Finance 330

UMUC
Economics and Finance Department

FINC 330 Business Finance
Semester: Summer 2011
Instructor: Dr. Emmanuel Anoruo Instructions: 1. Answer only 15 questions 2. Show all work 1)

Given the financial data for New Electronic World, Inc. (NEW), compute the following measures of cash flows for the NEW for the year ended December 31, 2005 (a) Operating Cash Flow. (b) Free Cash Flow.

For the year ended December 31,

EBIT + DEPR – TAXES
30000+3000-8000= 25000
OCF=25000
OCF-INV-FIXED ASSETS
25000-3000-2000=20,000

2)

Meese Paper Distributors, Inc. has before-tax earnings of $1,900,000. Calculate the amount of the total tax liability. 646000

113 900 + (0.34 x [1,900,000-335000])
113 900 + (0.34 x 1,565,000)
113900 + 532100 = 646000

3) Calculate the future value of $4,600 received today if it is deposited at 9 percent for three years. Rate | 9% | Nper | 3 | Pmt | 0 | Pv | 4600 | Fv | ($5,957.13) |

Rate | 14% | Nper | 15 | Pmt | 0 | Pv | ($12,468.59) | Fv | $89,000.00 |

5)

Nico establishes a seven-year, 8 percent loan with a bank requiring annual end-of-year payments of $960.43. Calculate the original principal amount.

Rate | 8% | Nper | 7 | Pmt | 960.43 | Pv | ($5,000.35) | Fv | $0.00 |

Rate | 10% | Nper | 4 | Pmt | 3900 | Pv | ($12,362.48) | Fv | $0.00 |

6)

Dottie has decided to set up an account that will pay her granddaughter (Lexi) $5,000 a year indefinitely. How much should Dottie deposit in an account paying 8 percent annual interest?

PV = 5000 / 0.08 = 62500

7)

Calculate the present value of an annuity of $3,900 each year for four years, assuming an opportunity cost of 10 percent.

8) Calculate the future value of an annuity of $5,000 each year for eight years, deposited at 6 percent. Rate | 6% | Nper | 8 | Pmt | 5000 | Pv | $0.00 | Fv | ($49,487.34) |

9)

Calculate the present value of a