A.Answer the following questions
1.What is the difference between book value and market value? Which should we use for decision-making purposes? ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
2. * Current Accounts
2009: Current Assets= 4,400; Current Liabilities= 1,500
2008: Current Assets= 3,500; Current Liabilities= 1,200
* Fixed Assets and Depreciation
2009: Net Fixed Assets= 3,400; 2008: Net Fixed Assets= 3,100
* Long-term Debt and Equity (R.E. not given)
2009: Long-term debt= 4,000; Common stock & APIC = 400
2008: Long-term debt= 3,950; Common stock & APIC = 400
* Income Statement
EBIT = 2,000; Taxes = 300
Interest Expense = 350; Dividends = 500
Depreciation Expense = 400
2.What is the total asset for 2009?
3.What is the total liabilities for 2009?
4.What is the net income?
5.What is the difference between simple interest and compound interest?
Suppose you have $500 to invest and you believe that you can earn 8% per year over the next 15 years.
6.How much would you have at the end of 15 years using compound interest?
FV with compound interest = PV*(1 + r)t
7.How much would you have using simple interest
FV with simple interest = principal (PV) + (principal × rate × time)
8.Suppose you need $15,000 in 3 years. If you can earn 6% annually, how much do you need to invest today?
PV = FV / (1 + r)t
9.You are offered the following investments:
-You can invest $500 today and receive $600 in 5 years. The investment is low risk.
-You can invest the $500 in a bank account paying 4%.
What is the implied interest rate for the first choice, and which investment should you choose?
r = [(FV / PV)1/t ]– 1
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