- The first step in cash budget preparation is determining projected sales levels. Cash budgets can be used effectively by management to plan for short-term financing needs. - Pro forma financial statements show the expected financial results of a planned event, rather than past performance. They are used to forecast the future financial impact of decisions. - Peerless believes sales will increase 20% next year to $960,000. With assets up $110,000 and current liabilities up $70,000, total financing needed is $110,000 + $70,000 = $180,000.

1. Managerial finance chapter 4-7 | Business & Finance homework help
In the percent-of-sales forecasting method, all of the following balance sheet and income
statement items areassumed to increase proportionately with sales EXCEPT:Pro forma
financial statements are used to:Cash budgeting can be employed effectively by
management toThe first step in cash budget preparation is theComputerized financial
planning models may be classified as any of the following except:Pro forma financial
statements show the results of some ____ event rather than a (an) ____ eventPeerless believes
that its sales next year will increase 20 percent from the current level of
$800,000.Management calculates that assets must increase $110,000 to support the new
sales level, and currentliabilities will increase $70,000. What total financing will be
needed?Calculate United’s total assets if the firm expects sales to grow 15 percent this year
and the earnings after taxwill be $50,000. United paid $20,000 in dividends last year and
expects to increase dividends 10 percent thisyear. The firm will need additional financing of
$25,000 to finance the expected growth. United started theyear with $40,000 in accounts
payable; $30,000 in notes payable; and $100,000 in long-term debt. Thecompany is
operating at full capacity.The financial statement that shows the effects of a company’s
operating, investing, and financing activities onits cash balance is known as the:The
Financial Accounting Standard Board (FASB) requires companies to prepare their
statement of cashflows using the: Which of the following shows the effects of a company’s
operating, investing, and financing activities on itscash flows?The Hudson River Line
Company has a balance sheet as of the end of the year as follows:Cash $ 5,000 Accounts
Payable $ 15,000Accounts Receivable 20,000 Notes Payable 10,000Inventories 40,000 Total
Current Liab. 25,000Total Current Assets $ 65,000 Long-term Debt 30,000Fixed Assets, net
50,000 Stockholder’s Equity 60,000Total Assets $115,000 Total Liabilities & Equity
$115,000Last year, the firm had sales of $148,750. This year the company expects sales to
increase 25%, to generateearnings after tax of $16,000, and to pay a dividend of $5,000.
Hudson operated its fixed assets at 85%capacity last year. What additional financing will be
needed to support the sales increase?Which of the following is an example of a
deterministic model?Short-term operational plans are generally conducted over what time
frame?The first step in the preparation of a cash budget is:The values shown in ordinary
annuity tables (either present value or compound value) can be adjusted to theannuity due
form by ____ the ordinary annuity interest factor by ____.An annuity due is one in whichThe
effective rate of interest will always be ____ the nominal rate.Comet Powder Company has
purchased a piece of equipment costing $100,000. It is expected to generate aten-year

2. stream of benefits amounting to $16,273 per year. Determine the rate of return Comet
expects to earnfrom this equipment.You sold 100 shares of stock today for $30 per share
that you paid $20 for 6 years ago. Determine the averageannual rate of return on your
investment, assuming the stock paid no dividends. Designs Now is opening a showcase
office to display and sell it’s computer designed poster art. Designsexpects cash flows to be
$120,000 in the first year, $180,000 in the second year, $240,000 in the third year. IfDesigns
uses 11 percent as its discount rate, what is the present value of the cash flows?Joe Brady
just won a $450,000 lottery in Pennsylvania. Instead of receiving a lump sum, he found that
hewould receive $22,500 annually (end of year) for 20 years. Joe is 75 years old and wants
his money now. Hehas been offered $140,827 to sell his ticket. What rate of return is the
buyer expecting to make if Joe acceptsthe offer?Your brother, who is 6 years old, just
received a trust fund that will be worth $25,000 when he is 21 years old.If the fund earns 10
percent interest compounded annually, what is the value of the fund today?A zero coupon
bond with a $1,000 par value is selling for $356 and matures in 12 years. What is the
implieddiscount rate (yield to maturity)?Your local bank offers 4-year certificates of deposit
(CD) at a 12 percent annual nominal interest ratecompounded quarterly. Determine how
much additional interest you will earn over 4 years on a $10,000 CDthat is compounded
quarterly compared with one that is compounded annually. You plan to lease a Saab
automobile that sells for $22,657 and has no salvage value. If the monthly lease is$499, with
the first of 60 payments due immediately. What is the implied annual interest rate on your
lease? What is the present value of the following net cash flows if the discount rate is
12%:Year Cash Flow1-5 $10,000 each year6-10 $15,000 each year11-15 $17,000 each
yearWhat is the present value of the following net cash flows if the discount rate is
10%?Year Net Cash Flow1-10 $20,000 each year11-15 $15,000 each year16-20 $10,000
each yearYour monthly statement from your bank credit card shows that the monthly rate
of interest is 1.5%. What isthe annual effective rate of interest you are being charged on
your credit card?What monthly rate of interest will yield an annual effective rate of interest
of 14%?Al Corbin is 25 years old today and he wishes to accumulate enough money over the
next 35 years to providefor a 20 year retirement annuity of $100,000 at the beginning of
each year, starting with his 60th birthday. Hecan save $2,000 at the end of each of the next
10 years and $3,000 each year for the following 10 years. Howmuch must he save each year
at the end of years 21 through 35 to obtain his goal? Assume that the averagerate of return
over the entire period will be 10%.Assume you purchased a home and borrowed $100,000
at a rate of 8% compounded monthly over 30 years.What is your monthly payment? Which
of the following statements is/are correct?I. At 6% interest, the present value of: $400 for
the first year, $600 for the second year, and $800 for the thirdyear is $1,603.00.II. The
future value of a mixed cash flow stream (if it is from an annuity due): $400 for the first
year, $600 forthe second year, and $800 for the third year is $1,999 (rounded). Determine
the present value of $5,000 to be received 4 years from now at the continuously discounted
rate of8 percent.First Texas National Bank is offering a one-year CD with a nominal rate of
9.5 percent. If compoundingoccurs continuously, what is the effective annual rate?Zero
coupon bonds are an example ofThe basic relationship in bond valuation is for a given
percentage point change in the required rate of return, the ____ the time to maturity, the ____

3. the change in value.. The following bond quotation indicates that the holder expects to
receive ____ in interest annually:PAC EI 11s 09 11.6 20 95 -1A Treasury bill with 182 days to
maturity is quoted at 5.62 bid, 5.60 asked, and an asked yield of 5.84. How much would you
pay for this security?A WPI 10s 08 bond closed at 89. What is the current yield on this
bond?Assume that the dividend on Central Power Company’s $3.25 preferred stock issue is
paid annually at the end of the year. Determine the value of this preferred stock to an
investor who requires a 12 percent rate of return.Mid-States Utility Company sold a 10-year
note with a 7 7/8% coupon and a par value of $1,000. If the note sold at a discount for $930,
what was the implied yield-to-maturity to the nearest tenth of one percent? Assume interest
is paid semiannually. . Baywa has an outstanding bond that has a coupon rate of 8.3%.
What is the market price of this bond if it pays interest semi-annually, has 15 years to
maturity, and the current required rate of return is 9% on bonds of similar quality?. King
World zero coupon bonds were issued in 1998 at $124. These bonds will mature in 2018.
What will these bonds sell for in 2008 if the required rate of return in 2008 is 9.5%? A U.S.
Government bond was quoted at 95:13 “bid” and 95:15 “asked”. How much would you have
to pay for one of these $1,000.00 face value bonds?UOP, a petroleum processing technology
firm, issued a 10% coupon, 20 year to maturity first mortgage bond five years ago. If the
current market rate of debt for UOP is 8%, at what price should this bond sell, to the nearest
dollar? Assume a par value of $1,000, and pays interest semi-annually What is the yield to
maturity of a TVA bond that has a 9 1/2 percent coupon, pays interest semi-annually, has 12
years to maturity, and sells for $871.50? . What is the yield-to-maturity of an Acme bond
selling for $1107.50 with 5 years to maturity, a 12 1/2% coupon, and semi-annual
compounding? Debt is usually issued with a par value ofThe largest user of mortgage
bonds isStockholders’ equity includes all of the following except:Common stockholders
have a number of general rights, including all of the following except:A change in the market
price of an asset will occur as a result of changes in:The valuation of common stock is
considerably more complicated than the valuation of bonds or preferred stocks
because:From an accounting standpoint, stock dividends involve a transfer from the____
result in what is known as treasury stock.From the following stock quotation, what is
AT&T’s dividend yield?ATT 1.20 4.3 19 1667 29.50 29 29 -.25The P/E ratio
indicatesAssume that the dividend ($3.25) on Central Power Company’s common stock
issue is paid annually at the end of the year. This dividend is not expected to increase for the
foreseeable future. Determine the value of this stock to an investor who requires a 12
percent rate of return.The earnings and dividends of MicroSun Computer Co. are expected
to grow at an annual rate of 15 percent over the next 4 years and then slow to a constant
growth rate of 8 percent per year. MicroSun currently pays a dividend of $0.50 per share.
What is the value of MicroSun stock to an investor who requires a 14 percent rate of
return? Lawton Company common stock currently sells for $38 and pays (year 0) a
dividend of $2. Determine the implied growth rate for Lawton assuming that an investor’s
required rate of return is 12% and that the stock can be evaluated using a constant growth
valuation model. Helix common stock currently sells for $30 and its current dividend is
$1.50. If the required rate of return on Helix stock is 15%, what is the implied growth rate of
its earnings and dividends? Over the past 10 years the dividends of Allegro have grown

4. from $0.45 to $1.82 per share. Determine the value of Allegro’s common stock to an
investor who requires a 20% rate of return, assuming that dividends continue growing at
the same rate as they grew over the past 10 years. What is the estimated price of Once in a
Blue Moon stock that has the following dividends? The return on similar investments is
18%. (Round the growth rate to the nearest whole percent)YEAR DIVIDENDS2003
$2.502002 $2.482001 $2.362000 $2.32All of the following are ways that securities are
offered to the public in a public offering EXCEPT:a. Securities are sold through competitive
biddingb. Securities are sold through negotiated underwriting to a purchasing syndicatec.
Securities are sold through excess-market pricingd. Securities are sold on a best efforts
basis