Sue and Neal are twins. Sue invests $5,000 at 7 percent when she is 25 years old. Neal invests $5,000 at 7 percent when he is 30 years old. Both investments compound interest annually. Both Sue and Neal retire at age 60. Which one of the following statements is correct assuming that neither Sue nor Neal has withdrawn any money from their accounts?
Multiple Choice Quizzes with Answer in English (Page: 382)
Andy deposited $3,000 this morning into an account that pays 5 percent interest, compounded annually. Barb also deposited $3,000 this morning into an account that pays 5 percent interest, compounded annually. Andy will withdraw his interest earnings and spend it as soon as possible. Barb will reinvest her interest earnings into her account. Given this, which one of the following statements is true?
The process of determining the present value of future cash flows in order to know their worth today is called which one of the following?
Steve just computed the present value of a $10,000 bonus he will receive in the future. The interest rate he used in this process is referred to as which one of the following?
Terry is calculating the present value of a bonus he will receive next year. The process he is using is called:
Shelley won a lottery and will receive $1,000 a year for the next ten years. The value of her winnings today discounted at her discount rate is called which one of the following?
Sara invested $500 six years ago at 5 percent interest. She spends her earnings as soon as she earns any interest so she only receives interest on her initial $500 investment. Which type of interest is Sara earning?
Interest earned on both the initial principal and the interest reinvested from prior periods is called:
Steve invested $100 two years ago at 10 percent interest. The first year, he earned $10 interest on his $100 investment. He reinvested the $10. The second year, he earned $11 interest on his $110 investment. The extra $1 he earned in interest the second year is referred to as:
Tracy invested $1,000 five years ago and earns 4 percent interest on her investment. By leaving her interest earnings in her account, she increases the amount of interest she earns each year. The way she is handling her interest income is referred to as which one of the following?
You are investing $100 today in a savings account at your local bank. Which one of the following terms refers to the value of this investment one year from now?
Country Comfort, Inc. had equity of $150,000 at the beginning of the year. At the end of the year, the company had total assets of $195,000. During the year, the company sold no new equity. Net income for the year was $72,000 and dividends were $44,640. What is the sustainable growth rate?
A firm wishes to maintain an internal growth rate of 11 percent and a dividend payout ratio of 24 percent. The current profit margin is 10 percent and the firm uses no external financing sources. What must the total asset turnover rate be?
A firm wishes to maintain a growth rate of 8 percent and a dividend payout ratio of 62 percent. The ratio of total assets to sales is constant at 1, and the profit margin is 10 percent. What must the debt-equity ratio be if the firm wishes to keep that ratio constant?
Fixed Appliance Co. wishes to maintain a growth rate of 8 percent a year, a constant debt-equity ratio of 0.34, and a dividend payout ratio of 52 percent. The ratio of total assets to sales is constant at 1.3. What profit margin must the firm achieve?
Seaweed Mfg., Inc. is currently operating at only 86 percent of fixed asset capacity. Fixed assets are $387,000. Current sales are $510,000 and are projected to grow to $664,000. What amount must be spent on new fixed assets to support this growth in sales?
Seaweed Mfg., Inc. is currently operating at only 81 percent of fixed asset capacity. Current sales are $550,000. What is the maximum rate at which sales can grow before any new fixed assets are needed?
The Dog House has net income of $3,450 and total equity of $8,600. The debt-equity ratio is 0.60 and the payout ratio is 20 percent. What is the internal growth rate?
The Two Sisters has a 9 percent return on assets and a 75 percent retention ratio. What is the internal growth rate?
Cross Town Express has sales of $132,000, net income of $12,600, total assets of $98,000, and total equity of $45,000. The firm paid $7,560 in dividends and maintains a constant dividend payout ratio. Currently, the firm is operating at full capacity. All costs and assets vary directly with sales. The firm does not want to obtain any additional external equity. At the sustainable rate of growth, how much new total debt must the firm acquire?