1. DEVRY FIN 515 Week 4 Midterm Check this A+ tutorial guideline at http://www.assignmentcloud.com/fin-515-devry/fin-515-week-4-midterm For more classes visit http://www.assignmentcloud.com FIN 515 Week 4 Midterm 1. (TCO G) The firm’s asset turnover measures 2. (TCO G) Suppose Novak Company experienced a reduction in its ROE over the last year. This fall could be attributed to 3. (TCO B) You plan on retiring in 20 years. You currently have $275,000 and think you will need $1,000,000 to retire. Assuming you don’t deposit any additional money into the account, what annual return will you need to earn to meet this goal? 4. (TCO B) You take out a 4 year car loan for $18,000. The loan has a 4% annual interest rate. The payments are made monthly. What are the monthly payments? Show your work 5. (TCO B) You currently have $10,000 in your retirement account. If you deposit $500 per month and the account pays 5% interest, how much will be in the account in 10 years? Show your work. 6. (TCO B) You have a two children, A and B. Child A is not going to college but is working in a business to learn the ropes. Child A plans on opening a business someday. Child B is attending college. You put a certain amount of money into an account. From this account, Child B will receive $2,000 per month for the next four years. Whatever is left at that time will go to Child A to help start the business. You want Child A to receive $96,000 at that time. The account pays 7% annually, compounded monthly. How much money do you need to start the account? Show your work.

2. (1 ) (TCO A) Which of the following statements is CORRECT? (Points : 10) (a) It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. (b) Corporations face fewer regulations than sole proprietorships. (c) One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level. (d) One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. (e) If a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business. (2) (TCO G) A security analyst obtained the following information from Prestopino Products’ financial statements: Retained earnings at the end of 2009 were $700,000, but retained earnings at the end of 2010 had declined to $320,000. The company does not pay dividends. The company’s depreciation expense is its only non-cash expense; it has no amortization charges. The company has no non-cash revenues. The company’s net cash flow (NCF) for 2010 was $150,000. On the basis of this information, which of the following statements is CORRECT? (Points : 10) (a) Prestopino had negative net income in 2010. ( b ) Prestopino’s depreciation expense in 2010 was less than $150,000. (c) Prestopino had positive net income in 2010, but its income was less than its 2009 income. (d) Prestopino’s NCF in 2010 must be higher than its NCF in 2009. (e) Prestopino’s cash on the balance sheet at the end of 2010 must be lower than the cash it had on the balance sheet at the end of 2009. (3) TCO G) Beranek Corp. has $410,000 of assets, and it uses no debt—it is financed only with common equity. The new CFO wants to employ enough debt to bring the debt/assets ratio to 40%, using the proceeds from the borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio? (Points : 10) $155,800 $164,000 $172,200 $180,810 $189,851 (4) (TCO B) You deposit $1,000 today in a savings account that pays 3.5% interest, compounded annually. How much will your account be worth at the end of 25 years? (Points : 10)