American University of Ras Al Khaimah

MEPM 521 Cost Accounting and Finance

Fall 2018
School of Engineering
Assignment #4
Due date 13/12/2018

Do not send me Excel files.

If used Excel function wright the function used and the syntax and the answer.
Ex. FV (Rate, Nper, PMT, PV, Type)
FV (10%, 5, , -1000) = ….
If you used the interest tables give the convention structure and answer.
Ex. P = $1,000 (P/F, 7%, 15) = ….

1. Sam invest $25,000 in a stock. This fund should earn 10% per year (on average - over long
time). How much should your investment be worth in 25 years?

2. Sam wants to know the present equivalent of $18,000 to be received in 15 years if the interest
rate is 7% per year?

3. How long does it take for $1,000 if invested to grow to $4,000 when the interest rate is 15%
per year?

4. A credit card company wants your business. If you accept their offer and use their card, they
will deposit 1 % of your monetary transactions into a savings account that will earn a guaranteed
5% per year. If our annual transactions total an average of $20,000, how much will you have in
this savings plan after 15 years?

5. A Machine can save $22,000 per year in labor cost and materials costs. The machine has an
expected life of five years and no market value. If the owner must earn a 15% annual return on
this investments, how much could be justified now for the purchase of this machine? Draw a
cash-flow diagram from the company's viewpoint.
 6. Consider the following cash-flow diagram.
a. If A = $200, P = $1,000, and i% = 12% per year, then N = ?
b. If A = $200, P = $1,000, and N = 10 years, then i = ?
c. If i% = 12% per year, A = $200, and N = 5 years, then P = ?
d. If i% - 12% per year, P = $1,000, and .N = 5 years, then A = ?

7. Inventory turnover is calculated by dividing cost of goods sold by average inventory. A higher
turnover than the industry average means that inventory is sold at a faster rate, signaling inventory
management effectiveness.

Based on the annual reports for the Unilate Company in the class slides find the Inventory Turnover
ratio for the Unilate Company. If the industry average = 7.4 times, how do you interpret the result?
8. Debt Ratio, measures a firm's total liabilities as a percentage of its total assets. In a sense, the
debt ratio shows a company's ability to pay off its liabilities with its assets. In other words, this
shows how many assets the company must sell in order to pay off all of its liabilities.

Based on the annual reports for the Unilate Company in the class slides find Debt Ratio. If the
industry average = 42%, How do you interpret the result?