Liabilities and Stockholders Equity Exam Practice

Liabilities and Stockholders Equity Exam Practice.

Liabilities and Stockholders Equity Exam Practice

Jackie took up a 30-year mortgage loan years ago and have since been making monthly payment of The mortgage interest rate is (APR). She noticed lower interest rate and plans to refinance. How much did Jackie borrow on the 30-year % APR mortgage? How much does she owe on the mortgage today? (Note: Be careful not to round any intermediate stepsveless than six decimal places.)

2. Assets	2006	2005	Liabilities and Stockholders’ Equity	2006	2005
Current Assets			Current Liabilities
Cash	60.8	58.5	Accounts payable	85.6	73.5
Accounts receivable	55.1	39.6	Notes payable / short-term debt	9.8	9.6
Inventories	45.4	42.9	Current maturities of long-term debt	39.6	36.9
Other current assets	5.9	3.0	Other current liabilities	6.0	12.0
Total current assets	167.2	144.0	Total current liabilities	141	132.0

Long-Term Assets			Long-Term Liabilities
Land	65.3	62.1	Long-term debt	238.9	168.9
Buildings	109.8	91.5	Capital lease obligations
Equipment	120.3	99.6
Less accumulated depreciation	(57.4)	(52.5)	Deferred taxes	22.8	22.2
Net property, plant, and equipment	238	200.7	Other long-term liabilities	−−−	−−−
Goodwill	60.0	−−	Total long-term liabilities	261.7	191.1
Other long-term assets	63.0	42.0	Total liabilities	402.7	323.1
Total long-term assets	361	242.7	Stockholders’ Equity	125.5	63.6

Total Assets	528.2	386.7	Total liabilities and Stockholders’ Equity	528.2	386.7

Refer to the balance sheet above. If in 2006 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share, then what is Luther’s enterprise value?

−$547.00

million

$781.40

million

$390.70

million

$528.20

million

A graphic designer needs a laptop for audio/video editing, and notices that they can elect to pay

$2,700

for a Dell XPS laptop, or lease from the manufacturer for monthly payments of

$78

each for four years. The designer can borrow at an interest rate of

14%

APR compounded monthly. What is the cost of leasing the laptop over buying it outright?

A graphic designer needs a laptop for audio/video editing, and notices that they can elect to pay

$2,700

for a Dell XPS laptop, or lease from the manufacturer for monthly payments of

$78

each for four years. The designer can borrow at an interest rate of

14%

APR compounded monthly. What is the cost of leasing the laptop over buying it outright?

You are borrowing money to buy a car. If you can make payments of

$310

per month starting one month from now at an interest rate of

12%,

how much will you be able to borrow for the car today if you finance the amount over

years?

A pottery factory purchases a continuous belt conveyor kiln for

$47,000.

8.1%

APR loan with monthly payments is taken out to purchase the kiln. If the monthly payments are

$451.87,

over what term is this loan being paid?

Assets	2006	2005	Liabilities and Stockholders’ Equity	2006	2005
Current Assets			Current Liabilities
Cash	61.3	58.5	Accounts payable	86.7	73.5
Accounts receivable	55.7	39.6	Notes payable / short−term debt	9.1	9.6
Inventories	46.4	42.9	Current maturities of long−term debt	37.2	36.9
Other current assets	5.1	3.0	Other current liabilities	6.0	12.0
Total current assets	168.5	144.0	Total current liabilities	139	132.0

Long−Term Assets			Long−Term Liabilities
Land	65.4	62.1	Long−term debt	238.3	168.9
Buildings	107.9	91.5	Capital lease obligations
Equipment	118.4	99.6
Less accumulated depreciation	(57.6)	(52.5)	Deferred taxes	22.8	22.2
Net property, plant, and equipment	234.1	200.7	Other long−term liabilities	−−−	−−−
Goodwill	60.0	−−	Total long−term liabilities	261.1	191.1
Other long−term assets	63.0	42.0	Total liabilities	400.1	323.1
Total long−term assets	357.1	242.7	Stockholders’ Equity	125.5	63.6

Total Assets	525.6	386.7	Total liabilities and Stockholders’ Equity	525.6	386.7

Refer to the balance sheet above. Luther’s current ratio for 2006 is closest to:

You are thinking about investing in a mine that will produce

$10,000

worth of ore in the first year. As the ore closest to the surface is removed it will become more difficult to extract the ore. Therefore, the value of the ore that you mine will decline at a rate of

per year forever. If the appropriate interest rate is

3%,

then the value of this mining operation is closest to:

Assets	2006	2005	Liabilities and Stockholders’ Equity	2006	2005
Current Assets			Current Liabilities
Cash	58.1	58.5	Accounts payable	85	73.5
Accounts receivable	54.3	39.6	Notes payable / short−term debt	10.5	9.6
Inventories	46.7	42.9	Current maturities of long−term debt	37.6	36.9
Other current assets	6.1	3.0	Other current liabilities	6.0	12.0
Total current assets	165.2	144.0	Total current liabilities	139.1	132.0

Long−Term Assets			Long−Term Liabilities
Land	66.2	62.1	Long−term debt	236.8	168.9
Buildings	107.7	91.5	Capital lease obligations
Equipment	117.8	99.6
Less accumulated depreciation	(55.4)	(52.5)	Deferred taxes	22.8	22.2
Net property, plant, and equipment	236.3	200.7	Other long−term liabilities	−−	−−
Goodwill	60.0	−−	Total long−term liabilities	259.6	191.1
Other long−term assets	63.0	42.0	Total liabilities	398.7	323.1
Total long−term assets	359.3	242.7	Stockholders’ Equity	125.8	63.6

Total Assets	524.5	386.7	Total liabilities and Stockholders’ Equity	524.5	386.7

Refer to the balance sheet above. What is Luther’s net working capital in 2006?

$26.10

million

$304.30

million

$52.20

million

$13.10

million

Jackie and Joe have just had their first baby and they wish to insure that enough money will be available to pay for their daughter’s college education. Assume that the educational savings account will return a constant APR of

5%.

They had initial savings of

$7389

deposited into the account right away (on the day the child was born) and plan to make further deposits into the educational savings account on each of their daughter’s birthdays, starting with her first birthday and ending on her

18th

birthday. They have a savings goal in the amount of

$92498

will be needed for college by their daughter’s

18th

birthday.

If the couple is to make an equal deposit into the account every year (annual compounding interest), how much do they need to deposit to reach the savings goal in the amount of

$92498

years?

The couple need to deposit

$nothing

to reach their savings goal in the amount of

$92498

years. (Enter dollar and cents amount, for example, enter $20.06 as 20.06, ignore the +/- sign)

If the couple does not have any initial savings and still plans to accomplish the same savings goal in the amount of

$92498in

years by making an equal deposit into the account every year (annual compounding interest), how much do they need to deposit to reach the savings goal in the amount of

$92498

years?

The couple need to deposit

$nothing

to reach their savings goal in the amount of

$92498

years. (Enter dollar and cents amount, for example, enter $20.06 as 20.06, ignore the +/- sign)

If the couple accomplishes the goal in the amount of

$92498

by their daughter’s 18th birthday, what is the maximum their daughter can withdraw from the account every year over the 4 years she will be in college if she withdraws an equal amount each year? Assume the interest rate remains

APR and the annual withdrawal occurs at the end of each year after she enters college.

The daughter’s maximum annual withdrawal is

$nothing(Enter

dollar and cents amount, for example, enter $20.06 as 20.06, ignore the +/- sign)

Maple is very happy that her investment in a neighbor’s business is going to result in cash inflows over the next three years:

She will be receiving

$46,199

at the end of this year,

$92,398

at the end of next year, and

$138,597

at the end of the year after that (three years from today). The interest rate is

13.1%

per year.

What is the present value of Maple’s cash inflows?
What is the future value of Maple’s cash flows in three years (on the date of the last payment)

Liabilities and Stockholders Equity Exam Practice