FNCE 370v10: Assignment 1

FNCE 370v10: Assignment 1
Assignment 1 is worth 5% of your final mark. Complete and submit Assignment 1 after you
complete Lesson 1.
Save this assignment file and use it to record your responses to all three parts of this
assignment. Answer all three parts in one file. Follow the instructions on the Assignment 1
page of the course website for submitting your completed assignment file.
This assignment consists of three parts.
1. Financial calculator exercises. You will become familiar with some basic corporate
finance concepts and your calculator to develop calculation techniques that will help
you complete future assignments with fewer errors and better understanding. In
some cases, you will be finding answers without completely understanding all the
terms (e.g., PV, PMT, FV, IRR). You will study these terms later in the course. For
now, concentrate on the keystrokes and the sequences.
2. Financial statements review: Preparing a Statement of Comprehensive Income

and a Statement of Financial Position. You will use the information given to prepare
these common financial statements.
3. Financial ratios review. You will use the information given to calculate common
financial ratios. It is assumed you are already familiar with financial statements and
financial ratios through your prerequisite courses.
If you have any questions about this assignment and how to complete it, contact the
Student Support Centre.
Assignment 1: Grading Summary
Part Marks available Marks obtained

1 33
2 35
3 32
Total 100
FNCE 370v10 1 August 2019

Part 1: Financial Calculator Exercises (33 marks)
The table on the following pages contains practice examples and the questions for
Assignment 1: Part 1. (For a detailed description of each column in this table, see “How do I
Read the Table?” below.)
1. Work through each example in Column B on your financial calculator.
2. Check your answer with the one provided in Column C.
3. Look to the right side of the yellow column divider and work through the corresponding
assignment question in Column E. Each numbered practice example corresponds to
the same numbered assignment question (e.g., practice example 1: “Chain
calculations – to the power of” with the calculation of (8 x 2)2 corresponds to
assignment question 1, where you calculate (1+0.25)8). If you can do the practice
example, you should be able to do the corresponding assignment question.
4. Pay careful attention when reading questions that include multiple sets of brackets
(e.g., assignment question 6). These can be confusing, so work through them
carefully.
5. To record your solutions, put your answer in Column F, on the same row as the
assignment question. See example for Question 1: (1+0.25)8).
Don’t be alarmed by the number of questions! You will likely be able to complete the work
more quickly than you think.
There are 33 questions in Part 1. Each question is worth 1 of the total marks for Assignment 1.
How Do I Read the Table?
Start from the far left-hand column and read across each row. We’ll refer to Example #10 in
our descriptions below.
 Column A: number of the task (e.g., 10)
 Column B: title of the task (e.g., Calculating basic loan interest). Below this title is the
description and data for the practice example. (In Example 10; N = 20 years, monthly
payments (P/Y=12); Interest rate comp. monthly (C/Y=12); ...)
Many of the practice examples and assignment questions take up several rows.
 Column C: check your answer against the practice example. (In Example 10:
7.172951345.)
 Column D: numbering of the assignment questions (e.g., 18).
 Column E: description and data for the tasks in the assignment question. (In Question
10: Find annual interest rate; N = 30 years, quarterly payments; Interest rate
compounded quarterly; …)
 Column F: write down your answer in this column. (See example provided for Question 1.)

A B C D E F
Examples Check Answer Q Answer the questions in this column Record your
answer
in this column
PRELIMINARIES
SCIENTIFIC FUNCTIONS
1 Chain calculations - to the power of 256 1 (1+0.25)8 5.9605
(8 x 2) 2
Round to 4 decimal places

2 Calculating natural logs 2.99573227 2 Ln(1 + 0.09) 0.0862
Ln(20) Round to 4 decimal places

3 To the power of 50.118723 3 1.97.3
101.7 Round to 4 decimal places 108.3680


4 e to the power of 20.08553692 4 1 – e(-0.19) 0.1730
e 3

5 Reciprocals 0.025037792 5 (1/1.09) + (1/1.092) + (1/1.093) 2.53129466
(1/6 ) + (1/7 )
3 2

6 Combinations, to the power of –2024.9844 6 –1,000,000+[200,000(1–0.35)(1–(1/(1.09)10))/0.09] -165,704.50
8 -3 x5
-2 4 2

7 Combinations, to the power of 6.447419591 7 {[(1+(0.09/2))2](1/12)} – 1 0.007363123
(12 ) 3 1/4

8 Combinations, roots 0.055136195 8 square root[(0.7x(0.15–0.1)2)+(0.3x(0.09–0.1)2)] 0.04219005

square root[(0.3x(0.15–0.07)2)+(0.7x(0.11–0.07)2)] Round to 8 decimal places

FINANCIAL FUNCTIONS
9 Memory calculations 4613.84 9 Sum of the following 4 parts:
20,698.87
Sum of the following 3 parts: 1000(1.1)/1.09
500 x (1 + 0.1)2 1000(1.1^2)/1.09^2
700 x (1 + 0.1)2 x (1 + 0.12)3 1000(1.1^3)/1.09^3
900 x (1 + 0.1)2 x (1 + 0.12)3 x (1 + 0.13)5 (1000(1.1^3)(1.03)/(0.09–0.03))/(1.09^3)
Round to 2 decimal places Round to 2 decimal places

10 Calculating basic loan interest 7.1730 10 Find interest rate 36.6657
N = 20 years, monthly payments (P/Y=12)
N = 30 years, quarterly payments
Interest rate compounded monthly (C/Y=12) Interest rate compounded quarterly
PV = 56,000 PV = 1,200,000
PMT = –440 PMT = –110,000
FV = 0 FV = 0
Compute annual interest rate Compute annual interest rate (%)

11 Calculating basic loan payments –1255.86 11 Find payment -12,069.34
N = 20 years, quarterly payments (P/Y=4) N = 30 years, monthly payments
Interest rate = 6.5%, compounded quarterly (C/Y=4) Interest rate = 9%, compounded monthly
PV = 56,000 PV = 1,500,000
FV = 0 FV = 0
Compute PMT Compute PMT


12 Calculating future value 7922.19 12 Find future value 4,423,193.76
N = 3 years, monthly payments (P/Y=12) N = 30 years, monthly payments
Interest rate = 6.5%, compounded quarterly (C/Y=4) Interest rate = 9%, compounded semi-annually
PV = 0 PV = 0
PMT = –200 PMT = –2500
Compute FV Compute FV

13 Calculating present value 3768.89 13 Find present value 135,772.01
N = 20 years, annual payments (P/Y=1) N = 30 years, monthly payments
Interest rate = 5%, compounded annually (C/Y=1) Interest rate = 9%, compounded monthly
PMT = 0 PMT = 0
FV = –10,000 FV = –2,000,000
Compute PV Compute PV

14 Ordinary annuity –16,245.70 14 Find payment 6,908.51
N = 1.5 years, monthly payments (P/Y=12) N = 30 years, semi-annual payments
Interest rate = 3.6%, compounded monthly (C/Y=12) Interest rate = 9%, compounded semi-annually
PV = 0 PV = 0
FV = 300,000 FV = –2,000,000
Compute PMT Compute PMT

15 Annuity due 7.0798 15 Find interest rate in annuity due 11.9745
N = 2 years, monthly payments, at beginning of month (P/Y=12) N = 9 years, monthly payments, BGN
Interest rate compounded monthly (P/Y=12) Interest rate compounded monthly
PV = 2995 PV = 350,000
PMT = –145 PMT = –5000
FV = 299.5 FV = –50,000
Compute I/Y Compute annual interest rate (%)

1 Calculating PV (annuity due) 16 Find present value in annuity due 1,005.55
6
N = 34 months, monthly payments (P/Y=12) 6279.95 N = 15 years, monthly payments
Interest rate = 18%, compounded monthly (C/Y=12) Interest rate = 9%, compounded monthly
PMT = –200 PMT = –1000(0.09/12)
FV = –1500 FV = –1000

1 Calculating PV (ordinary annuity) 146,558.92 17 Find present value in ordinary annuity -186,422.80
7
N = 25 years, monthly payments, at end of month (P/Y=12) N = 30 years, monthly payments
Interest rate = 5.5%, compounded monthly (C/Y=12) Interest rate = 9%, compounded monthly
PMT = –900 PMT = 1500
FV = 0 FV = 0

Examples 18–27 use the same data Questions 18–27 use the same data
1 Calculating mortgage payments and –616.56 18 Mortgage: find payment -3,953.97
8 generating an amortization schedule
N = 15 years, monthly payments, starts at end of
January
N = 20 years, monthly payments, starts at end of August (P/Y=12) Interest rate = 5%, compounded monthly
Interest rate = 5.45%, compounded monthly (C/Y=12) PV = 500,000
PV = 90,000 FV = 0
FV = 0 Compute PMT
Compute PMT Round to 2 decimal places

Amortization schedule: first five months (August–December) P1 = 1
P1 = 1, P2 = 5 P2 = 12
1 Balance at end of December 88,951.47 19 Balance at end of December in first year 477,030.72
9
2 Total principal repayment first 5 months –1048.53 20 Total principal repayment at end of first year -22,969.28
0
2 Total interest payments first 5 months –2034.27 21 Total interest payments at end of first year -24,478.36

1
Amortization schedule: second year
P1 = 6 P1 = 49
P2 = 17 P2 = 60
2 Balance at end of December in 2nd year 86,335.92 22 Balance at end of December in 5th year 372,785.28
2
2 Total principal repayment in 2nd year –2615.55 23 Total principal repayment in 5th year -28,043.05
3
2 Total interest payments in 2nd year –4783.16 24 Total interest payments in 5th year -19,404.56
4

Amortization schedule: third year
2 Balance at end of December in 3rd year 83,574.20 25 Balance at end of December in 13th year 90,126.35
5
2 Total principal repayment in 3rd year –2761.72 26 Total principal repayment in 13th year -41,800.57
6
2 Total interest payments in 3rd year –4637.00 27 Total interest payments in 13th year -5,647.05
7

Examples 28–31 use the same data Questions 28–31 use the same data
2 Calculating payments, interest, and loan –3844.57 28 Find mortgage payment -804.65
8 balance after a specified payment
N = 5 years, monthly payment, annuity due
N = 30 years, monthly payment (P/Y=12) Interest rate = 2.9%, compounded monthly
Interest rate = 8.5%, compounded monthly (C/Y=12) PV = 45,000
PV = 500,000 FV = 0
FV = 0 Compute PMT
Compute PMT Round to 2 decimal places

Amortization schedule: first to 48th payment Amortization schedule after 3 years: same data as Q28
P1 = 1 P1 = 1
P2 = 48 P2 = 36
2 Balance after 48th payment 482,755.41 29 Balance after 3 years of payments 18,740.21
9

3 Total principal repayment after 48 payments –17,244.59 30 Total principal repayment after 3 yrs of payments -26,259.79
0
3 Total interest payments after 48 payments –167,294.64 31 Total interest payments after 3 yrs of payments -2707.55
1

3 Calculating IRR 17.5006 32 Compute IRR (%) using following data: 28.8276
2
CF0 = –5000 CF0 = –100,000
CF1 = 2000 CF1 = 10,000
CF2 = 2000 CF2 = 30,000
CF3 = 3000 CF3 = 50,000
Round to 4 decimal places CF4 = 70,000
CF5 = 90,000

3 Calculating NPV 223.97 33 Compute NPV 49,024.41
3
CF0 = –5000 Same cash flows as Q32
CF1 = 2000 Interest rate = 15%
CF2 = 2000 Round to 2 decimal places
CF3 = 3000
Interest rate = 15%

Part 2: Financial Statements Review (35 marks)
1. Build the Statement of Comprehensive Income and Statement of Financial Position
for CanDo Inc. based on the information given below, as of December 31, 2019.
Round all numbers to the nearest integer.
Statement of Comprehensive Income (12 marks)

Statement of Financial Position (14 marks)
Accounts payable $117,000

Accounts receivable $174,000
Cash and cash equivalents $134,000
CoGS $362,400
Common stock $1,090,000
Depreciation $42,000
Dividend payout ratio 40%
Interest paid $38,000
Inventory $144,000
Long-term debt $1,856,000
Net fixed assets $2,893,000
Sales $459,000
Short-term debt $112,000
Tax rate 31%
Number of shares 1,000,000
Price per share $0.15
2. Obtain the following values from the Statement of Comprehensive Income and Statement
of Financial Position: (9 marks)
a. Total current assets

b. Total current liabilities
c. Net working capital
d. Retained earnings (from Statement of Financial Position)
e. Total owners’ equity
f. Total assets
g. Earnings before depreciation, interest, and taxes (EBDIT)
h. Earnings before interest and taxes (EBIT)
i. Addition to retained earnings

Part 3: Financial Ratios Review (32 marks)
The following table presents the data for CanDo Inc. as of December 31, 2018:
Accounts payable $126,000

Accounts receivable $165,000
Cash and cash equivalents $106,000
CoGS $271,600
Common stock $1,090,000
Depreciation $42,000
Dividend payout ratio 40%
Interest paid $38,596
Inventory $175,000
Long-term debt $1,856,000
Net fixed assets $2,932,000
Sales $440,000
Short-term debt $142,872
Tax rate 31%
Calculate the following financial ratios for CanDo Inc. in the fiscal year of 2019 (round all
answers to six decimal places):
a. Current ratio (1 mark)

b. Quick ratio (1 mark)
c. Cash ratio (1 mark)
d. Net working capital ratio (1 mark)
e. Interval measure (1 mark)
f. Total debt ratio (1 mark)
g. Debt-equity ratio (1 mark)
h. Equity multiplier (1 mark)
i. Long-term debt ratio (1 mark)
j. Times interest earned (1 mark)
k. Cash coverage ratio (1 mark)
l. Inventory turnover (using avg. inventory from 2018 & 2019) (2 marks)
m. Days’ sales in inventory (1 mark)
n. Receivables turnover (using avg. accounts receivable from 2018 & 2019) (2 marks)
o. Days’ sales in receivables (1 mark)
p. Payables turnover (using avg. accounts payable from 2018 & 2019) (2 marks)
q. Days’ sales in payables (1 mark)
r. NWC turnover (1 mark)
s. Fixed assets turnover (1 mark)
t. Total asset turnover (1 mark)
u. Profit margin (1 mark)
v. Return on assets (ROA) (1 mark)
w. Return on equity (ROE) (1 mark)
x. Price-earnings (P/E) ratio (using price per share provided in Part 2) (3 marks)
y. Market-to-book ratio (using price per share provided in Part 2) (3 marks)
Part 2: Financial Statement Review Answers

P2Q1: Statement of Comprehensive Income
CanDo Inc
Statement of Comprehensive Income as of December 31, 2019
Sales $459,000
Cost of Goods Sold 362,400
Earnings Before Depreciation, Interest, and Taxes $ 96,600
Depreciation 42,000
Earnings Before Interest and Taxes $ 54,600
Interest Paid 38,000
Earnings Before Taxes $ 16,600
Taxes 5,146
Net Income $ 11,454
Addition to Retained Earnings $ 6,872
Dividends 4,582
To find Dividends:
Dividend ratio =40%
Net Income = $11,454
11454 x 0.4 = $4582
P2Q1 continued: Statement of Financial Position

CanDo Inc
Statement of Financial Position as of December 31, 2019
ASSETS LIABILITIES
Current Assets Current Liabilities
Cash $134,000 Accounts Payable $117,000
Accounts Receivable 174,000 Short Term Debt 112,000
Inventory 144,000 Total $229,000
Total $452,000
Long Term Liabilities
Fixed Assets Total $1,856,000
Total $2,893,000
Total Liabilities: $2,085,000
Total Assets: $3,345,000
OWNER’S EQUITY
Common shares $1,090,000
Retained Earnings 170,000
Total $1,260,000
Total Liabilities &

Owner’s Equity $3,345,000
P2Q2:
a. Total current assets: $452,000

b. Total current liabilities: $229,000
c. Net working capital = Current Assets – Current Liabilities = $452,000 - $229,000 =
$223,000
d. Retained earnings (from Statement of Financial Position): $170,000
e. Total owners’ equity: $1,260,000
f. Total assets: $3,345,000
g. Earnings before depreciation, interest, and taxes (EBDIT): $96,600
h. Earnings before interest and taxes (EBIT): $54,600
i. Addition to retained earnings: $6,872
Part 3: Financial Ratios Review

P3Q1:
a. Current ratio
=current assets / current liabilities
=452000/229000
=1.973799
b. Quick ratio
=(current assets – inventory) / current liabilities
= (452000 – 144000) / 229000
=1.344978
c. Cash ratio
= (cash + cash equivalents) / current liabilities
= (134000) / 229000
=0.585153
d. Net working capital ratio

=NWC / total assets
=223000 / 3345000
=0.066667
e. Interval measure
=current assets / average daily operating costs
= 452000/ (352400/365)
= 452000 / 965.48
=468.16 days
f. Total debt ratio

= (total assets – total equity) / total assets
= (3345000 – 1260000) / 3345000
=0.623318
g. Debt-equity ratio
= total debt / total equity
= 0.623318 / 0.376682
=1.654759
h. Equity multiplier
=total assets / total equity
= 1 / 0.376682
= 2.654759
i. Long-term debt ratio

=long term debt / (long term debt + total equity)
=1856000 / (1856000 + 1260000)
= 1856000 / 3116000
=0.595635
j. Times interest earned

= EBIT / interest

= 54600 / 38596
= 1.436842 times
k. Cash coverage ratio

= (EBIT + depreciation) / interest
= (54600 + 42000) / 38000
= 96600 / 38000
= 2.542105 times
l. Inventory turnover (using avg. inventory from 2018 & 2019)

= COGs / inventory
= 362400 / ((144000 + 175000)/2))
= 362400 / 159500
= 2.272100 times
m. Days’ sales in inventory

=365 / inventory turnover
= 365 / 2.272100
= 160.644338 days
n. Receivables turnover (using avg. accounts receivable from 2018 & 2019)
= sales / accounts receivables
= 459000 / ((174000 +165000)/2))
= 459000 / 169500
= 2.707964 times
o. Days’ sales in receivables

= 365 / receivables turnover
= 365 / 2.707964
= 134.787612 days
p. Payables turnover (using avg. accounts payable from 2018 & 2019)
=cost of goods sold/ accounts payables
= 362400 / ((117000 + 126000)/2)
= 362400 / 121500
= 2.982716 times
q. Days’ sales in payables

= 365 / payables turnover
= 365 / 2.982716
= 122.371691 days
r. NWC turnover
= sales / NWC
= 459000 / 223000
= 2.058296 times
s. Fixed assets turnover

= sales / fixed assets
= 459000 / 2893000
=0.158659 times
t. Total asset turnover
= sales / total assets

= 459000 / 3345000
= 0.137219 times
u. Profit margin
=net income / sales
= 11454 / 459000
= 0.2495425
= 2.495425%
v. Return on assets (ROA)

= net income / total assets
= 11454 / 3345000
= 0.00342422
= 0.342422%
w. Return on equity (ROE)

= net income / total equity
= 11454 / 1260000
= 0.009090476
= 0.9090478%
x. Price-earnings (P/E) ratio (using price per share provided in Part 2)

=price per share / earnings per share
= 0.15 / (1000000 / 11454)
= 0.15 / 87.305744
=0.001718
y. Market-to-book ratio (using price per share provided in Part 2)

= market value per share / book value per share
= market value per share / (total equity / shares outstanding)
= 0.15 / (1260000 / 1000000)
= 0.15 / 1.26
=0.119048

FNCE 370v10: Assignment 1

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FNCE 370v10: Assignment 1

This assignment consists of three parts.

2. Financial statements review: Preparing a Statement of Comprehensive Income

Assignment 1: Grading Summary

Part Marks available Marks obtained

FNCE 370v10 1 August 2019

1. Work through each example in Column B on your financial calculator.

2. Check your answer with the one provided in Column C.

How Do I Read the Table?

 Column A: number of the task (e.g., 10)

 Column D: numbering of the assignment questions (e.g., 18).

FNCE 370v10 2 August 2019

101.7 Round to 4 decimal places 108.3680

FNCE 370v10 3 August 2019

FNCE 370v10 4 August 2019

FNCE 370v10 5 August 2019

FNCE 370v10 6 August 2019

FNCE 370v10 7 August 2019

FNCE 370v10 8 August 2019

Statement of Comprehensive Income (12 marks)

Accounts payable $117,000

a. Total current assets

FNCE 370v10 9 August 2019

Accounts payable $126,000

a. Current ratio (1 mark)

Part 2: Financial Statement Review Answers

FNCE 370v10 10 August 2019

P2Q1 continued: Statement of Financial Position

FNCE 370v10 11 August 2019

Total Liabilities &

a. Total current assets: $452,000

Part 3: Financial Ratios Review

FNCE 370v10 12 August 2019

d. Net working capital ratio

f. Total debt ratio

i. Long-term debt ratio

j. Times interest earned

FNCE 370v10 13 August 2019

k. Cash coverage ratio

l. Inventory turnover (using avg. inventory from 2018 & 2019)

m. Days’ sales in inventory

o. Days’ sales in receivables

q. Days’ sales in payables

s. Fixed assets turnover

FNCE 370v10 14 August 2019

v. Return on assets (ROA)

w. Return on equity (ROE)

x. Price-earnings (P/E) ratio (using price per share provided in Part 2)

y. Market-to-book ratio (using price per share provided in Part 2)

FNCE 370v10 15 August 2019

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