**Calculate the dividends, net of capital contribution**

Finance study guide

2005 2006

Operation

assets

2000

2700

Marketable debt

security

400 100

Operating

liabilities (100) (300)

Bonds

payable (1400)

(1300)

Book value

$900 $1200

Sales 2100

Operating

expenses

(1677)

Interest

revenue

27

Interest

expenses (137)

Tax expense

(rate=34%) (106)

Earning

(net) 207

a. Calculate the dividends, net of capital contribution, for

2006.

b. Calculate ROCE, use average net book value in the

denominator.

c. Calculate RNOA for 2006, use the average net operating assets in

the denominator.

d. 1. Supply the numbers for the formula ROCE = pm*ato+(financial

leverage*(RNOA – BORROWING COST)

• The firm’s short term borrowing rate is 4.5% after tax, supply

the numbers for the formula. @ RNOA = ROOA +(OLLEV * OLSPREAD)

e. repeat the exercise in part a using the

following information

2005 2006

Operation

assets

2000 2700

Marketable debt

security

800 1000

Operating

liabilities (100) (300)

Bonds value

(net)

2700 3400

Sales

2100

Operating

expenses

(1677)

Interest

revenue

90

tax expense

(rate=34%) (174)

Earning

(net) 339

(Finance Class) Future Value and Required Annuity Payment

Question 1

Fine the future values of the following ordinary annuities:

a. FV of $400 each 6 months for 5 years at a nominal

rate of 12%, compounded semiannually?

b. Fine of $200 each 3 months for 5 years at a nominal

rate of 12%, compounded quarterly?

c. The annuties described in parts a and b have the same

amount of money paid into them during the 5-year period and both

earn interest at the same nominal rate, tye annunity in bart b

earns $101.75 more that the one in part a over the 5

years. why does this occur?

Question 2

Assume that your father is not 50 years old, that he plans to

retire in 10 years, and that he expects to live for 25 years after

he retires, that is until he is 85. He wants his first

retirement payment to have the same purchasing power at the time he

retires as $40,000 has today. He wants all his

subsequent retirement payments to be equal to his first retirement

payment (do not let the retirements grow with

inflation: he realizes that the real value of his

retirement income will decline year by year after he

retires). His retirement income will began the day he

retires, 10 years from today, and he will than get 24 additional

annual payments. Inflation is expected to be 5% per year

from today forward; he currently has $100,000 saved up; and he

expects to earn a return on his savings of 8% per year, annual

compounding. To the nearest dollar, how much must he save during

each of the next 10 years (with equal deposits being made at the

end of each year) to meet his retirement

goals? (Hint: neither the amount he saves nor

the amount he withdraws upon retirement is a growing

annuity

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