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These are answers that ROLCAM has provided in Finance
| Question/Answer | | kkemper asked on 04/04/06 - allexperts are you still with allexperts?
I have been told that all those who started there
are being purged.
arbitrarily.
I am writing to the TY times, their parent company.
[this is a private query]. ROLCAM answered on 04/05/06:Impossible to login on the site.
New members have no way of joining.
rolcam. | | Question/Answer | | hotpotato asked on 06/11/05 - finance hi expert! i just started a introductory finance course and I'm having some trouble with the questions below. They are multiple choice practice questions from a cd. I was wondering if you can help me with the ones below. Can you briefly show me the steps in how to do them? thank you so much.
1. Taxrate, Inc. reported taxable income of $77,000. Based on this
information, the firm's
a. average tax rate was 18.7%
b. average tax rate was 34.0%
c. marginal tax rate was 15.0%
d. marginal tax rate was 25.0%
e. marginal tax rate was 39.0%
2. In The Black Inc. made $250,000 last year selling greeting cards.
How much will it pay in taxes? What is the average tax rate?
a. $80,750; 32.3%
b. $99,000; 39.6%
c. $105,000; 42.0%
d. $107,500; 39.0%
e. $125,500; 39.0%
3. Suppose a firm has a taxable income of $74,000. Then, its total
tax liability is
a. $10,050
b. $11,750
c. $14592
d. $16,750
e. $18,500
4.If a firm has a total debt ratio of 1.5, what is its equity
multiplier?
a. -2.00 times
b. 0.50 times
c. 0.67 times
d. 1.50 times
e. 3.00 times
5. The BeenThereDoneThat Company has net income of $200, interest
expenses of $50, and depreciation of $50. The corporate tax rate is
50%. What is the cash coverage ratio?
a. 1.2 times
b. 1.8 times
c. 3.0 times
d. 9.0 times
e. 10.0 times
6. Computronics, Inc. has a current ratio of 1.5. This implies that
if the firm liquidates its current assets in order to pay off its
current liabilities, it can sell the current assets for as little as
a. 15% of book value
b. 25% of book value
c. 33% of book value
d. 67% of book value
e. 150% of book value
7. A firm has current assets of $100, net fixed assets of $200,
accounts payable of $50, long-term debt of $100, equity of $150,
sales of $1,000, costs of $800, and a tax rate of 34%. Assume costs
and assets increase at the same rate as sales. Also assume 40% of
net income is paid out in dividends. What is the maximum growth rate
achievable assuming no external debt or equity is available?
a. 11.2%
b. 25.4%
c. 35.8%
d. 51.6%
e. 111.8%
8. A firm has current assets of $100, net fixed assets of $200,
accounts payable of $50, long-term debt of $100, equity of $150,
sales of $1,000, costs of $800, and a tax rate of 34%. Assume costs
and assets increase at the same rate as sales. Also assume 40% of
net income is paid out in dividends, the current debt to equity
ratio is optimal, and that no new equity sales are possible.
Forecast the addition to retained earnings assuming the firm's sales
increase at the maximum percent possible given these assumptions.
a. $43.20
b. $88.50
c. $113.30
d. $146.70
e. $167.80
9. An account was opened with an investment of $1,000 three years
ago. Today, the account balance is $1,157.63. If the account earns a
fixed annual interest rate, how long will it take until the account
has earned a total of $225 in simple interest?
a. Less than one more year
b. Between one and two more years
c. Between two and three more years
d. Between three and four more years
e. Between four and five more years
10. Given the following end-of-year cash flows, what is the implicit
discount rate if the PV is $2,020? Year Cash Flow 1 $500 2 $750 3
$1,000
a. 4.5%
b. 4.8%
c. 5.0%
d. 5.4%
e. 5.9%
11. Given the following end-of-year cash flows, what is the future
value at the end of year 3 of the second cash flow if the interest
rate is 6%? Year Cash Flow 1 $500 2 $750 3 $1,000
a. $750
b. $795
c. $843
d. $893
e. $1,000
12. Given the following end-of-year cash flows, what is the interest
rate if the future value at the end of year three is equal to
$2,393? Year Cash Flow 1 $500 2 $750 3 $1,000
a. 6.5%
b. 6.8%
c. 7.0%
d. 8.0%
e. 8.9%
13. Your monthly mortgage payment on your house is $593.90. It is a
30 year mortgage at 7.8% compounded monthly. How much did you
borrow?
a. $75,000
b. $77,500
c. $80,000
d. $82,500
e. $85,000
14. You agree to loan your parents $22,000 to buy a new van. They
agree to pay you $450 a month for 5 years. The
a. interest rate on the loan is 0.75% per month
b. APR on the loan is 8.17%
c. EAR on the loan is 8.37%
d. APR on the loan is 8.68%
e. EAR on the loan is 8.7%
15 . Deryl wishes to save money to provide for his retirement.
Beginning one month from now, he will deposit a fixed amount into a
retirement savings account that will earn 12% compounded monthly. He
will make 360 such deposits. Then, one year after making his final
deposit, he will withdraw $100,000 annually for 25 years. The
account balance will reduce to zero when the last withdrawal is
made. The fund will continue to earn 12.68% compounded annually
during these last 25 years. How much should his monthly deposits be?
a. $205.28
b. $209.58
c. $214.24
d. $234.89
e. $249.38
16 . Mrs. Roth's child will attend university 18 years from now. The
university tuition today is $20,100 and is expected to grow 10% per
year. The university education takes four years and the tuition is
payable at the beginning of each year. Mrs. Roth can invest her
savings for this purpose at 15%per year. The amount that Mrs. Roth
must save today is:
a. $32,219
b. $37,440
c. $25,220
d. $33669
e. $44,972 ROLCAM answered on 06/12/05:hotpotato,
Here are some notes that you might find helpful:-
1) You need to help the experts before the experts can help you.
2)Do not forget that we do NOT all live in the U S like you do.
3)All questions with Taxation flavours can only be answered by U S experts.
4)You cannot expect NON US experts to study Taxation Rates just to help you.
5)When you ask finance questions , do NOT
ask 16 questions at a time.
6)Just ask 16 questions, ask them one at a time.
7)You might get some help that way.
8)Tell us what is this introductory course you are entering.
9)It does not sound very introductory to me.
10) You are having trouble.
11) Having trouble with what??
12) Have you tried to solve any of the questions ?
13) Where is your documentary evidence that you tried?
14) Have you got anywhere with any of the questions?
15)Do you understand the questions?
16)What is the standard of your education?
17)What are your Mathematical capabilities?
18)To some of us some of these questions are very easy.
19)To you they may be very difficult.
20)Let us get to specific examples.
21)We go to question 11.
########################################
This question , if you understand it , is so easy that you can easily see that the answer
is (B).
WHY ??
Stated differently the question being asked is?
What does $750 become at 6% for 1 year.
If you cannot answer this you will never make the grade.
On site 6% of $750 is $45.
So the answer is $ 795.
See how easy it is when you try.
############################################
22) Now we go to question 12.
You have 3 amounts here!!
Get pen to paper and start calculating.
At 6.5% you get $2,365.86 NOT CORRECT
At 6.8% you get $2,371.31 NOT CORRECT
At 7.0% you get $2,374.95 NOT CORRECT
At 8.0% you get $2,393.20 BINGO !!
So the answer is (D).
HOW??
$500.00 for two years @ 8.00% = $583.20
$750.00 for onr year @ 8.00% = $810.00
Plus $1,000.
These 3 amounts will give you $2,393.20
This is close enough to $2,393.00
###########################################
I think I have helped you enough
for one session.
It is now nearly 10.00 p.m. Sydney Australian
time , I am nearly 75 years old, I think
I shall have to go to bed, seeing it is winter here and things are getting very chilly.
Wishing you well in your studies.
ROLCAM.
roland camilleri.
| | Question/Answer | | denberg asked on 05/26/05 - Premium Bonds # 2 Following on from my last question, can you visit this site and tell me what you think:
www.nsandi.com
and read what it says about Premium Bonds - I still can't help feeling that there just might be a difference between whether you buy weekly or monthly. I know you're going to say there's not, but I just can't help thinking it.
Let me know your thoughts.
Thanks as always.
Paul. ROLCAM answered on 05/26/05:Dear Paul,
Savings methods are usually the prerogative of every individual.
Every person is different so his choices
are also different.
I have perused the site you mentioned.
This is mainly an advertising site to get you to save.
You do not need this because you have already
been convinced that savings are good for you.
I am enclosing the part that alludes to this
discussion:-
Saving regularly
The easy way to build up your savings
Setting up a standing order is the easiest way to build up your savings without even having to think about it.
Once it’s set up, your bank or building society will pay the same amount into your NS&I Investment Account each month. The minimum you can save each month is £20.
Simply print and complete the form below, indicating the amount you wish to save each month, and send or take it to your bank or building society. (Please do not send to NS&I or take to your local Post Office®). You can cancel your standing order at any time by contacting your bank or building society.
To complete the form you’ll need:
Your bank or building society account details
Your Investment Account number
Standing Order PDF
Please note you must have opened an NS&I Investment Account and have received details of the account number before completing the standing order form.
#########################################
I think you should avail yourself of this methodology.
Please note carefully that this is only avilable on a MONTHLY basis.
If it had been more beneficial then they would have made it available on a WEEKLY
basis.
All the very best for your future.
If you get a chance,write to me and tell
me a bit about yourself.
1) Where do you live?
2) How old ?
3) Are you still studying ?
4) What subjects and level and where?
If you have any questions you would like to ask me , do not hesitate!!
rolcam@aol.com.
Best of luck,
rolcam.
roland camilleri.B.Ec. FCPA.
retired financial management teacher.
aged 74
sydney australia.
| | Question/Answer | | denberg asked on 05/25/05 - British Premium Bonds #1 Hello again Roland!
I haven't been around for a while but here is a very important question - for me, anyway!
In Australia, do you have something called PREMIUM BONDS? Or an Australian equivalent?
Here in the UK we have a scheme whereby you can buy Premium Bonds, which are a government security backed by the Treasury.
The minimum investment is £100. You go to the post office, fill out a form and hand over your money. A few days later you receive a certificate from the government agency that runs the scheme, confirming your purchase of x amount of bonds. Each bond certificate has a serial number.
The money goes into a draw which is held once a month, on the 18th of each month. The minimum prize is £50 and the maximum is £1,000,000.
The prizes are drawn by an electronic computer called ERNIE or Electronic Random Number Indicator Equipment.
The draw is only once a month, on the 18th.
Now I personally can afford to put in £400 a month or £100 a week, and have been doing so for the past couple of years.
But my question is this: should I go to the post office and buy my bonds every week or should I wait and just do it once a month? Should I invest £100 per week every week or £400 once a month?
Unlike most people nowadays, in my job I actually do get a paycheck every Friday. So to keep things simple it's easy for me to drop in at the post office on the way home from work every Friday afternoon, and this is what I've been doing for the past two years.
But what I really need is a statistician's opinion. Is the machine more likely to pick my numbers if they're all bunched up in one go (i.e. all bought together once a month) or if they're all spread out (i.e. once a week)?
I do not know whether the government agency that runs the scheme enters my bonds every day or every week or just once a month. This is the problem. I don't know how often a data inputter sits in front of a computer terminal and actually keys the numbers in - or even if it would make any difference if I did.
Can you see what I am getting at?
What do you think? Apart from the general impression that Paul in England is completely clueless...
All the best and thanks as ever,
Paul,
London UK.
ROLCAM answered on 05/25/05:Dear Paul,
1) You are far from being clueless.
2) I admire people that save regularly
from their income.
3) We have not got Premium Bonds in Australia.
4) There is no difference whether you save
weekly or four weekly.Financially it is the same as long as you maintain the regularity.
Starting from January 1st in any year,
do you finish up with 5,200 pounds worth of Bonds at December 30th.
If you do then it is fine, if you do not then
what you need do is supplement the balance at year end.
5)As to the bunching of the numbers,
it really statistically makes no difference
because the numbers are drawn at random.
I commend you highly for saving for a rainy day.
Best of luck,
rolcam. | | Question/Answer | | sallie00 asked on 03/28/05 - Accidental and Dismembership Insurance In your opinion, is that just a waste of money or is it beneficial to have?
Thanks in advance. ROLCAM answered on 03/29/05:sallie00,
All Insurance Products have beneficial aspects to them.
It is quite silly that everyone insures their car for accidents.
They should insure themselves also.
What is very beneficial is to insure
your young ones for accidents, both
for accidental death and also dismemberment.
ROLCAM | | Question/Answer | | sallie00 asked on 03/15/05 - Term Insurance Once you signed the application with an insurance Company and turned in your check for the 1st payment, how long do you have to get a refund?
Thanks in advance. ROLCAM answered on 03/15/05:sallie00,
Refund for what?
Term Insurance is paid for covering the
possibility of you dying prematurely.
You can never collect anything yourself from
Term Insurance.
Ther is no accumulation of Funds from the premiums paid.
Once the period of cover comes to an end,
all the premiums have been eaten in.
ROLCAM. |
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