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## Finance

 Basic Finance Corporate Finance Financial Management Financial Econometrics Portfolio Management Risk Management Public Finance Business Law & Ethics

problem 1: Swann Systems has forecast this income statement for the forthcoming year:

• Sales \$5,000,000
• Operating costs (excluding depr and amort) 3,000,000
• EBITDA \$2,000,000
• Depreciation and amortization 500,000
• EBIT \$1,500,000
• Interest 500,000
• EBT \$1,000,000
• Taxes (40%) 400,000
• Net income \$ 600,000

The company's president is not satisfied with the forecast and wants to see higher sales and a forecasted total income of \$2,000,000.

Suppose that operating costs are always 60% of sales and that depreciation and amortization, interest expense and the company's tax rate (40%) will remain similar even if sales change. How many in sales would Swann have to obtain to produce \$2,000,000 in net income?

a) \$ 5,800,000
b) \$ 6,000,000
c) \$ 7,200,000
d) \$ 8,300,000
e) \$10,833,333

problem 2: A real estate investment has the given expected cash flows:

Year    Cash Flows
1           \$10,000
2           25,000
3           50,000
4           35,000

If the discount rate is 8%, determine the investment's present value?

a) \$103,799
b) \$ 96,110
c) \$ 95,353
d) \$120,000
e) \$ 77,592

problem 3: An investment pays \$100 every six months (semi-annually) over the next 2.5 years. Interest, though, is compounded quarterly, at a nominal rate of 8%. Determine the future value of the investment after 2.5 years?

a) \$520.61
b) \$541.63
c) \$542.07
d) \$543.98
e) \$547.49

problem 4: The Wilson Corporation has the given results:

• Sales/Total assets 2.0×
• Return on assets (ROA) 4.0%
• Return on equity (ROE) 6.0%

Determine the Wilson's profit margin and debt ratio?

a) 2%; 0.33
b) 4%; 0.33
c) 4%; 0.67
d) 2%; 0.67
e) 4%; 0.50

problem 5: Cleveland Corporation consists of 100,000 shares of common stock outstanding, its total income is \$750,000, and its P/E is 8. Determine the company's stock price?

a) \$20.00
b) \$30.00
c) \$40.00
d) \$50.00
e) \$60.00

Basic Finance, Finance

• Category:- Basic Finance
• Reference No.:- M97085

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