FIN 571 Week 2 Individual Homework

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FIN 571 Week 2 Individual Homework

Week 2 Individual Homework Submit Through Gradebook In Excel

1- Your daughter would like to attend college in 5 years. You have determined that if you have
$60,000 when she begins college you will be able to pay for her 4 year degree. You have
opportunity to invest at 12%. How much must you put away in equal annual payments in order
to achieve your goal of $60,000 in 5 years?

2- Assuming you have opportunity to invest at 15 percent, which would you prefer, $12,000
today or $27,000 in 5 years?

3- Beginning in 6 years you will receive $12,000 a year for 4 years from a trust. You plan to
retire in 15 years. How much will you have at that time from the income of this trust if you have
opportunity to invest at 8%?

4- Assuming your interest is compounded monthly, how much will $5,000 grow to in 5 years at
an interest rate of 10%?

5- You just received an inheritance of $60,000. You need to have $40,000 in 5 years for your
daughters tuition. You have opportunity to invest at 12%. You feel an urgent need to spend your
cash on a nice car. How much can you spend on your car today and still be able to fund the
$40,000 tuition in 5 years?

1. Calculating Interest Rate. Find the annual interest rate for the following:

Present Value Years

Future Value

$400

11

$684

$183

$249

$300

$300

1. Present Values. What is the total present value of the following cash-flow stream if the
interest rate
is 5 percent?
Year Cash Flow
1 $200
2 $400
3 $300
8- Analyze Ratios For Pharmaceuticals. Rank all companies in order of financial health based on
their respective ratios. Utilize only the ratios that are underlined and bolded in your ranking.

High
Low
High
P/E
Low
Current Ratio
Quick Ratio
Cash/Currrent Assets
Liquidity Cash/Current Liabilities
Ratios
Cash Flow/Current
Liabilities
Cash Flow/Interest
Cash Flow/Assets
Profitability Gross Profit Margin
Measures Net Profit Margin
EBIT Margin
Return on Assets
Return on Equity
Price

$/S
$/S

%
%
%
%
%

AMGN
72.37
48.09
42.82
28.46
3.3
2.98
0.69
2.28

PFE
36.92
27.9
167.83
126.82
1.26
1.01
0.4
0.51

MRK
63.5
40.57
21.75
13.89
1.2
0.94
0.36
0.44

ABT
47.15
33.75
26.94
19.29
1.35
0.99
0.13
0.17

LLY
73.89
53.7
31.18
22.66
1.58
1.22
0.42
0.67

MYL
12.91
7.45
19.86
11.46
4.62
3.73
0.56
2.58

IVX
24.69
10.5
49.38
21
2.05
1.2
0.16
0.32

1.31

0.34

0.83

0.53

0.56

1.18

0.36

93.52
0.11
41.1
27
38.4
16.8
11.7

38.18
0.07
28.7
8.7
12.8
5.5
6

0.19
38.2
29.3
40.3
14.6
42.3

27.56
0.15
17.4
14
19.7
15.1
21.1

50.97
0.14
27.8
20.4
26.4
11.8
26.2

0.18
32.4
21.5
33.6
18.1
18.8

4.03
0.07
13.8
7
13.3
6.3
10.3

Leverage
Ratios

Coverage
Ratios

EBIT to Assets
%
Effective Tax Rate
%
Financial Leverage
Assets/Equity
%
Debt/Assets
Debt/Equity
Long-Term Debt/Assets
Long-Term
Debt/Equity

12.2
28.8
3.9
135.01
0.26
0.35
0.12

4.9
29.1
5.9
178.62
0.37
0.65
0.05

22.3
27.2
2
260.57
0.52
1.35
0.13

14.5
26.3
5.9
204.37
0.42
0.85
0.13

15.3
21.5
2.2
222
0.47
1.05
0.22

24.4
36.1
1.4
120.66
0.17
0.21
0.01

7.9
31.5
15
246.58
0.57
1.39
0.36

0.16

0.09

0.33

0.26

0.48

0.01

0.89

Times Interest Earned

71.73

18.76

A/R Turnover
Asset Turnover
Turnover
Capital Turnover
Ratios
Plant Turnover
Inventory Turnover
Efficiency Collection Period
Measures Inventory Stockpile
Income/Assets
Income/Plant
Income/Employee
Asset
Sales/Employee
Utilization
Plant/Assets
Depreciation/Sales
Depreciation/Assets

8.29
0.32
0.43
2.2
4.16
Days 43.4
Days 86.5
0.09
0.59
$K 175.16
$K 647.75
0.15
0.08
0.03

4.93
0.39
0.69
2.47
2.91
73
123.9
0.03
0.22
32.3
370.39
0.16
0.09
0.03

18.84 41.98
5.59
0.55
1.44
1.59
2.93
64.4
122.7
0.16
0.47
104.27
355.79
0.35
0.06
0.03

5.94
0.74
1.51
3.13
4.09
60.6
88
0.1
0.44
38.13
272.58
0.24
0.06
0.05

5.39
0.58
1.29
1.92
2.56
66.7
140.6
0.12
0.39
55.55
272.94
0.3
0.04
0.03

2.27
6.77
0.73
0.88
7.12
2.88
53.2
125.1
0.16
1.53
111.16
518.04
0.1
0.03
0.02

5.37
0.6
1.48
2.82
2.66
67
135.2
0.04
0.2
11.36
162.9
0.21
0.95
0.03

RANKING

1. Number of Periods.How long will it take for $400 to grow to $1,000 at the interest rate
specified?
2. 4 percent
3. 8 percent
4. 16 percent

Answers To Week 2 Problems

1- $9,444.36

2- FV= $24,136

PV= $13,424

3- $85,807

4- $8226.54

5- PV=$22,697.07 Amount Available = $60,000 22,697.07 = $37,302.93

1. r = 5%
r = 8%
r = 0%

1. P.V. = $812.44

8-

Solution not given.

1. In these problems, you can either solve the equation provided directly, or you can use
your financial calculator setting PV = (-)400, FV = 1000, PMT = 0, i as specified by the
problem. Then compute n on the calculator.

1. t = 23.36 periods

2. t = 11.91 periods
3. t = 6.17 periods