Midterm I

Practice Test – Answer Key

FI 3300

Section 021

18 February 2020

Name:____________________________

What is $1,000.00 received in 25 years worth today if the interest rate is 7.5% compounded annually:
$163.98

What is $1,000.00 received every month for 5 years worth today if the interest rate is 8%: $49,318.43

What is $1,000.00 received every month for 5 years plus $5,000 received after all the other payments
worth today if the interest rate is 8%: $52,674.49

What is $1,000 invested today at 8% compounded monthly worth in 20 years: $4926.80

What is $500 per month invested at 5% per year, compounded monthly, worth is 15 years: $133,644.47

What is $1,000 invested today and $2,000 invested every year thereafter earning 7.25% per year,
compounded annually, worth in 25 years: $136,884.69

What is a perpetual payment of $450 per month worth if the annual interest rate is 6%: $90,000

What would be the monthly payment on a loan for $35,000 for 5 years at 4.25%: $648.53

What would be the annual interest rate on an investment for 10 years that started with an initial $5,000
and ended with $10,000 that compounded quarterly: 6.99%

How many months would it take to grow $1,000 to $15,000 at an annual interest rate of 7.25%
compounded monthly: 449.5816646 months

What are the 3 “Big Picture” decisions in finance?

Finance Investment Dividend

What are the 3 drivers of the time value of money?

Size Timing Risk of cash flows

Atlanta Delivery Service
12/31/2019
Assets Current Liabilities Current
Short Term
Cash $ 1,000 Debt $ 2,000
Acc. Rec. $ 25,000 Acc. Payable $ 20,000
Current
Portion of
Long Term
Inventory $ 50,000 Debt $ 25,000
$ 76,000 $ 47,000
Assets Long Term Liabilities Long Term
Property,
Plant &
Equipment Long Term
(Net) $ 100,000 Debt $ 75,000

Notes to financial statement -

Current portion of Long Term Debt is due on 7/1/2020
Long term debt is due to be paid as follows
$ 50,000 on 2/1/2021
$ 20,000 on 6/1/2021
$ 5,000 on 2/1/2022

As of 12/31/2019-

What’s the Current Ratio of Atlanta Delivery Service: 1.617021

What’s the Quick Ratio of Atlanta Delivery Service: .55

What’s the Debt Ratio of Atlanta Delivery Service: 57.9%

On 6/2/2020- What will be the Current Ratio of Atlanta Delivery Service assuming all amounts are the
same except for the Current Portion of long Term Debt: .649
Honda Bob's Kayla's Internet Toyota
Revenues $ 50,000,000 Revenues $ 20,000,000
Cost of Goods Cost of
Sold $ 38,000,000 Goods Sold $ 14,350,000

Gross Profit $ 12,000,000 Gross Profit $ 5,650,000

Operating Operating
Expenses $ 10,000,000 Expenses $ 4,445,000
Operating Operating
Income $ 2,000,000 Income $ 1,205,000
Interest $ 1,400,000 Interest $ 605,000
Taxes $ 150,000 Taxes $ 150,000

Net Income $ 450,000 Net Income $ 450,000

Using Common Sizing Analysis-

Which company has the better gross profit margin? Kayla

Which company has the better operating profit margin? Kayla

Which company has the better cost of operations? Bob’s

Which company has the better Net Profit Margin? Kayla