Business Finance Questions

ACC501.pdf
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MAKE 10 NUMERICAL BASED QUESTIONS FROM LESSON 01 INTRODUCTION OF THE ABOVE

ATTACHED FILE ALONG WITH SOLUTION

Here are 10 numerical-based questions from Lesson 1 (Introduction) of your attached ACC501 - Business Finance document, along with
solutions:

1. Future Value Calculation

Question:
If you invest $5,000 today at an annual interest rate of 8%, how much will it be worth in 5 years using compound interest?

Solution:
Using the future value formula:

F V = P V × (1 + r)t

F V = 5, 000 × (1.08)5

F V = 5, 000 × 1.4693

F V = 7, 346.50

Answer: $7,346.50

2. Present Value Calculation

Question:
You need $10,000 in 3 years. If the discount rate is 6%, how much should you invest today?

Solution:
Using the present value formula:

FV
PV =
(1 + r)t
​

10, 000
PV =
(1.06)3
​

10, 000
PV =
1.191016
​

P V = 8, 400.20

Answer: $8,400.20

3. Simple Interest Calculation

Question:
If a company borrows $12,000 at an annual simple interest rate of 5% for 4 years, how much interest will it pay?

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Solution:
Using the simple interest formula:

I =P ×r×t

I = 12, 000 × 0.05 × 4

I = 2, 400

Answer: $2,400

4. Loan Repayment Calculation

Question:
A company takes a 3-year loan of $20,000 at an interest rate of 10% compounded annually. What will be the total amount to be repaid?

Solution:

F V = P V × (1 + r)t

F V = 20, 000 × (1.10)3

F V = 20, 000 × 1.331

F V = 26, 620

Answer: $26,620

5. Net Working Capital (NWC)

Question:
If a company has current assets of $50,000 and current liabilities of $30,000, what is the Net Working Capital (NWC)?

Solution:

N W C = Current Assets − Current Liabilities

N W C = 50, 000 − 30, 000

N W C = 20, 000

Answer: $20,000

6. Inventory Turnover Ratio

Question:
A company has Cost of Goods Sold (COGS) of $120,000 and average inventory of $30,000. What is its Inventory Turnover Ratio?

Solution:

COGS
Inventory Turnover Ratio =
Average Inventory
​

120, 000
=
30, 000
​

=4

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Answer: 4 times

7. Return on Investment (ROI)

Question:
A company invests $50,000 in a project and earns a net profit of $12,000. What is the Return on Investment (ROI)?

Solution:

Net Profit
ROI = ( ) × 100
Investment
​

12, 000
=( ) × 100
50, 000
​

= 24%

Answer: 24%

8. Debt-to-Equity Ratio
Question:
If a company's total liabilities are $40,000 and total equity is $60,000, what is its debt-to-equity ratio?

Solution:

Total Liabilities
Debt-to-Equity Ratio =
Total Equity
​

40, 000
=
60, 000
​

= 0.67

Answer: 0.67 (or 67%)

9. Break-even Point Calculation

Question:
A company has fixed costs of $10,000, a selling price per unit of $50, and a variable cost per unit of $30. How many units must it sell to
break even?

Solution:

Fixed Costs
Break-even Point =
Selling Price per Unit − Variable Cost per Unit
​

10, 000
=
50 − 30
​

10, 000
=
20
​

= 500 units

Answer: 500 units

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10. Gross Profit Margin Calculation
Question:
A company has Revenue of $150,000 and COGS of $90,000. What is its Gross Profit Margin?

Solution:

Gross Profit = Revenue − COGS

= 150, 000 − 90, 000

= 60, 000
Gross Profit
Gross Profit Margin = ( ) × 100
Revenue
​

60, 000
=( ) × 100
150, 000
​

= 40%

Answer: 40%

These questions cover key financial concepts such as time value of money, financial ratios, and profitability, which are essential for
understanding Business Finance. Let me know if you need any modifications or additional explanations! 🚀
continue with lesson 2

Here are 10 numerical-based questions from Lesson 2: Why Study Finance? of your ACC501 - Business Finance document, along with
solutions:

1. Budget Allocation
Question:
A company has a marketing budget of $500,000. If 40% is allocated to advertising, 35% to promotions, and the rest to market research,
how much is allocated to market research?

Solution:

Market Research Budget = Total Budget − (Advertising Budget + Promotion Budget)

= 500, 000 − (0.40 × 500, 000 + 0.35 × 500, 000)

= 500, 000 − (200, 000 + 175, 000)

= 125, 000

Answer: $125,000

2. Product Pricing Calculation

Question:
A company wants a 30% profit margin on a product that costs $50 to produce. What should be the selling price?

Solution:

Cost Price
Selling Price =
1 − Profit Margin
​

50

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 50
=
1 − 0.30
​

50
=
0.70
​

= 71.43

Answer: $71.43

3. Investment Decision - Future Value

Question:
If a business invests $10,000 in a marketing campaign that provides a 15% annual return, what will be the value of this investment after 3
years?

Solution:
Using Future Value (FV) formula:

F V = P V × (1 + r)t

= 10, 000 × (1.15)3

= 10, 000 × 1.5208

= 15, 208

Answer: $15,208

4. Financial Ratios - Current Ratio

Question:
A company has current assets of $80,000 and current liabilities of $50,000. What is the current ratio?

Solution:

Current Assets
Current Ratio =
Current Liabilities
​

80, 000
=
50, 000
​

= 1.6

Answer: 1.6

5. Break-even Analysis
Question:
A firm has fixed costs of $200,000, sells a product for $40 per unit, and incurs a variable cost of $25 per unit. How many units must it sell
to break even?

Solution:

Fixed Costs
Break-even Point =
Selling Price per Unit − Variable Cost per Unit
​

200, 000
=
40 − 25
​

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 200, 000
=
15
​

= 13, 333 units

Answer: 13,333 units

6. Capital Structure Calculation

Question:
A company's total assets are $500,000. If it has $200,000 in debt and $300,000 in equity, what is its debt-to-equity ratio?

Solution:

Total Debt
Debt-to-Equity Ratio =
Total Equity
​

200, 000
=
300, 000
​

= 0.67

Answer: 0.67 (or 67%)

7. Working Capital Calculation

Question:
A company has accounts receivable of $40,000, inventory of $60,000, accounts payable of $30,000, and cash of $20,000. What is its
working capital?

Solution:

Working Capital = Current Assets − Current Liabilities

= (40, 000 + 60, 000 + 20, 000) − 30, 000

= 120, 000 − 30, 000

= 90, 000

Answer: $90,000

8. ROI Calculation
Question:
A firm invests $150,000 in a new project and earns a net profit of $45,000. What is its Return on Investment (ROI)?

Solution:

Net Profit
ROI = ( ) × 100
Investment
​

45, 000
=( ) × 100
150, 000
​

= 30%

Answer: 30%

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9. Interest Expense Calculation
Question:
A company has a loan of $75,000 at an annual interest rate of 8%. What is the annual interest expense?

Solution:

Annual Interest Expense = Loan Amount × Interest Rate

= 75, 000 × 0.08

= 6, 000

Answer: $6,000

10. Capital Budgeting Decision

Question:
A company is evaluating a project that requires an investment of $50,000 and generates cash flows of $20,000 per year for 3 years. If the
discount rate is 10%, what is the Net Present Value (NPV)?

Solution:
Using the NPV formula:

CFt
NP V = ∑ − Initial Investment
​

(1 + r)t
​

20, 000 20, 000 20, 000

NP V = ( + + ) − 50, 000
(1.10)1 (1.10)2 (1.10)3
​ ​ ​

20, 000 20, 000 20, 000

=( + + ) − 50, 000
1.10 1.21 1.331
​ ​ ​

= (18, 181.82 + 16, 528.93 + 15, 025.92) − 50, 000

= 49, 736.67 − 50, 000

= −263.33

Since NPV < 0, the project should not be accepted.

Answer: NPV = -$263.33 (Reject the project).

These questions cover financial decision-making, capital budgeting, investment, and working capital concepts from Lesson 2: Why Study
Finance? Let me know if you need additional variations or modifications! 🚀

continue with lesson 3

Here are 10 numerical-based questions from Lesson 3: The Corporate Firm of your ACC501 - Business Finance document, along with
solutions:

1. Business Ownership Capital Calculation

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Question:
A sole proprietor invests $50,000 in their business. The business earns a profit of $12,000 in the first year. If the owner withdraws $5,000,
what is the ending capital?

Solution:

Ending Capital = Initial Investment + Profit − Withdrawals

= 50, 000 + 12, 000 − 5, 000

= 57, 000

Answer: $57,000

2. Partnership Profit Sharing

Question:
Two partners invest in a business: Partner A invests $60,000, and Partner B invests $40,000. If the annual profit is $50,000, how much
does each partner receive assuming profit is shared based on capital contribution?

Solution:
Total Investment = $60,000 + $40,000 = $100,000
Profit Share:
60,000
Partner A’s share = 100,000 ​ × 50, 000 = 30, 000
40,000
Partner B’s share = 100,000 ​ × 50, 000 = 20, 000

Answer:

Partner A: $30,000

Partner B: $20,000

3. Corporate Taxation - Double Taxation Calculation

Question:
A corporation earns $80,000 in profit. The corporate tax rate is 25%, and dividends are taxed at 10%. If the corporation distributes 50% of
after-tax profit as dividends, what is the total tax paid?

Solution:

1. Corporate Tax:

80, 000 × 0.25 = 20, 000

2. After-Tax Profit:

80, 000 − 20, 000 = 60, 000

3. Dividends Distributed (50%):

60, 000 × 0.50 = 30, 000

4. Dividend Tax:

30, 000 × 0.10 = 3, 000

5. Total Tax Paid:

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 20, 000 + 3, 000 = 23, 000

Answer: $23,000

4. Limited Liability Impact on Shareholder’s Loss

Question:
A shareholder owns 100 shares in a company, and each share is priced at $25. If the company goes bankrupt, what is the maximum
amount the shareholder can lose?

Solution:

Maximum Loss = Number of Shares × Price per Share

= 100 × 25

= 2, 500

Answer: $2,500

5. Corporation Value Calculation

Question:
A corporation has 10,000 shares outstanding, and its stock price is $40 per share. What is the total market value of the corporation?

Solution:

Market Value = Shares Outstanding × Stock Price

= 10, 000 × 40

= 400, 000

Answer: $400,000

6. Debt-to-Equity Ratio Calculation

Question:
A corporation has $500,000 in total liabilities and $750,000 in shareholder equity. What is its debt-to-equity ratio?

Solution:

Total Liabilities
Debt-to-Equity Ratio =
Shareholder Equity
​

500, 000
=
750, 000
​

= 0.67

Answer: 0.67 (or 67%)

7. Break-even Analysis for Incorporation

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Question:
A company is considering incorporating, which will save it $10,000 in liability costs annually but incur additional $5,000 in legal and tax
expenses. How many years will it take to break even?

Solution:

Additional Costs
Break-even Years =
Annual Savings
​

5, 000
=
10, 000
​

= 0.5 years

Answer: 0.5 years (6 months)

8. Shareholder’s Voting Power Calculation

Question:
A corporation has 1,000,000 shares, and a shareholder owns 50,000 shares. What percentage of voting power does the shareholder have?

Solution:

Shares Owned
Voting Power = ( ) × 100
Total Shares
​

50, 000
=( ) × 100
1, 000, 000
​

= 5%

Answer: 5%

9. Financial Manager’s Impact on Stock Price

Question:
A company’s stock price is $20 per share, and there are 500,000 shares outstanding. If a financial manager's decision increases the stock
price to $25 per share, what is the total increase in company value?

Solution:

Increase in Value = (New Price − Old Price) × Shares Outstanding

= (25 − 20) × 500, 000

= 5 × 500, 000

= 2, 500, 000

Answer: $2,500,000

10. Agency Cost Calculation

Question:
A company's shareholders suffer an $8,000 loss due to a manager’s poor investment decision. If the company had spent $2,000 on better
managerial oversight, what would have been the net saving?

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Solution:

Net Saving = Loss Prevented − Oversight Cost

= 8, 000 − 2, 000

= 6, 000

Answer: $6,000

These questions cover ownership structures, financial decision-making, corporate taxation, and managerial impacts on shareholder wealth
from Lesson 3: The Corporate Firm. Let me know if you need additional modifications or explanations! 🚀
continue with lesson 4

Here are 10 numerical-based questions from Lesson 4: The Firm and the Financial Markets of your ACC501 - Business Finance document,
along with solutions:

1. Net Working Capital Calculation

Question:
A firm has current assets of $150,000 and current liabilities of $90,000. What is its Net Working Capital (NWC)?

Solution:

N W C = Current Assets − Current Liabilities

= 150, 000 − 90, 000

= 60, 000

Answer: $60,000

2. Market Value of Firm

Question:
A company has 50,000 outstanding shares, each trading at $35 per share. What is the total market value of the company?

Solution:

Market Value = Number of Shares × Price per Share

= 50, 000 × 35

= 1, 750, 000

Answer: $1,750,000

3. Capital Structure - Equity Calculation

Question:
A firm's total assets are $500,000, and its total liabilities are $200,000. What is its shareholder equity?

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Solution:
Using the Balance Sheet Identity:

Assets = Liabilities + Stockholder Equity

500, 000 = 200, 000 + Stockholder Equity

Stockholder Equity = 500, 000 − 200, 000

= 300, 000

Answer: $300,000

4. Debt-to-Equity Ratio
Question:
A company has total debt of $250,000 and equity of $500,000. What is its Debt-to-Equity Ratio?

Solution:

Total Debt
Debt-to-Equity Ratio =
Total Equity
​

250, 000
=
500, 000
​

= 0.50

Answer: 0.50 (or 50%)

5. Liquidity Ratio - Current Ratio Calculation

Question:
A business has current assets of $120,000 and current liabilities of $80,000. What is the current ratio?

Solution:

Current Assets
Current Ratio =
Current Liabilities
​

120, 000
=
80, 000
​

= 1.5

Answer: 1.5

6. Primary Market Capital Raised

Question:
A corporation issues 200,000 new shares in the primary market at a price of $20 per share. How much capital does the firm raise?

Solution:

Capital Raised = Number of Shares Issued × Price per Share

= 200, 000 × 20

= 4, 000, 000

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Answer: $4,000,000

7. Interest Coverage Ratio

Question:
A company has an Earnings Before Interest and Taxes (EBIT) of $90,000 and pays annual interest of $30,000. What is its Interest
Coverage Ratio?

Solution:

EBIT
Interest Coverage Ratio =
Interest Expense
​

90, 000
=
30, 000
​

=3

Answer: 3 times

8. Stock Return Calculation

Question:
An investor buys a stock at $40 and sells it after one year for $50, receiving a $2 dividend during the holding period. What is the total
return?

Solution:

Selling Price − Buying Price + Dividend

Total Return = × 100
Buying Price
​

50 − 40 + 2
= × 100
40
​

12
= × 100
40
​

= 30%

Answer: 30%

9. Break-even Analysis for a Financial Investment

Question:
An investor buys 500 shares at $25 per share. If they want to break even, at what price must they sell the shares after paying a $500
brokerage fee?

Solution:

Total Cost = Shares × Price per Share + Brokerage Fee

= 500 × 25 + 500

= 12, 500 + 500

= 13, 000

Break-even price per share:

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 Total Cost
Break-even Price =
Shares
​

13, 000
=
500
​

= 26

Answer: $26 per share

10. Market-to-Book Ratio

Question:
A firm has total assets of $800,000, total liabilities of $500,000, and a market value of equity of $450,000. What is its Market-to-Book
Ratio?

Solution:

Book Value of Equity = Total Assets − Total Liabilities

= 800, 000 − 500, 000

= 300, 000
Market Value of Equity
Market-to-Book Ratio =
Book Value of Equity
​

450, 000
=
300, 000
​

= 1.5

Answer: 1.5 times

These questions cover financial markets, balance sheet analysis, market value, and corporate finance decisions from Lesson 4: The
Firm and The Financial Markets. Let me know if you need modifications or additional explanations! 🚀
continue with lesson 5

Here are 10 numerical-based questions from Lesson 5: The Income Statement of your ACC501 - Business Finance document, along with
solutions:

1. Gross Profit Calculation

Question:
A company has total revenue of $2,262 million and a cost of goods sold (COGS) of $1,655 million. What is the gross profit?

Solution:

Gross Profit = Total Revenue − COGS

= 2, 262 − 1, 655

= 607

Answer: $607 million​

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2. Operating Income Calculation
Question:
A company’s gross profit is $607 million. It has selling, general, and administrative expenses of $327 million and depreciation of $90
million. What is the operating income?

Solution:

Operating Income = Gross Profit − Operating Expenses

= 607 − (327 + 90)

= 607 − 417

= 190

Answer: $190 million​

3. Earnings Before Interest and Taxes (EBIT)

Question:
A company has operating income of $190 million and other income of $29 million. What is its EBIT?

Solution:

EBIT = Operating Income + Other Income

= 190 + 29

= 219

Answer: $219 million​

4. Pretax Income Calculation

Question:
A company’s EBIT is $219 million, and it has an interest expense of $49 million. What is its pretax income?

Solution:

Pretax Income = EBIT − Interest Expense

= 219 − 49

= 170

Answer: $170 million​

5. Tax Expense Calculation

Question:
A company has a pretax income of $170 million. If its current taxes are $71 million and deferred taxes are $13 million, what is its total
tax expense?

Solution:

Total Tax Expense = Current Taxes + Deferred Taxes

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 = 71 + 13

= 84

Answer: $84 million​

6. Net Income Calculation

Question:
A company has a pretax income of $170 million and a total tax expense of $84 million. What is its net income?

Solution:

Net Income = Pretax Income − Total Tax Expense

= 170 − 84

= 86

Answer: $86 million​

7. Earnings Per Share (EPS) Calculation

Question:
A company has net income of $86 million and 29 million shares outstanding. What is its Earnings Per Share (EPS)?

Solution:

Net Income
EPS =
Shares Outstanding
​

86
=
29
​

= 2.97

Answer: $2.97 per share​

8. Dividend Per Share Calculation

Question:
A company pays total dividends of $43 million and has 29 million shares outstanding. What is the Dividend Per Share (DPS)?

Solution:

Total Dividends
DPS =
Shares Outstanding
​

43
=
29
​

= 1.48

Answer: $1.48 per share​

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9. Common-Size Net Income Calculation
Question:
A company has total sales revenue of $2,262 million and a net income of $86 million. What is the net profit margin as a percentage?

Solution:

Net Income
Net Profit Margin = ( ) × 100
Total Revenue
​

86
=( ) × 100
2, 262
​

= 3.8%

Answer: 3.8%​

10. Retained Earnings Calculation

Question:
A company has net income of $86 million and pays dividends of $43 million. What is the retained earnings amount?

Solution:

Retained Earnings = Net Income − Dividends

= 86 − 43

= 43

Answer: $43 million​

These numerical problems cover income statement analysis, profitability metrics, and earnings calculations from Lesson 5: The Income
Statement. Let me know if you need more details or explanations! 🚀

continue with lesson 6

Here are 10 numerical-based questions from Lesson 6: Depreciation as a Tax Shield of your ACC501 - Business Finance document, along
with solutions:

1. Depreciation Tax Shield Calculation

Question:
A company records $100,000 in depreciation expenses annually. If the corporate tax rate is 35%, what is the tax shield benefit?

Solution:

Depreciation Tax Shield = Depreciation × Tax Rate

= 100, 000 × 0.35

= 35, 000

Answer: $35,000​

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2. Cash Flow Impact of Depreciation
Question:
A corporation has earnings before depreciation and taxes (EBDT) of $500,000 and records $100,000 in depreciation. If the tax rate is
35%, what is the impact on cash flow?

Solution:

1. Taxable Income Calculation:

Taxable Income = EBDT − Depreciation

= 500, 000 − 100, 000

= 400, 000

2. Tax Expense:

Tax Expense = 400, 000 × 0.35 = 140, 000

3. Net Income:

Net Income = 400, 000 − 140, 000 = 260, 000

4. Cash Flow Calculation:

Cash Flow = Net Income + Depreciation

= 260, 000 + 100, 000

= 360, 000

Answer: $360,000​

3. Effect of Depreciation on Net Income

Question:
If a firm increases its depreciation expense by $50,000, how much will net income decrease, assuming a 35% tax rate?

Solution:

Net Income Reduction = Depreciation Increase × (1 − Tax Rate)

= 50, 000 × (1 − 0.35)

= 50, 000 × 0.65

= 32, 500

Answer: $32,500 decrease in net income​

4. Book Value after Depreciation

Question:
An asset costing $500,000 is depreciated using straight-line depreciation over 5 years. What is its book value at the end of Year 3?

Solution:

1. Annual Depreciation:

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 Initial Cost
Annual Depreciation =
Life Span
​

500, 000
=
5
​

= 100, 000 per year

2. Accumulated Depreciation after 3 Years:

100, 000 × 3 = 300, 000

3. Book Value Calculation:

Book Value = Initial Cost − Accumulated Depreciation

= 500, 000 − 300, 000

= 200, 000

Answer: $200,000​

5. MACRS Depreciation for Year 2

Question:
A company purchases a $160,000 asset classified as 5-year property under MACRS. What is the depreciation for Year 2 if the MACRS rate is
32%?

Solution:

Depreciation = Cost × MACRS Rate

= 160, 000 × 0.32

= 51, 200

Answer: $51,200​

6. Tax Impact of Selling an Asset Below Book Value

Question:
A machine was bought for $100,000, depreciated to $30,000, and sold for $25,000. If the tax rate is 35%, what is the tax impact?

Solution:

1. Loss on Sale:

Loss = Book Value − Selling Price

= 30, 000 − 25, 000

= 5, 000

2. Tax Savings:

Tax Savings = Loss × Tax Rate

= 5, 000 × 0.35

= 1, 750

Answer: $1,750 tax savings​

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7. Operating Cash Flow using Tax Shield Approach
Question:
A business has $50,000 in sales, $35,000 in costs, and $7,000 in depreciation. If the tax rate is 34%, what is the Operating Cash Flow
(OCF)?

Solution:
Using the Tax Shield Approach formula:

OCF = (Sales − Costs) × (1 − T ) + (Depreciation × T )

= (50, 000 − 35, 000) × (1 − 0.34) + (7, 000 × 0.34)

= 15, 000 × 0.66 + 2, 380

= 9, 900 + 2, 380

= 12, 280

Answer: $12,280​

8. Effect of Depreciation on Cash Flow

Question:
If a firm reports $50,000 in net income and has $20,000 in depreciation expenses, what is its cash flow?

Solution:

Cash Flow = Net Income + Depreciation

= 50, 000 + 20, 000

= 70, 000

Answer: $70,000​

9. Capital Spending Calculation

Question:
A firm’s net fixed assets increased from $250,000 to $400,000, and depreciation expense was $50,000. What was the capital spending?

Solution:

Capital Spending = Ending Net Fixed Assets − Beginning Net Fixed Assets + Depreciation

= 400, 000 − 250, 000 + 50, 000

= 200, 000

Answer: $200,000​

10. Salvage Value After Taxes

Question:
An asset was sold for $10,000 but had a book value of $27,648. If the tax rate is 34%, what is the total after-tax cash flow?

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Solution:

1. Tax Loss Calculation:

Loss = 27, 648 − 10, 000 = 17, 648

2. Tax Savings:

Tax Savings = 17, 648 × 0.34 = 6, 000

3. Total Cash Flow:

After-tax Cash Flow = 10, 000 + 6, 000

Answer: $16,000​

These questions cover depreciation tax shields, book value, MACRS depreciation, and cash flow impact from Lesson 6: Depreciation as
a Tax Shield. Let me know if you need additional modifications! 🚀

continue with lesson 7

Here are 10 numerical-based questions from Lesson 7: The Statement of Cash Flows of your ACC501 - Business Finance document, along
with solutions:

1. Operating Cash Flow Calculation

Question:
A company reports the following:

Net income: $86 million

Depreciation: $90 million

Deferred taxes: $13 million

Change in accounts receivable: -$24 million

Change in inventories: $11 million

Change in accounts payable: $16 million

Change in accrued expenses: $18 million

Change in notes payable: -$3 million

Other adjustments: -$8 million

What is the total Operating Cash Flow (OCF)?

Solution:

OCF = Net Income + Depreciation + Deferred Taxes + Changes in Working Capital

= 86 + 90 + 13 + (−24 + 11 + 16 + 18 − 3 − 8)

= 86 + 90 + 13 + 10

= 199

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Answer: $199 million​

2. Cash Flow from Investing Activities

Question:
A company has the following cash flows related to investing activities:

Acquisition of fixed assets: -$198 million

Sales of fixed assets: $25 million

What is the total Cash Flow from Investing Activities?

Solution:

Cash Flow from Investing = Sales of Fixed Assets − Acquisition of Fixed Assets

= 25 − 198

= −173

Answer: -$173 million​

3. Cash Flow from Financing Activities

Question:
A company reports the following:

Retirement of debt: -$73 million

Proceeds from long-term debt sales: $86 million

Dividends paid: -$43 million

Repurchase of stock: -$6 million

Proceeds from new stock issue: $43 million

Calculate the total Cash Flow from Financing Activities.

Solution:

Cash Flow from Financing = (Proceeds from Debt − Debt Retirement) + (New Stock Issue − Stock Repurchase − Dividends Paid)

= (86 − 73) + (43 − 6 − 43)

= 13 + (−6)

=7

Answer: $7 million​

4. Total Cash Flow of the Firm

Question:
A firm reports the following:

Operating Cash Flow: $238 million

Capital Spending: -$173 million

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 Change in Net Working Capital: -$23 million

Calculate the Total Cash Flow of the Firm.

Solution:

Total Cash Flow = Operating Cash Flow − Capital Spending − Change in NWC

= 238 − 173 − 23

= 42

Answer: $42 million​

5. Cash Flow to Creditors Calculation

Question:
A company has the following:

Interest paid: $49 million

Retirement of debt: $73 million

Proceeds from new debt sales: $86 million

What is the Cash Flow to Creditors?

Solution:

Cash Flow to Creditors = Interest Paid + (Debt Retirement − New Debt Issued)

= 49 + (73 − 86)

= 49 − 13

= 36

Answer: $36 million​

6. Cash Flow to Stockholders Calculation

Question:
A company reports:

Dividends paid: $43 million

Repurchase of stock: $6 million

Proceeds from new stock issue: $43 million

Calculate the Cash Flow to Stockholders.

Solution:

Cash Flow to Stockholders = (Dividends Paid + Stock Repurchase) − New Stock Issued

= (43 + 6) − 43

= 49 − 43

=6

Answer: $6 million​

23/62
7. Net Change in Cash
Question:
A company’s cash flows are:

Cash Flow from Operations: $199 million

Cash Flow from Investing: -$173 million

Cash Flow from Financing: $7 million

Calculate the Net Change in Cash.

Solution:

Net Change in Cash = Operating CF + Investing CF + Financing CF

= 199 − 173 + 7

= 33

Answer: $33 million​

8. Free Cash Flow Calculation

Question:
A company has:

Operating Cash Flow: $199 million

Net Capital Spending: $173 million

Change in Net Working Capital: $23 million

What is the Free Cash Flow (FCF)?

Solution:

FCF = Operating Cash Flow − (Net Capital Spending + Change in NWC)

= 199 − (173 + 23)

= 199 − 196

=3

Answer: $3 million​

9. Cash Collection from Sales

Question:
A company reports $500 million in sales, but accounts receivable increased by $30 million. What is the actual cash collected from sales?

Solution:

Cash Collected = Sales − Increase in Accounts Receivable

= 500 − 30

= 470

24/62
Answer: $470 million​

10. Cash Flow Identity Verification

Question:
A company reports:

Cash Flow from Assets: $42 million

Cash Flow to Creditors: $36 million

Cash Flow to Stockholders: $6 million

Verify if the Cash Flow Identity holds.

Solution:

Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders

42 = 36 + 6

42 = 42 (Identity holds true)

Answer: Cash Flow Identity Verified ✅​

These problems cover key cash flow statement components, including operating, investing, and financing activities. Let me know if you
need more details or additional questions! 🚀

continue with lesson 8

Here are 10 numerical-based questions from Lesson 8: Common-Size Statements of your ACC501 - Business Finance document, along
with solutions:

1. Common-Size Percentage for Accounts Payable

Question:
A company has total assets of $3,588 million and accounts payable of $344 million. What is the common-size percentage for accounts
payable?

Solution:

Accounts Payable
Common-Size Percentage = ( ) × 100
Total Assets
​

344
=( ) × 100
3, 588
​

= 9.6%

Answer: 9.6%​

25/62
2. Common-Size Percentage for Notes Payable
Question:
If notes payable is $196 million and total assets are $3,588 million, what is the common-size percentage for notes payable?

Solution:

Notes Payable
Common-Size Percentage = ( ) × 100
Total Assets
​

196
=( ) × 100
3, 588
​

= 5.5%

Answer: 5.5%​

3. Common-Size Percentage for Total Current Liabilities

Question:
If total current liabilities are $540 million, what is the common-size percentage for total current liabilities?

Solution:

540
Common-Size Percentage = ( ) × 100
3, 588
​

= 15.1%

Answer: 15.1%​

4. Common-Size Percentage for Long-Term Debt

Question:
A company reports long-term debt of $457 million. What is its common-size percentage?

Solution:

Long-Term Debt
Common-Size Percentage = ( ) × 100
Total Assets
​

457
=( ) × 100
3, 588
​

= 12.7%

Answer: 12.7%​

5. Common-Size Percentage for Retained Earnings

Question:
A company has retained earnings of $2,041 million. What is its common-size percentage?

Solution:

2, 041
Common-Size Percentage = ( ) × 100
3, 588
​

26/62
 = 56.9%

Answer: 56.9%​

6. Common-Size Percentage for Total Stockholders' Equity

Question:
A company reports total stockholders’ equity of $2,591 million. What is the common-size percentage?

Solution:

Total Stockholders’ Equity

Common-Size Percentage = ( ) × 100
Total Assets
​

2, 591
=( ) × 100
3, 588
​

= 72.2%

Answer: 72.2%​

7. Common-Size Percentage for Net Plant and Equipment

Question:
If Net Plant and Equipment (NP&E) is $2,880 million, what is its common-size percentage?

Solution:

2, 880
Common-Size Percentage = ( ) × 100
3, 588
​

= 80.3%

Answer: 80.3%​

8. Change in Common-Size NP&E from Previous Year

Question:
If Net Plant and Equipment as a percentage of total assets was 80.9% in 20X1 and 80.3% in 20X2, what is the change?

Solution:

Change = 80.3% − 80.9%

= −0.6%

Answer: Decrease of 0.6%​

9. Common-Size Percentage for Net Income

Question:
A company has net income of $363 million and net sales of $2,311 million. What is the common-size percentage for net income?

Solution:

27/62
 Net Income
Common-Size Percentage = ( ) × 100
Net Sales
​

363
=( ) × 100
2, 311
​

= 15.7%

Answer: 15.7%​

10. Common-Size Percentage for Depreciation

Question:
A company reports depreciation of $276 million and net sales of $2,311 million. What is the common-size percentage for depreciation?

Solution:

Depreciation
Common-Size Percentage = ( ) × 100
Net Sales
​

276
=( ) × 100
2, 311
​

= 11.9%

Answer: 11.9%​

These problems focus on common-size analysis for balance sheets and income statements, which help compare financial performance
across different periods and firms. Let me know if you need additional modifications or explanations! 🚀

continue with lesson 9

Here are 10 numerical-based questions from Lesson 9: Ratio Analysis of your ACC501 - Business Finance document, along with solutions:

1. Current Ratio Calculation

Question:
A company has current assets of $708 million and current liabilities of $540 million. What is its current ratio?

Solution:

Current Assets
Current Ratio =
Current Liabilities
​

708
=
540
​

= 1.31

Answer: 1.31 times​

28/62
2. Quick Ratio Calculation
Question:
A company has cash of $98 million, accounts receivable of $188 million, and inventory of $422 million. If total current liabilities are
$540 million, what is its quick ratio?

Solution:

Cash + Accounts Receivable

Quick Ratio =
Current Liabilities
​

98 + 188
=
540
​

286
=
540
​

= 0.53

Answer: 0.53 times​

3. Debt-to-Equity Ratio Calculation

Question:
A company has total debt of $653 million and total stockholders' equity of $2,591 million. What is its debt-to-equity ratio?

Solution:

Total Debt
Debt-to-Equity Ratio =
Total Equity
​

653
=
2, 591
​

= 0.25

Answer: 0.25 times (or 25%)​

4. Interest Coverage Ratio

Question:
A company has EBIT of $691 million and interest expense of $141 million. What is its interest coverage ratio?

Solution:

EBIT
Interest Coverage Ratio =
Interest Expense
​

691
=
141
​

= 4.9

Answer: 4.9 times​

5. Inventory Turnover Ratio

Question:
A company has cost of goods sold (COGS) of $1,344 million and inventory of $422 million. What is its inventory turnover ratio?

29/62
Solution:

COGS
Inventory Turnover Ratio =
Inventory
​

1, 344
=
422
​

= 3.2

Answer: 3.2 times​

6. Days' Sales in Inventory

Question:
A company has an inventory turnover ratio of 3.2. What is its days' sales in inventory?

Solution:

365
Days’ Sales in Inventory =
Inventory Turnover
​

365
=
3.2
​

= 114

Answer: 114 days​

7. Receivables Turnover Ratio

Question:
A company has net sales of $2,311 million and accounts receivable of $188 million. What is its receivables turnover ratio?

Solution:

Net Sales
Receivables Turnover Ratio =
Accounts Receivable
​

2, 311
=
188
​

= 12.3

Answer: 12.3 times​

8. Days' Sales in Receivables

Question:
A company has a receivables turnover ratio of 12.3. What is its days' sales in receivables?

Solution:

365
Days’ Sales in Receivables =
Receivables Turnover
​

365
=
12.3
​

= 30

30/62
Answer: 30 days​

9. Total Asset Turnover

Question:
A company has net sales of $2,311 million and total assets of $3,588 million. What is its total asset turnover ratio?

Solution:

Net Sales
Total Asset Turnover =
Total Assets
​

2, 311
=
3, 588
​

= 0.64

Answer: 0.64 times​

10. Return on Equity (ROE) Calculation

Question:
A company has net income of $363 million and stockholders' equity of $2,591 million. What is its return on equity (ROE)?

Solution:

Net Income
ROE = × 100
Stockholders’ Equity
​

363
=( ) × 100
2, 591
​

= 14%

Answer: 14%​

These questions cover liquidity ratios, asset turnover ratios, profitability measures, and financial leverage from Lesson 9: Ratio
Analysis. Let me know if you need more details or additional questions! 🚀

continue with lesson 10

Here are 10 numerical-based questions from Lesson 10: Ratio Analysis (Continued) of your ACC501 - Business Finance document, along
with solutions:

1. Total Asset Turnover Calculation

Question:
A company has net sales of $2,311 million and total assets of $3,588 million. What is its total asset turnover ratio?

Solution:

31/62
 Net Sales
Total Asset Turnover =
Total Assets
​

2, 311
=
3, 588
​

= 0.64

Answer: 0.64 times​

2. Capital Intensity Ratio

Question:
If a company’s total asset turnover is 0.64, what is its capital intensity ratio?

Solution:

1
Capital Intensity Ratio =
Total Asset Turnover
​

1
=
0.64
​

= 1.56

Answer: 1.56​

3. Profit Margin Calculation

Question:
A company has net income of $363 million and net sales of $2,311 million. What is its profit margin?

Solution:

Net Income
Profit Margin = ( ) × 100
Net Sales
​

363
=( ) × 100
2, 311
​

= 15.7%

Answer: 15.7%​

4. Return on Assets (ROA) Calculation

Question:
A company’s net income is $363 million, and its total assets are $3,588 million. What is its return on assets (ROA)?

Solution:

Net Income
ROA = ( ) × 100
Total Assets
​

363
=( ) × 100
3, 588
​

= 10.12%

32/62
Answer: 10.12%​

5. Return on Equity (ROE) Calculation

Question:
A company’s net income is $363 million, and its total equity is $2,591 million. What is its return on equity (ROE)?

Solution:

Net Income
ROE = ( ) × 100
Total Equity
​

363
=( ) × 100
2, 591
​

= 14%

Answer: 14%​

6. Price-to-Earnings (P/E) Ratio

Question:
If a company has earnings per share (EPS) of $11 and its stock price is $88 per share, what is its P/E ratio?

Solution:

Stock Price
P/E Ratio =
Earnings Per Share
​

88
=
11
​

=8

Answer: 8 times​

7. Market-to-Book Ratio
Question:
A company’s book value per share is $78.5, and its market price per share is $88. What is its market-to-book ratio?

Solution:

Market Price Per Share

Market-to-Book Ratio =
Book Value Per Share
​

88
=
78.5
​

= 1.12

Answer: 1.12 times​

8. Dividend Payout Ratio

33/62
Question:
A company has net income of $363 million and pays dividends of $121 million. What is its dividend payout ratio?

Solution:

Dividends Paid
Dividend Payout Ratio = ( ) × 100
Net Income
​

121
=( ) × 100
363
​

= 33%

Answer: 33%​

9. Retention Ratio Calculation

Question:
If a company’s dividend payout ratio is 33%, what is its retention ratio?

Solution:

Retention Ratio = 1 − Dividend Payout Ratio

= 1 − 0.33

= 0.67

Answer: 67%​

10. Sustainable Growth Rate Calculation

Question:
If a company has ROE of 14% and a retention ratio of 67%, what is its sustainable growth rate?

Solution:

Sustainable Growth Rate = ROE × Retention Ratio

= 14% × 67%

= 9.38%

Answer: 9.38%​

These questions cover financial performance evaluation using ratio analysis from Lesson 10: Ratio Analysis (Continued). Let me know if
you need more details or additional problems! 🚀

continue with lesson 11

Here are 10 numerical-based questions from Lesson 11: The DuPont Identity of your ACC501 - Business Finance document, along with
solutions:

34/62
1. Return on Equity (ROE) Using DuPont Identity
Question:
A company has the following data:

Return on Assets (ROA) = 10.12%

Debt-Equity Ratio = 0.39

Using the DuPont Identity, calculate ROE.

Solution:

ROE = ROA × (1 + Debt-Equity Ratio)

= 10.12% × (1 + 0.39)

= 10.12% × 1.39

= 14.05%

Answer: 14% (Rounded)​

2. Equity Multiplier Calculation

Question:
If a company has a debt-equity ratio of 0.50, what is its equity multiplier?

Solution:

Equity Multiplier = 1 + Debt-Equity Ratio

= 1 + 0.50

= 1.50

Answer: 1.50​

3. Profit Margin from DuPont Identity

Question:
A company has:

ROE = 14%

Total Asset Turnover = 0.64

Equity Multiplier = 1.39

Find its Profit Margin.

Solution:
Using the DuPont Identity:

ROE = Profit Margin × Total Asset Turnover × Equity Multiplier

Rearrange for Profit Margin:

ROE
Profit Margin =
Total Asset Turnover × Equity Multiplier
​

14%
=
0.64 × 1.39
​

35/62
 14
=
0.8896
​

= 15.7%

Answer: 15.7%​

4. DuPont Identity Verification

Question:
A company reports:

Profit Margin = 15.7%

Total Asset Turnover = 0.64

Equity Multiplier = 1.39

Verify if the ROE is correctly calculated.

Solution:

ROE = 15.7% × 0.64 × 1.39

= 0.157 × 0.64 × 1.39

= 0.14 = 14%

Answer: ROE = 14% (Correct)​

5. Return on Assets (ROA) Calculation

Question:
If a company has:

Profit Margin = 12%

Total Asset Turnover = 0.80

Find its ROA.

Solution:

ROA = Profit Margin × Total Asset Turnover

= 12% × 0.80

= 9.6%

Answer: 9.6%​

6. Sustainable Growth Rate Calculation

Question:
A company has:

ROE = 14%

Retention Ratio = 67%

36/62
Find the Sustainable Growth Rate.

Solution:

Sustainable Growth Rate = ROE × Retention Ratio

= 14% × 67%

= 9.38%

Answer: 9.38%​

7. Debt-to-Equity Ratio from Equity Multiplier

Question:
A company has an equity multiplier of 2.0. What is its debt-to-equity ratio?

Solution:

Equity Multiplier = 1 + Debt-to-Equity Ratio

Debt-to-Equity Ratio = Equity Multiplier − 1

= 2.0 − 1

= 1.0

Answer: 1.0​

8. Effect of Leverage on ROE

Question:
If a company increases its debt-equity ratio, what happens to its ROE, assuming other factors remain constant?

Solution:
From the DuPont Identity:

ROE = ROA × (1 + Debt-Equity Ratio)

Since (1 + Debt-Equity Ratio) is increasing, ROE will also increase.

Answer: ROE increases​

9. ROE Without Debt

Question:
A company has:

ROA = 10%

Debt-to-Equity Ratio = 0

What is ROE?

Solution:
Since Debt-to-Equity Ratio = 0, the Equity Multiplier = 1.

ROE = ROA × Equity Multiplier

37/62
 = 10% × 1

= 10%

Answer: 10%​

10. Maximum Growth Rate Without External Financing

Question:
A firm wants to grow without raising external capital. It has:

ROA = 9%

Retention Ratio = 60%

Find its Internal Growth Rate.

Solution:

ROA × Retention Ratio

Internal Growth Rate =
1 − (ROA × Retention Ratio)
​

9% × 60%
=
1 − (9% × 60%)
​

5.4%
=
1 − 5.4%
​

5.4
= × 100
94.6
​

= 5.71%

Answer: 5.71%​

These questions cover ROE, ROA, the DuPont Identity, financial leverage, and growth rate calculations from Lesson 11: The DuPont
Identity. Let me know if you need additional modifications! 🚀

continue with lesson 12

Here are 10 numerical-based questions from Lesson 12: Using Financial Statements Information of your ACC501 - Business Finance
document, along with solutions:

1. Current Ratio Analysis

Question:
A company has current assets of $761 million and current liabilities of $486 million. What is its current ratio?

Solution:

Current Assets
Current Ratio =
Current Liabilities
​

761
=
486
​

38/62
 = 1.57

Answer: 1.57 times​

2. Debt-to-Equity Ratio Calculation

Question:
A company has total liabilities of $1,074 million and total equity of $805 million. What is its debt-to-equity ratio?

Solution:

Total Liabilities
Debt-to-Equity Ratio =
Total Equity
​

1, 074
=
805
​

= 1.33

Answer: 1.33 times​

3. Net Working Capital Calculation

Question:
A firm has total current assets of $761 million and total current liabilities of $486 million. What is its net working capital (NWC)?

Solution:

NWC = Current Assets − Current Liabilities

= 761 − 486

= 275

Answer: $275 million​

4. Return on Assets (ROA)

Question:
A company has net income of $363 million and total assets of $1,879 million. What is its ROA?

Solution:

Net Income
ROA = ( ) × 100
Total Assets
​

363
=( ) × 100
1, 879
​

= 19.3%

Answer: 19.3%​

5. Return on Equity (ROE)

39/62
Question:
A firm has net income of $363 million and shareholders’ equity of $805 million. What is its ROE?

Solution:

Net Income
ROE = ( ) × 100
Total Equity
​

363
=( ) × 100
805
​

= 45.1%

Answer: 45.1%​

6. Profit Margin Calculation

Question:
A company has net sales of $2,311 million and net income of $363 million. What is its profit margin?

Solution:

Net Income
Profit Margin = ( ) × 100
Net Sales
​

363
=( ) × 100
2, 311
​

= 15.7%

Answer: 15.7%​

7. Equity Multiplier Calculation

Question:
A firm has total assets of $1,879 million and total equity of $805 million. What is its equity multiplier?

Solution:

Total Assets
Equity Multiplier =
Total Equity
​

1, 879
=
805
​

= 2.33

Answer: 2.33 times​

8. Times Interest Earned (TIE) Ratio

Question:
A company has EBIT of $691 million and interest expense of $141 million. What is its Times Interest Earned (TIE) ratio?

Solution:

EBIT
TIE Ratio =
Interest Expense
​

40/62
 691
=
141
​

= 4.9

Answer: 4.9 times​

9. Dividend Payout Ratio

Question:
A company has net income of $363 million and pays dividends of $121 million. What is its dividend payout ratio?

Solution:

Dividends Paid
Dividend Payout Ratio = ( ) × 100
Net Income
​

121
=( ) × 100
363
​

= 33.3%

Answer: 33.3%​

10. Retention Ratio Calculation

Question:
If a company has a dividend payout ratio of 33.3%, what is its retention ratio?

Solution:

Retention Ratio = 1 − Dividend Payout Ratio

= 1 − 0.333

= 0.667

= 66.7%

Answer: 66.7%​

These questions cover financial statement analysis, profitability ratios, leverage ratios, and liquidity ratios from Lesson 12: Using
Financial Statements Information. Let me know if you need additional details or modifications! 🚀

continue with lesson 13

Here are 10 numerical-based questions from Lesson 13: Future Value of your ACC501 - Business Finance document, along with solutions:

1. Future Value Calculation (Simple Interest)

41/62
Question:
If you invest $10,000 in an 8% annual simple interest account for 90 days, what will be the total future value?

Solution:

FV = Principal + (Principal × Rate × Time)

90
= 10, 000 + (10, 000 × 0.08 × )
365
​

= 10, 000 + 197.26

= 10, 197.26

Answer: $10,197.26​

2. Future Value with Compound Interest

Question:
What will be the future value of $10,000 invested at 5% annual interest for 1 year with yearly compounding?

Solution:

F V = P (1 + r)t

= 10, 000(1.05)1

= 10, 500

Answer: $10,500​

3. Future Value for Multiple Years

Question:
A company deposits $100 at 10% annual interest. What is the future value after 3 years?

Solution:

F V = 100(1.10)3

= 100 × 1.331

= 133.10

Answer: $133.10​

4. Future Value with Different Compounding Periods

Question:
If $5,000 is invested at 6% annual interest for 2 years, what will be the future value if compounded quarterly?

Solution:

r nt
F V = P (1 + )
​

n
4×2
0.06
= 5, 000 (1 + )
4
​

42/62
 = 5, 000(1.015)8

= 5, 000 × 1.1265

= 5, 632.50

Answer: $5,632.50​

5. Future Value Interest Factor (FVIF) Calculation

Question:
Using the FVIF table, find the future value of $1,000 invested at 10% for 3 years.

Solution:
From the FVIF table:

F V IF (10%, 3) = 1.331

F V = 1, 000 × 1.331

= 1, 331

Answer: $1,331​

6. Doubling Money with Compound Interest

Question:
How long will it take to double $5,000 at 8% annual interest compounded annually?

Solution:
Using the Rule of 72:

72
Time =
Rate
​

72
=
8
​

= 9 years

Answer: 9 years​

7. Present Value Calculation

Question:
How much should be invested today at 7% annual interest to have $400 next year?

Solution:

FV
PV =
(1 + r)
​

400
=
1.07
​

= 373.83

Answer: $373.83​

43/62
8. Present Value for Multiple Years
Question:
How much should you invest today at 10% interest, compounded annually, to have $1,000 in 3 years?

Solution:

FV
PV =
(1 + r)t
​

1, 000
=
(1.10)3
​

1, 000
=
1.331
​

= 751.31

Answer: $751.31​

9. Future Value with Continuous Compounding

Question:
If $2,000 is invested at an 8% continuously compounded rate for 5 years, what is the future value?

Solution:

F V = P ert

= 2, 000 × e(0.08×5)

= 2, 000 × e0.4

= 2, 000 × 1.4918

= 2, 983.60

Answer: $2,983.60​

10. Present Value with Continuous Compounding

Question:
How much should you invest today to receive $5,000 in 4 years at 6% continuously compounded interest?

Solution:

P V = F V × e−rt

= 5, 000 × e(−0.06×4)

= 5, 000 × e−0.24

= 5, 000 × 0.7866

= 3, 933

Answer: $3,933​

44/62
These problems cover future value, present value, compound interest, continuous compounding, and financial growth projections
from Lesson 13: Future Value. Let me know if you need additional details or modifications! 🚀

continue with lesson 14

Here are 10 numerical-based questions from Lesson 14: Evaluating Investments of your ACC501 - Business Finance document, along
with solutions:

1. Present Value of an Investment

Question:
A company is considering purchasing an asset for $335, which will be sold for $400 in 3 years. If the discount rate is 10%, should the
company invest?

Solution:

FV
PV =
(1 + r)t
​

400
=
(1.10)3
​

400
=
1.331
​

= 300.53

Since PV ($300.53$) is less than the cost ($335$), the investment is not favorable.

Answer: No, the investment is not favorable​.

2. Future Value of an Investment

Question:
A company invests $335 at 10% annual return for 3 years. What is the future value?

Solution:

F V = P V × (1 + r)t

= 335 × (1.10)3

= 335 × 1.331

= 445.89

Answer: $445.89​.

3. Interest Rate Required to Reach a Future Value

Question:
A parent invests $5,000 today for their child’s college fund, expecting it to grow to $50,000 in 12 years. What annual interest rate is
needed?

Solution:

45/62
 F V = P V × (1 + r)t

50, 000 = 5, 000 × (1 + r)12

50, 000
(1 + r)12 =
5, 000
(1 + r)12 = 10

Taking the 12th root:

1 + r = 10(1/12)

1 + r = 1.2115

r = 0.2115 = 21.15%

Answer: 21.15% annual interest rate​.

4. Present Value Calculation for College Fund

Question:
A couple needs $50,000 in 12 years for their child’s education. If the investment earns 10% annually, how much should they invest today?

Solution:

FV
PV =
(1 + r)t
​

50, 000
=
(1.10)12
​

50, 000
=
3.1384
​

= 15, 933.58

Answer: $15,933.58 should be invested today​.

5. How Much to Invest to Become a Millionaire?

Question:
You are 21 years old and want $1,000,000 by age 65, earning 10% annually. How much should you invest today?

Solution:

FV
PV =
(1 + r)t
​

1, 000, 000
=
(1.10)44
​

1, 000, 000
=
45.259
​

= 15, 091

Answer: $15,091 should be invested today​.

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6. Future Value of a Long-Term Investment
Question:
A $1,000 investment grows at 12% annually for 30 years. What will it be worth?

Solution:

F V = P V × (1 + r)t

= 1, 000 × (1.12)30

Using FVIF(12%, 30) = 29.96 from the tables:

= 1, 000 × 29.96

= 29, 960

Answer: $29,960​.

7. Franklin’s Investment Growth Rate

Question:
Benjamin Franklin left $1,000 to Massachusetts and Pennsylvania in 1790, which grew to $4.5 million and $2 million, respectively, in 200
years. What was the annual growth rate?

Solution:

F V = P V × (1 + r)t

For Massachusetts:

4, 500, 000 = 1, 000 × (1 + r)200

Taking natural logarithms and solving for r:

ln(4, 500, 000) − ln(1, 000)

r=( )
200
​

r = 0.0421 = 4.21%

Answer: 4.21% annual growth rate​.

8. Evaluating a Loan Investment

Question:
A $10,000 loan is given at 8% annual simple interest for 90 days. What is the present value?

Solution:

FV
PV =
(1 + r × t
)
​

365
​

10, 000
= 90
(1 + 0.08 × 365 )
​

10, 000
=
1.0197
​

= 9, 806.56

Answer: $9,806.56​.

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9. Maximum Price to Pay for an Investment
Question:
An investment pays $200 in 1 year, $400 in 2 years, $600 in 3 years, and $800 in 4 years. If the discount rate is 12%, what is its present
value?

Solution:

200 400 600 800

PV = 1
+ 2
+ 3
+
(1.12) (1.12) (1.12) (1.12)4
​ ​ ​ ​

200 400 600 800

= + + +
1.12 1.2544 1.4049 1.5735
​ ​ ​ ​

= 178.57 + 318.88 + 427.07 + 508.41

= 1, 432.93

Answer: $1,432.93​.

10. How Long to Double an Investment?

Question:
At what rate does an investment double in 10 years?

Solution:
Using the Rule of 72:

72
r= ​

t
72
=
10
​

= 7.2%

Answer: 7.2% annual interest rate​.

These problems cover present value, future value, investment evaluation, and financial planning from Lesson 14: Evaluating
Investments. Let me know if you need additional modifications! 🚀

continue with lesson 15

Here are 10 numerical-based questions from Lesson 15: Annuities of your ACC501 - Business Finance document, along with solutions:

1. Present Value of an Annuity

Question:
You will receive $1,000 annually for 5 years at an interest rate of 5% per year. What is the present value of this annuity?

Solution:

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 1
P V = C × (1 − )÷r
(1 + r)t
​

1
= 1, 000 × (1 − ) ÷ 0.05
(1.05)5
​

= 1, 000 × (1 − 0.7835) ÷ 0.05

= 1, 000 × 4.3295

= 4, 329.50

Answer: $4,329.50​.

2. Future Value of an Annuity

Question:
You invest $500 annually at 6% interest for 4 years. What will be the future value of this annuity?

Solution:

(1 + r)t − 1
FV = C × ​

r
(1.06)4 − 1
= 500 ×
0.06
​

1.2624 − 1
= 500 ×
0.06
​

= 500 × 4.3734

= 2, 186.70

Answer: $2,186.70​.

3. Monthly Payment for a Car Loan

Question:
You want to buy a car for $24,000 and the bank offers a 4-year loan at 12% annual interest (1% per month). What will be the monthly
payment?

Solution:

1
P V A = C × (1 − )÷r
(1 + r)t
​

1
24, 000 = C × (1 − ) ÷ 0.01
(1.01)48
​

Using PVIFA(1%, 48) = 37.9740,

24, 000
C=
37.9740
​

= 632

Answer: $632 per month​.

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4. Present Value of a Lottery Winnings
Question:
A lottery offers $50,000 per year for 20 years at a discount rate of 8%. What is the present value of the winnings?

Solution:
Using PVIFA(8%, 20) = 9.8181,

P V = 50, 000 × 9.8181

= 490, 905

Answer: $490,905​.

5. Finding the Required Savings for Retirement

Question:
You need $1,000,000 at retirement in 25 years. You save $10,168.07 per year in an account earning 10% annually. Will you meet your
goal?

Solution:

(1 + r)t − 1
FV = C × ​

r
Using FVIFA(10%, 25) = 98.3471,

F V = 10, 168.07 × 98.3471

= 1, 000, 000

Answer: Yes, you will meet your goal​.

6. Annuity Due vs. Ordinary Annuity

Question:
A 4-year annuity of $400 per year earns 10% annually. What is the difference in present value between an annuity due and an ordinary
annuity?

Solution:
Using PVIFA(10%, 4) = 3.1699,

For an ordinary annuity:

P V = 400 × 3.1699 = 1, 267.95

For an annuity due:

P V = 1, 267.95 × (1.10) = 1, 394.75

Difference: $126.80​.

7. Loan Amount Calculation

Question:
You can afford $632 per month for a 48-month car loan at 1% monthly interest. What is the maximum loan amount?

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Solution:
Using PVIFA(1%, 48) = 37.9740,

P V A = 632 × 37.9740

= 24, 000

Answer: $24,000​.

8. Finding Annuity Payment for Mortgage

Question:
You borrow $150,000 for a 30-year mortgage at 6% annual interest (0.5% per month). What is the monthly payment?

Solution:
Using PVIFA(0.5%, 360) = 166.7916,

150, 000
C=
166.7916
​

= 899.33

Answer: $899.33 per month​.

9. Future Value of an Annuity Due

Question:
An annuity due of $500 per year is invested at 8% for 5 years. What is the future value?

Solution:
Using FVIFA(8%, 5) = 5.8666,

F V = 500 × 5.8666 × (1.08)

= 3, 171.97

Answer: $3,171.97​.

10. Present Value of a Perpetuity

Question:
You will receive $1,000 annually forever, and the discount rate is 6%. What is the present value?

Solution:

C
PV = ​

r
1, 000
=
0.06
​

= 16, 666.67

Answer: $16,666.67​.

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These problems cover annuities, perpetuities, loan amortization, and financial planning calculations from Lesson 15: Annuities. Let me
know if you need additional modifications! 🚀

continue with lesson 16

Here are 10 numerical-based questions from Lesson 16: Perpetuities of your ACC501 - Business Finance document, along with solutions:

1. Present Value of a Perpetuity

Question:
You expect to receive $1,000 per year forever. The discount rate is 6%. What is the present value of this perpetuity?

Solution:

C
PV = ​

r
1, 000
=
0.06
​

= 16, 666.67

Answer: $16,666.67​.

2. Present Value of a 5-Year Cash Flow vs. Perpetuity

Question:
A company will receive $1,000 annually for the next 5 years at a 6% discount rate. What is the present value of this set of cash flows?

Solution:
Using the Present Value Annuity Formula:

1
P V = C × (1 − )÷r
(1 + r)t
​

1
= 1, 000 × (1 − ) ÷ 0.06
(1.06)5
​

= 1, 000 × 4.212364

= 4, 212.36

Answer: $4,212.36​.

3. Future Value of a Perpetuity (Impossible Case)

Question:
What is the future value of a perpetuity after 50 years?

Solution:
Since a perpetuity continues indefinitely, it does not have a future value at a specific point in time.

Answer: Perpetuities do not have a future value​.

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4. Value of a Growing Perpetuity
Question:
You will receive $500 per year forever, but the payments grow at 3% annually. If the discount rate is 7%, what is the present value?

Solution:

C
PV =
r−g
​

500
=
0.07 − 0.03
​

500
=
0.04
​

= 12, 500

Answer: $12,500​.

5. Calculating Required Rate for a Perpetuity

Question:
A company wants to offer a perpetual annual dividend of $200 per share. If investors are willing to pay $2,500 per share, what is the
required rate of return?

Solution:

C
r= ​

PV
200
=
2, 500
​

= 0.08 = 8%

Answer: 8% required rate of return​.

6. Perpetuity with Delayed Payments

Question:
You will receive $800 per year forever, but the first payment starts in 3 years. The discount rate is 5%. What is the present value today?

Solution:
First, find the value of the perpetuity at Year 2:

800
P V2 = = 16, 000
0.05
​ ​

Then discount it back to Year 0:

16, 000
PV =
(1.05)2
​

16, 000
=
1.1025
​

= 14, 511.92

Answer: $14,511.92​.

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7. Perpetuity with Monthly Payments
Question:
A trust fund will pay $1,200 per month forever, and the annual discount rate is 9% (compounded monthly). What is the present value?

Solution:
Convert annual rate to monthly:

9%
r= = 0.0075
12
​

1, 200
PV =
0.0075
​

= 160, 000

Answer: $160,000​.

8. Value of a Scholarship Endowment

Question:
A university wants to provide a $20,000 annual scholarship forever. If the fund earns 5% per year, how much must be invested today?

Solution:

C
PV = ​

r
20, 000
=
0.05
​

= 400, 000

Answer: $400,000​.

9. Real vs. Nominal Perpetuity Calculation

Question:
If a perpetuity pays $1,000 annually, the nominal discount rate is 8%, and inflation is 3%, what is the real present value?

Solution:
Convert to real discount rate using Fisher Equation:

1.08
rreal = −1
1.03
​ ​

= 0.0485 = 4.85%

Now, calculate PV:

1, 000
PV =
0.0485
​

= 20, 618.56

Answer: $20,618.56​.

10. Perpetuity with Deferred Payments

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Question:
A company will pay $5,000 annually forever, but payments start in 6 years. The discount rate is 7%. What is the present value today?

Solution:
First, calculate PV at Year 5:

5, 000
P V5 = = 71, 428.57
0.07
​ ​

Now, discount it to Year 0:

71, 428.57
PV =
(1.07)5
​

71, 428.57
=
1.40255
​

= 50, 921.64

Answer: $50,921.64​.

These problems cover perpetuities, growing perpetuities, delayed cash flows, and real discount rates from Lesson 16: Perpetuities. Let
me know if you need additional details! 🚀

continue with lesson 17

Here are 10 numerical-based questions from Lesson 17: Effective Annual Rate (EAR) and APR of your ACC501 - Business Finance
document, along with solutions:

1. Effective Annual Rate (EAR) Calculation

Question:
A bank offers a 12% nominal interest rate compounded quarterly. What is the EAR?

Solution:
m
Quoted Rate
EAR = (1 + ) −1 ​

m
4
0.12
= (1 + ) −1
4
​

= (1.03)4 − 1

= 1.1255 − 1

= 12.55%

Answer: 12.55%​.

2. Future Value with Compounded Interest

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Question:
If you invest $100 in an account offering 12% compounded quarterly, how much will you have after one year?

Solution:

F V = P × (1 + r/m)m×t

= 100 × (1.03)4

= 100 × 1.1255

= 112.55

Answer: $112.55​.

3. Comparing Different Compounding Periods

Question:
Which of the following offers the highest effective annual rate (EAR)?

10% compounded annually

10% compounded quarterly

10% compounded monthly

10% compounded daily

Solution:
Using the EAR formula:

For quarterly (m=4):

EAR = (1.025)4 − 1 = 10.381%

For monthly (m=12):

EAR = (1.0083)12 − 1 = 10.471%

For daily (m=365):

EAR = (1.00027)365 − 1 = 10.515%

Answer: Daily compounding (10.515%) offers the highest EAR​.

4. APR to EAR Conversion

Question:
A credit card company charges 18% APR with monthly compounding. What is the EAR?

Solution:

0.18 12
EAR = (1 + ) −1
12
​

= (1.015)12 − 1

= 1.1956 − 1

= 19.56%

Answer: 19.56%​.

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5. Finding the Yield Over Two Years
Question:
A bank offers 12% compounded quarterly. How much will $100 be worth in two years?

Solution:

F V = 100 × (1.03)8

= 100 × 1.268

= 126.68

Answer: $126.68​.

6. Loan Interest Rate Analysis

Question:
A lender offers a 10% loan but compounds semiannually. What is the effective interest rate?

Solution:

EAR = (1 + 0.10/2)2 − 1

= (1.05)2 − 1

= 1.1025 − 1

= 10.25%

Answer: 10.25%​.

7. Interest on a Pure Discount Loan

Question:
A borrower will repay $25,000 in 5 years. If the discount rate is 12%, what is the present value?

Solution:

25, 000
PV =
(1.12)5
​

25, 000
=
1.7623
​

= 14, 186

Answer: $14,186​.

8. Credit Card Monthly Interest Rate

Question:
A credit card charges 24% APR. What is the monthly interest rate?

Solution:

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 24%
Monthly Rate =
12
​

= 2%

Answer: 2% per month​.

9. Loan Payment Calculation

Question:
A bank offers a 5-year loan of $10,000 at 6% APR with monthly payments. What is the monthly payment?

Solution:
Using the annuity formula:

P × r/m
PMT =
1 − (1 + r/m)−m×t
​

10, 000 × 0.06/12

=
1 − (1.005)−60
​

50
=
1 − 0.7408
​

50
=
0.2592
​

= 192.16

Answer: $192.16 per month​.

10. Comparing Loan Costs with Different APRs

Question:
A borrower is choosing between two loans:

Loan A: 8% APR, monthly compounding

Loan B: 7.8% APR, daily compounding

Which loan has the lower effective interest rate?

Solution:

For Loan A (Monthly Compounding):

EAR = (1 + 0.08/12)12 − 1

= (1.00667)12 − 1

= 8.30%

For Loan B (Daily Compounding):

EAR = (1 + 0.078/365)365 − 1

= (1.0002137)365 − 1

= 8.12%

Answer: Loan B (7.8% APR, daily compounding) is cheaper​.

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These problems cover Effective Annual Rate (EAR), Annual Percentage Rate (APR), compounding periods, loan interest, and present
value calculations from Lesson 17: Effective Annual Rate. Let me know if you need additional modifications! 🚀

continue with lesson 18

Here are 10 numerical-based questions from Lesson 18: Valuing a Bond of your ACC501 - Business Finance document, along with
solutions:

1. Bond Valuation at Par

Question:
A BMN Inc. bond has:

Face value = $1,000

Annual coupon payment = $100

Maturity = 20 years

Market required return = 10%

What is the value of the bond?

Solution:

Bond Value = PV of Coupons + PV of Face Value

1, 000
P Vface = = 1, 000 × 0.14864 = 148.64
(1.10)20
​ ​

1 − (1.10)−20
P Vcoupons = 100 × ( )
0.10
​ ​

= 100 × 8.5136 = 851.36

Total Bond Value = 148.64 + 851.36 = 1, 000

Answer: $1,000 (Par Value Bond)​.

2. Bond Valuation at Discount

Question:
If the required return increases to 12%, what is the new value of the bond?

Solution:

1, 000
P Vface = = 1, 000 × 0.10366 = 103.66
(1.12)20
​ ​

1 − (1.12)−20
P Vcoupons = 100 × ( )
0.12
​ ​

= 100 × 7.4694 = 746.94

Total Bond Value = 103.66 + 746.94 = 850.60

Answer: $850.60 (Discount Bond)​.

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3. Bond Valuation at Premium
Question:
If the required return decreases to 8%, what is the new value of the bond?

Solution:

1, 000
P Vface = = 1, 000 × 0.21455 = 214.55
(1.08)20
​ ​

1 − (1.08)−20
P Vcoupons = 100 × ( )
0.08
​ ​

= 100 × 9.8181 = 981.81

Total Bond Value = 214.55 + 981.81 = 1, 196.36

Answer: $1,196.36 (Premium Bond)​.

4. Finding Yield to Maturity (YTM)

Question:
A bond is selling for $900, has 10 years to maturity, $80 annual coupon payments, and $1,000 face value. What is its YTM?

Solution:
Using the trial and error method with the bond valuation formula:

1 − (1 + r)−10 1, 000
900 = 80 × ( )+
(1 + r)10
​ ​

Solving for r iteratively gives YTM = 9.86%.

Answer: 9.86%​.

5. Bond Price Sensitivity

Question:
What happens to the bond price if the interest rate increases?

Answer:
Bond prices and interest rates move inversely. If interest rates increase, bond prices decrease. Conversely, if rates decrease, bond prices
increase​.

6. Current Yield Calculation

Question:
A bond has:

Annual coupon payment = $80

Current market price = $900

What is the current yield?

Solution:

Annual Coupon
Current Yield =
Current Price
​

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 80
= = 8.89%
900
​

Answer: 8.89%​.

7. Bond Price with Semiannual Compounding

Question:
A 10-year bond pays $50 semiannually with a face value of $1,000. The market interest rate is 10% annually (or 5% semiannually). What
is its price?

Solution:

1, 000
P Vface = = 1, 000 × 0.3769 = 376.89
(1.05)20
​ ​

1 − (1.05)−20
P Vcoupons = 50 × ( )
0.05
​ ​

= 50 × 12.4622 = 623.11

Total Bond Value = 376.89 + 623.11 = 1, 000

Answer: $1,000 (Par Bond with Semiannual Compounding)​.

8. Bond Price with 15-Year Maturity

Question:
A BMN bond has a $100 annual coupon, 15 years to maturity, and a 10% market rate. What is its price?

Solution:
Using PV formulas:

1, 000
P Vface = = 239.39
(1.10)15
​ ​

1 − (1.10)−15
P Vcoupons = 100 × ( )
0.10
​ ​

= 100 × 7.6061 = 760.61

Total Bond Value = 239.39 + 760.61 = 1, 000

Answer: $1,000​.

9. Bond Yield to Maturity (YTM) for Discount Bond

Question:
A 20-year bond sells for $850, pays an $80 annual coupon, and has a $1,000 face value. Find its YTM.

Solution:
Using trial and error,

1 − (1 + r)−20 1, 000
850 = 80 × ( )+
(1 + r)20
​ ​

Solving for r, YTM ≈ 9.5%.

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Answer: 9.5%​.

10. Premium Bond's Yield to Call (YTC)

Question:
A 10-year bond with $100 annual coupon is callable in 5 years at $1,050. If its price is $1,150, what is the Yield to Call (YTC)?

Solution:
Using the call price instead of face value,

1 − (1 + r)−5 1, 050
1, 150 = 100 × ( )+
(1 + r)5
​ ​

Solving for r, YTC ≈ 7.8%.

Answer: 7.8%​.

These problems cover bond valuation, YTM, YTC, premium/discount bonds, and price sensitivity from Lesson 18: Valuing a Bond. Let
me know if you need modifications! 🚀

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