Use the following information to answer this and the following question.

Highway Corporation had net sales of $1,000,000 last year, and increased its retained earnings by $75,000 for the year after paying a dividend of $2 per share on 45,000 outstanding shares. The tax rate for the company is 40%. The company had cost of goods sold of $310,000; selling, general and administrative costs were $40,000; and the depreciation charge was $200,000.

What is the EBIT for the Highway Corporation?

A. $420,000

B. $390,000

C. $510,000

D. $480,000

E. $450,000

F. $360,000

6 points

Question 2

What is the cash coverage ratio for the Highway Corporation?

A. 3.71

B. 6.59

C. 4.28

D. 3.32

E. 5.13

F. 3.02

6 points

Question 3

The pure rate of interest is 4 percent. Investors require an inflation premium is 2.5 percent and a risk premium of 3 percent to invest in the stock of a company. What is the real rate?

A. 6.60%

B. 8.66%

C. 7.12%

D. 7.63%

E. 6.09%

F. 8.15%

6 points

Question 4

The pure rate of interest is 3 percent. Investors require an inflation premium is 2.5 percent and a risk premium of 3 percent to invest in the stock of a company. What is the risk-free rate?

A. 5.58%

B. 7.62%

C. 8.14%

D. 7.11%

E. 6.09%

F. 6.60%

6 points

Question 5

How long will it take for $1,000 to grow to $2,000 at a rate of 12 percent compounded monthly?

A. 5.83

B. 6.48

C. 4.84

D. 5.81

E. 7.28

F. 3.88

6 points

Question 6

You are planning to retire in 15 years with $1,000,000. You can earn 11.5% compounded quarterly. How much do you need to invest today? (Note: Answers are rounded.)

A. $157,820

B. $169,740

C. $211,260

D. $182,560

E. $146,760

F. $196,380

6 points

Question 7

You plan to retire with $800,000 in 20 years. How much should you deposit each month into an account that pays 9% annual rate compounded monthly? (Note: Compounding frequency is the same as the deposit frequency. Answers are rounded.)

A. $2,056

B. $1,709

C. $1,080

D. $1,198

E. $1,276

F. $1,124

6 points

Question 8

You just won the lottery! You wish to put enough money away so that you can withdraw $6,000 per month for 38 years. You can earn 9% rate on any funds you deposit. How much will you have to deposit now to meet your goal? (Note: Compounding matches the withdrawal frequency.)

A. $785,850

B. $765,313

C. $773,494

D. $777,845

E. $745,691

F. $714,970

6 points

Question 9

In 1948, your grandfather bought a painting for $100,000. In 2006, you sold it for $6 million. What annual return on investment did you earn on your grandfather’s purchase?

A. 9.99%

B. 8.67%

C. 8.83%

D. 7.31%

E. 9.62%

F. 6.32%

6 points

Question 10

You purchased a car for $33,000 with no down payment. You plan to pay it off with monthly payments of $850 in 4 years. What is the effective annual rate of interest on the loan?

A. 13.20%

B. 12.27%

C. 11.37%

D. 8.81%

E. 10.50%

F. 14.16%

6 points

Question 11

An investment offers to pay you $7,600 per month for the next 10 years (The payments start a month after you purchase the investment). If you require 12% rate of return, how much should you pay for this investment? (Note: Answers are rounded.)

A. $536,260

B. $494,870

C. $529,720

D. $501,840

E. $485,410

F. $515,460

6 points

Question 12

CiproMilda is planning a college fund for her child. When the child joins college in 15 years, the tuition payment for the first semester is expected to be $21,000. Thereafter, tuition payments will be due every six months for the following semester. These payments are expected to increase at an annual inflation rate of 6 percent. The child will graduate in eight semesters, so she will have to make a total of eight tuition payments. If she can earn 12 percent annual rate compounded monthly, how much will she have to deposit monthly in the college fund so that the balance in the fund is zero when the last tuition payment is made? She plans to continue making these deposits until the last tuition bill is paid.

A. $283.92

B. $348.35

C. $403.04

D. $423.70

E. $331.62

F. $270.49

6 points

Question 13

Please use the following information for this and the following two questions.

The 2005 income statement for Alpha-Beta, Inc. (ABI) shows $100,000 in sales and $55,000 in costs. The company had annual depreciation of $6,000. The company paid a dividend of $6,000 and added $18,000 to retainedearning. Its balance sheet had $85,000 in total assets and $45,000 in total equity at the end of 2005, and its tax rate is 35%. If a SG&E cost was zero, how much was the interest charge for ABI in 2005?

A. 2,077

B. 538

C. 1,692

D. 4,769

E. 2,462

F. 1,308

6 points

Question 14

If the profit margin and dividend payout ratio for ABI remain unchanged in 2006, what is the internal growth rate it can achieve in 2006?

A. 21.86%

B. 25.00%

C. 26.87%

D. 20.57%

E. 23.64%

F. 19.72%

6 points

Question 15

If ABI sales grow at the internal growth rate in 2006, what will be the Total Debt Ratio at the end of 2006?

A. 38.62%

B. 39.31%

C. 39.03%

D. 37.65%

E. 38.06%

F. 37.09%

6 points

Question 16

Please use the following information for this and the following question.

The income statement for the Lowell Factory, Inc. for the last year had: Sales = $200,000; Cost of Goods Sold = $84,000; Selling, General and Administrative Expense = $18,000; Depreciation = $14,600; and interest expense = 6,477. The company raised $5,000 in new equity and reduced its long-term debt by $16,000. Its tax rate is 35 percent and the retention ratio is 0.6. What was the cash flow to stockholders?

A. $21,000

B. $20,000

C. $15,000

D. $16,000

E. $25,000

F. $27,000

6 points

Question 17

What was the cash flow from assets for the Lowell Factory, Inc.?

A. $38,477

B. $45,477

C. $44,477

D. $47,477

E. $37,477

F. $50,477

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