab. & Sh. Eq. $40,000
For 2012, BAGS is forecasting that Sales will grow 50% and that COGS, Current Assets and Current Liabilities will all vary proportionally with Sales. BAGS also forecasts that it will add $1,000 in Net Fixed Assets. BAGS pays no dividends. Given these forecasts, what is BAGS' Total Assets (TA) and Total Liabilities and Owner's Equity (TL&OE) for fiscal year 2012?
a. TA=$52,500; TL&OE=$53,833
b. TA=$53,500; TL&OE=$53,500
c. TA=$53,500; TL&OE=$48,500
d. TA=$53,500; TL&OE=$52,500
5) At the end of 2006 you purchased property in Sedona, AZ for $10,000,000. At the end of 2011 you sold the property for $4,025,517 more than what you paid for it. What was your annual return?
6) You can invest $1000 into a 1-year CD that pays 12% compounded monthly. How much will you receive at the end of the year?
a. $887.47
b. $1,120.00
c. $1,200.00
d. $1,126.80
7) You have set a goal to retire once your retirement account grows to $500,000. If the return on your retirement account increases from 4% to 6% per year, what impact will that have on the time it takes for you to reach your $500,000 and why?
8) BAGS, Inc. manufactures and sells golf balls. For 2010 it sold 1.0 million golf balls and ended the fiscal year with the following income statement:
Sales $2,000,000
Variable Costs $800,000
Fixed Costs $200,000
EBIT $1,000,000
Interest $300,000
EBT $700,000
Tax $240,000
Net Income $460,000
What was BAGS' breakeven point in units sold for 2010?
a. 460,000
b. 444,444
c. 400,000
d. 166,667
9) Your company is considering a new investment opportunity that will provide a cash inflow of $6,000 the 1st year, $4,000 the 2nd year and $2,000 the 3rd (final) year of the investment's life. If the investment requires an initial outlay of $10,000 and your company's required return on investments is 10%, should your company undertake the investment?
10) In planning for your retirement, you decide to set aside $300 a quarter into your retirement fund for 5 years. You can earn a return of 8% annually, compounded quarterly on the fund. How much will you have accumulated at the end of the 5 year period?
a. $7,289.10
b. $13,728.59
c. $7,039.92
d. $1,561.21
11) You are asked to invest $2,566.70 in a project that is promising to return 12% per year compounded annually. The cash flows promised are: Year 1=$325.00, Year 2=$400.00, Year 3=$550.00, Year 5=$750.00, Year 6=$800.00. What is the cash flow you should expect at the end of Year 4?