Economics Homework Help

Problem 4-1: Compound Interest Rate

To what amount will the following investments accumulate? 

a. 2,750 SAR invested for 5 years at 8% compounded annually

b. 15,000 SAR invested for 12 years at 7% compounded annually

c. 6,500 SAR invested for 9 years at 15% compounded annually

d. 30,000 SAR invested for 5 years at 4% compounded annually 

Problem 4-2: Future values calculations 

You are hoping to purchase a business in the future and recentlyreceived an inheritance of 150,000 SAR. You like to use your inheritance as down payment for the business.

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 875,000SAR?

b. If you let your money grow for 20 years at 5%, 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 Allways Corporationare as follows: 

  

DATA (All amounts in SAR unless   otherwise indicated, all sales are on credit)

 

Allways Corporation Balance Sheet 

2019

 

Cash

250

 

Accounts receivable

550

 

Inventories

750

 

Other current assets

200

 

Total current assets 

1750

 

Gross fixed assets

2500

 

Accumulated depreciation

-1000

 

Net fixed assets

1500

 

Total assets 

3250

 

LIABILITIES (DEBT) AND EQUITY

 

Accounts payable

375

 

Short-term notes payable

190

 

Total current liabilities 

565

 

Long-term debt

1100

 

Total liabilities 

1665

 

Common stock (par & paid in capital)

1500

 

Retained earnings

1550

 

Total common equity 

2600

 

Total liabilities and equity

4265

       

Allways Corporation Income Statement

2019

 

Sales

7500

 

Cost of goods sold

-4250

 

Gross profits 

3250

 

Operating expenses:

 

Selling and G&A expenses

-750

 

Depreciation expenses

-250

 

Total operating expenses

-1000

 

Operating income (earnings before interest and taxes)

2250

 

Interest expense

-150

 

Earnings before taxes

2100

 

Income taxes

-270

 

Net Income

1830

       

Number of shares (thousands)

225

 

Dividends (thousands)

150

 

Market price per share

35

  

Current ratio

 

Acid-test ratio

 

Days in receivables

 

Days in inventories

 

Operating return on assets

 

Operating profit margin

 

Total asset turnover

 

Fixed asset turnover

 

Debt ratio

 

Times interest earned

 

Return on equity

 

Earnings per share

 

Dividends per share

 

Price/Earnings

 

Book value per share

 

Market/Book

Problem 4-5: Present value of annuity calculations

What is the present value of a 7-year annuity that pays 1000SAR, given a

6% discount rate?

Problem 4-6: Future value of annuity calculations

Find the future value at the end of year 7 of an annuity that pays 750SAR 

per year for 7 years compounded at 6% annually. What would be the future value of

this annuity? 

Problem 4-7: Annuity Payments 

You want to have 1,250,000SAR in 32 years by making equal end-of-the-year deposits into a tax-deferred account paying 9.5% annually. What annual amount should you deposit?