Module 4 Critical Thinking Assignment:
Financial Ratios and Basics of Time Value of Money (TVM)
*Complete the problems from Module 3 and Module 4 in an Excel spreadsheet. Be sure to show your work to receive credit; no hard keys.
Problem 4-1: Compound Interest
To what amount will the following investments accumulate?
a. 4,500 SAR invested for 8 years at 10% compounded annually
b. 10,000 SAR invested for 10 years at 10% compounded annually
c. 8,000 SAR invested for 7 years at 12% compounded annually
d. 20,000 SAR invested for 6 years at 5% compounded annually
Problem 4-2: Future value calculations
You are hoping to purchase a house in the future and recently received an inheritance of 100,000 SAR.
You like to use your inheritance for a down payment for the house.
a. If you use your inheritance in an account that generates 6% returns compounded annually, how many years will it take before your money grows to 750,000SAR?
b. If you let your money grow for 15 years at 8%, how much will you have in your account?
Problem 4-3: Present value calculations
What is the present value of the following future amounts?
a. 15,500 SAR received from 5 years from now at 8%.
b. 105,500 SAR received from 10 years from now at 10%
c. 35,500 SAR received from 15 years from now at 12%.
d. 10,500 SAR received from 8 years from now at 7%.
|Problem 4-4 Financial Ratios|
|The Balance Sheet and the Income Statement for ABC Manufacturing Corporation are as follows:|
|DATA (All amounts in SAR unless otherwise indicated, all sales are on credit and no hard keys.)|
|ABC Corporation Balance Sheet|
|Other current assets||105|
|Total current assets||1,700|
|Gross fixed assets||3,750|
|Net fixed assets||2,250|
|LIABILITIES (DEBT) AND EQUITY|
|Short-term notes payable||250|
|Total current liabilities||600|
|Common stock (par & paid in capital)||1,050|
|Total common equity||2,400|
|Total liabilities and equity||3,950|
|ABC Corporation Income Statement||2019|
|Cost of goods sold||-3,700|
|Selling and G&A expenses||-820|
|Total operating expenses||-1,160|
|Operating income (earnings before interest and taxes)||1,140|
|Earnings before taxes||940|
|Number of shares (thousands)||160|
|Market price per share||40|
|Calculate the following ratios:|
|Days in receivables|
|Days in inventories|
|Operating return on assets|
|Operating profit margin|
|Total asset turnover|
|Fixed asset turnover|
|Times interest earned|
|Return on equity|
|Earnings per share|
|Dividends per share|
|Book value per share|
Problem 4-5: Present value of annuity calculations
What is the present value of a 5-year annuity that pays 800SAR, given a 8% discount rate?
Problem 4-6: Future value of annuity calculations
Find the future value at the end of year 5 of an annuity that pays 800SAR
per year for 5 years compounded at 8% annually. What would be the future value of this annuity?
Problem 4-7: Annuity Payments
You want to have 1,000,000SAR in 30 years by making equal end-of-the-year deposits into a tax-deferred account paying 7.75% annually. What annual amount should you deposit?