You are given the following information for Thrice Corp

You are given the following information for Thrice Corp.:

   

Decrease in inventory	$	560
Decrease in accounts payable		230
Increase in notes payable		215
Increase in accounts receivable		245

  

Did cash go up or down? By how much?

Explanation

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

A decrease in inventory is a source of cash.

A decrease in accounts payable is a use of cash.

An increase in notes payable is a source of cash.

An increase in accounts receivable is a use of cash.

Change in cash = Sources − Uses

Change in cash = $560 − 230 + 215 − 245

Change in cash = $300

Cash increased by $300

Thanks

You're trying to save to buy a new $196,000 Ferrari. You have $46,000 today that can be invested at your bank.

You're trying to save to buy a new $196,000 Ferrari. You have $46,000 today that can be invested at your bank. The bank pays 5.4 percent annual interest on its accounts.

  

How long will it be before you have enough to buy the car? Explanation Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation. The time line is:       0   ?     –$46,000   $196,000 To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is:   FV = PV(1 + r)t   Solving for t, we get:   t = ln(FV/PV)/ln(1 + r) t = ln($196,000/$46,000)/ln(1.054) t = 27.56 years Calculator Solution: Enter 5.4% $46,000 ±$196,000   N I/Y PV PMT FV Solve for 27.56

Thanks

In 1895, the first Putting Green Championship was held. The winner’s prize money was $210. In 2016, the winner’s check was $1,470,000.

In 1895, the first Putting Green Championship was held. The winner’s prize money was $210. In 2016, the winner’s check was $1,470,000.

  

a.	What was the percentage increase per year in the winner’s check over this period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b.	If the winner’s prize increases at the same rate, what will it be in 2042? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Explanation

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

The time line is:

0		121
–$210		$1,470,000

To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is:

    

FV = PV(1 + r)t

Solving for r, we get:

r = (FV/PV)1/t – 1

r = ($1,470,000/$210)1/121 – 1

r = .0759, or 7.59%

To find the FV of the first prize in 2042, we use:

  

0		26
–$1,470,000		FV

  

FV = PV(1 + r)t

FV = $1,470,000(1.075914)26

FV = $9,852,280.05

Calculator Solution:

Enter

121

±$210

$1,470,000

N

I/Y

PV

PMT

FV

Solve for

7.59%

Enter

26

7.5914%

±$1,470,000

N

I/Y

PV

PMT

FV

Solve for

$9,852,280.05

Thanks

The most recent financial statements for Bello Co. are shown here:

The most recent financial statements for Bello Co. are shown here:

Income Statement				Balance Sheet
Sales	$	19,000		Current assets	$	11,720		Debt	$	15,760
Costs		12,880		Fixed assets		26,550		Equity		22,510
Taxable income	$	6,120		Total	$	38,270		Total	$	38,270
Taxes (21%)		1,285
Net income	$	4,835

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 35 percent dividend payout ratio.

What is the internal growth rate? Explanation Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.   To calculate the internal growth rate, we first need to calculate the ROA, which is: ROA = NI/TA ROA = $4,835/$38,270 ROA = .1263, or 12.63% The plowback ratio, b, is one minus the payout ratio, so: b =  1 – .35 b =  .65 Now we can use the internal growth rate equation to get: Internal growth rate =  (ROA × b)/[1 – (ROA × b)] Internal growth rate =  [.1263(.65)]/[1 – .1263(.65)] Internal growth rate =  .0895, or 8.95%

Thanks

The most recent financial statements for Bello Co. are shown here:

The most recent financial statements for Bello Co. are shown here:

Income Statement				Balance Sheet
Sales	$	19,300		Current assets	$	11,780		Debt	$	15,940
Costs		13,200		Fixed assets		27,900		Equity		23,740
Taxable income	$	6,100		Total	$	39,680		Total	$	39,680
Taxes (21%)		1,281
Net income	$	4,819

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 45 percent dividend payout ratio.

What is the sustainable growth rate?

Answer

Explanation

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.   To calculate the sustainable growth rate, we first need to calculate the ROE, which is:

  

ROE	=	NI/TE
ROE	=	$4,819/$23,740
ROE	=	.2030, or 20.30%

  

The plowback ratio, b, is one minus the payout ratio, so:

  

b	=	1 – .45
b	=	.55

  

Now we can use the sustainable growth rate equation to get:

  

Sustainable growth rate = (ROE × b)/[1 – (ROE × b)]

Sustainable growth rate = [.2030(.55)]/[1 – .2030(.55)]

Sustainable growth rate = .1257, or 12.57%