1.Future value of single sum problem. You put $2,000 in an investment account today which will earn 8% over the next 14 years, what is the future value?
2.Explain the weaknesses of using the percentage of sales method in forecasting. Your response should be at least 250 words in length.
3. Construct a pro forma income statement for the first year and second year for the following assumptions:
Units of Sales in Year 1: 100,000
Price per Unit: $10
Variable cost per unit: 30%
Fixed Costs: $120,000
Income taxes: 15%
Interest Expense: $200,000
In year 2, Price per unit increases to $11.50, and unit of sales increases by 3%, all other assumptions remain the same.
4. Calculate the sustainable growth based on the following information:
• Earnings after taxes = $35,000
• Equity = $100,000
• d=22.4%
5. Calculate a table of interest rates for 5 years based on the following information:
The pure interest rate is 2%
Inflation expectations for year 1 = 3%, year 2 =4%, years 3-5 =5%
The default risk is .1% for year one and increases by .1% over each year
Liquidity premium is 0 for year 1 and increases by .2% each year
Maturity risk premium is 0 for years 1 and 2 and .3% for years 3-5