Exam 2 Summer 2012 Solved

7/29/2019 Exam 2 Summer 2012 Solved

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IMPORTANT: SAVE THIS SPREADSHEET TO THE DESKTOP OF THE

COMPUTER YOU ARE USING WITH YOUR NAME IN THE FILENAME.

RESAVE IT OFTEN WHILE YOU ARE WORKING ON IT.

NOTHING SHOULD BE USED OR ACCESSED BY YOU DURING THIS

TEST EXCEPT THE COMPUTER YOU ARE USING AND THIS FILE, ANDBLACKBOARD WHEN YOU SUBMIT YOUR COMPLETED EXAM.

.

YOU MAY NOT ACCESS ANY PROGRAM ON YOUR COMPUTER OTHER THAN EXC. .

.

There are 7 tabbed pages in this exam spreadsheet including this one.

Points are shown on each tab. Partial credit will be given where possible.

The last tab contains multiple choice and true/false questions that count for

20 points of the 100 point total for the exam.

SAVE THIS FILE BACK TO YOUR DESKTOP WITH YOUR NAME IN THE FILENAME.

RESAVE IT OFTEN WHILE YOU ARE COMPLETING IT.

When you have completed this exam spreadsheet:

Save it one last time to the desktop of your computer.Close Excel

Tell your proctor that you have finished.

Complete the written portion and give it to your proctor.


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L


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INPUTS:

Amount of Loan: $240,000 Total Interest Paid

Term of Loan in Years 3 over life of loan

Annual Interest Rate on Loan: 6.40%

Balloon Payment 50,000 Effective Annual

Payment Frequency Annual Interest Rate

aymen

Number Payment Interest Principal Balance

0 $240,000.00

1 $74,807.53 15,360.00 $59,447.53 180,552.47

2 $74,807.53 11,555.36 $63,252.17 117,300.31

3 $124,807.53 7,507.22 $117,300.31 -

4

5

67

8

9

10

11

12

13

14

INSTRUCTIONS:

Use the space beginning in Row 29 to create an amoritzation table model that will work for ANY

changeable inputs are in red. Create restrictions on the input cells that prevent users from enteri

The amount of the loan must be a positive number.

The balloon payment must be a positive number or zero and must be less than the amount of thThe term of the loan can be 1, 2, 3, 4, or 5 years.

The interest rate can be between 5% and 15%.

The payment frequency can be annual, quarterly, or monthly. Use a drop-down list in Cell F25 wi

the choices. Use the results from that cell to set the payment frequency for computation in the t

Each row in your table should show the monthly payment, the interest portion of that payment,

the balance immediately following that payment for all payments within the term of the loan. Ro

of the loan should show nothing (be blank) except for the payment number. All values in the tabl

In cell H22, create a formula that computes the total dollar amount of interest that will be paid o

In cell H25, create a formula that computes the effective annual interest rate for the loan given t


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15

16

17

18

19

20

2122

23

24

25

26

27

28

29

30

31

3233

34

35

36

37

38

39

40

41

4243

44

45

46

47

48

49

50

51

52

5354

55

56

57

58

59

60


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Annual 1 1

34,422.58$ Quarterly 2

Monthly 3

4

6.400% 5

LLOWABLE values of the inputs. User-

ng values that are not allowed.

loan.

h "Annual", "Quarterly" and "Monthly" as

ble.

he principal portion of that payment, and

ws in the table that are beyond the term

e should be positive numbers or zero.

ver the life of the loan. given the inputs.

e inputs.


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1


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Loan Amount 60,000$ Required regular p

Term in Years 20 not including the s

Annual Interest Rate 6.50%

Supplemental Monthly Payment 1,200$ Number of paymeoff the loan with t

supplemental pa

Difference betwee

amount of intere

of the loan with t

and the dollar am

will be paid over t

the regular and s

are made every m

Instructions:

The inputs below represent a loan with monthly payments. The loan will have

required monthly payment, but the borrower can pay more than the required

The input for the supplemental monthly payment is the additional amount tha

paid each month that the loan is in effect.

Create a formula that computes the number of payments that will be needed t

the loan if the same supplemental monthly payment is made throughout the li

loan.

Also create whatever formulas are necessary to compute the difference betwe

total dollar amount of interest that would have been paid on the loan if only th

required payments were made and the total dollar amount of interest that will

if the supplemental monthly payment is made every month.


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ayment on the loan

pplemental payment $447.34

ts needed to payhe regular and

ments made every month 40.68

n the total dollar

t paid over this life

e regular payment

ount of interest that

he life of the loan if

pplemental payments

onth. 40,347.66$

a

payment.

t will be

o pay off

fe of the

en the

e

l be paid


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You are planning for your retirement. Your goal is to accumulate enough money in

your retirement account to pay out $200,00 per year for 30 years starting on January 1, 2050.

The account will have a zero balance after the 30 withdrawals. There will be one payout per year.

You plan to make annual deposits into your retirement account on January 1 of every year from 201

to 2045 (33 deposits). The first deposit will be $40,000. The remaining 32 deposits will all be equal to

but the amount is not yet known. That is the amount you must compute.

The average annual interest rate you expect to earn on the account is given in the green input cell be

In the space provided, create whatever formulas are needed to compute the dollar amount of the un

annual deposits that will be needed to meet your goal.

Ignore taxes. Lable your computation steps to enable partial credit. Your formulas should work

for any positive value of the input interest rate.

Average annual interest rate earned on the account: 6.75%

#1 Amount needed on1/1/2049 $2,545,431.01

#2 PV of above on 01/01/2013 $242,391.57

#3 Subtract the first payment from #2 $202,391.57

#3 Amount of each of the 32 regualar payments th $15,589.18


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each other,

low.

known

Cash Account

t Date Action Flow Balance

0 1/1/2013 Deposit 1 40,000.00 40,000.00

1 1/1/2014 Deposit 2 $15,589.18 $58,289.18

2 1/1/2015 Deposit 3 $15,589.18 $77,812.89

3 1/1/2016 Deposit 4 $15,589.18 $98,654.44

4 1/1/2017 Deposit 5 $15,589.18 $120,902.80

5 1/1/2018 Deposit 6 $15,589.18 $144,652.92

6 1/1/2019 Deposit 7 $15,589.18 $170,006.17

7 1/1/2020 Deposit 8 $15,589.18 $197,070.77

8 1/1/2021 Deposit 9 $15,589.18 $225,962.23

9 1/1/2022 Deposit 10 $15,589.18 $256,803.86

10 1/1/2023 Deposit 11 $15,589.18 $289,727.31

11 1/1/2024 Deposit 12 $15,589.18 $324,873.0812 1/1/2025 Deposit 13 $15,589.18 $362,391.20

13 1/1/2026 Deposit 14 $15,589.18 $402,441.79

14 1/1/2027 Deposit 15 $15,589.18 $445,195.79

15 1/1/2028 Deposit 16 $15,589.18 $490,835.69

16 1/1/2029 Deposit 17 $15,589.18 $539,556.28

17 1/1/2030 Deposit 18 $15,589.18 $591,565.52

18 1/1/2031 Deposit 19 $15,589.18 $647,085.37

19 1/1/2032 Deposit 20 $15,589.18 $706,352.82

20 1/1/2033 Deposit 21 $15,589.18 $769,620.81

21 1/1/2034 Deposit 22 $15,589.18 $837,159.40

22 1/1/2035 Deposit 23 $15,589.18 $909,256.8423 1/1/2036 Deposit 24 $15,589.18 $986,220.86

24 1/1/2037 Deposit 25 $15,589.18 $1,068,379.96

25 1/1/2038 Deposit 26 $15,589.18 $1,156,084.78

26 1/1/2039 Deposit 27 $15,589.18 $1,249,709.69

27 1/1/2040 Deposit 28 $15,589.18 $1,349,654.28

28 1/1/2041 Deposit 29 $15,589.18 $1,456,345.12

29 1/1/2042 Deposit 30 $15,589.18 $1,570,237.60

30 1/1/2043 Deposit 31 $15,589.18 $1,691,817.82


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31 1/1/2044 Deposit 32 $15,589.18 $1,821,604.71

32 1/1/2045 Deposit 33 $15,589.18 $1,960,152.21

33 1/1/2046 Do Nothing 0 $2,092,462.48

34 1/1/2047 Do Nothing 0 $2,233,703.70

35 1/1/2048 Do Nothing 0 $2,384,478.70

36 1/1/2049 Do Nothing 0 $2,545,431.01

1/1/2050 Withdrawal 1 ($200,000.00) $2,517,247.611/1/2051 Withdrawal 2 ($200,000.00) $2,487,161.82

1/1/2052 Withdrawal 3 ($200,000.00) $2,455,045.24

1/1/2053 Withdrawal 4 ($200,000.00) $2,420,760.80

1/1/2054 Withdrawal 5 ($200,000.00) $2,384,162.15

1/1/2055 Withdrawal 6 ($200,000.00) $2,345,093.10

1/1/2056 Withdrawal 7 ($200,000.00) $2,303,386.88

1/1/2057 Withdrawal 8 ($200,000.00) $2,258,865.50

1/1/2058 Withdrawal 9 ($200,000.00) $2,211,338.92

1/1/2059 Withdrawal 10 ($200,000.00) $2,160,604.29

1/1/2060 Withdrawal 11 ($200,000.00) $2,106,445.08


1/1/2063 Withdrawal 14 ($200,000.00) $1,921,029.27

1/1/2064 Withdrawal 15 ($200,000.00) $1,850,698.74

1/1/2065 Withdrawal 16 ($200,000.00) $1,775,620.91

1/1/2066 Withdrawal 17 ($200,000.00) $1,695,475.32

1/1/2067 Withdrawal 18 ($200,000.00) $1,609,919.90

1/1/2068 Withdrawal 19 ($200,000.00) $1,518,589.50

1/1/2069 Withdrawal 20 ($200,000.00) $1,421,094.29

1/1/2070 Withdrawal 21 ($200,000.00) $1,317,018.15


1/1/2073 Withdrawal 24 ($200,000.00) $960,710.11

1/1/2074 Withdrawal 25 ($200,000.00) $825,558.04

1/1/2075 Withdrawal 26 ($200,000.00) $681,283.21

1/1/2076 Withdrawal 27 ($200,000.00) $527,269.83

1/1/2077 Withdrawal 28 ($200,000.00) $362,860.54

1/1/2078 Withdrawal 29 ($200,000.00) $187,353.63

1/1/2079 Withdrawal 30 ($200,000.00) ($0.00)


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Quarterly 15.865%

Monthly 16.075%

Daily 16.180%

Continuous 16.183%

3. Consider the following cash flow timeline:

The total present value of all 10 cash flows, including the four missing ones, is $4500

if the discount rate is 10% per year compounded annually. The four missing cash flows,

represented by $X in the timeline, are all identical amounts. In the space below,

create whatever formulas are needed to find the value of $X. There are no inputs so you can

hard-code the numbers in the formulas but the formulas must be shown. [ 6 Points ]

PV at t=0 of CF0 $500.00

PV at t=0 of CF1 $454.55

PV at t=0 of CF6-10 $1,273.28

Total PV at t=0 of known CFs $2,227.82

PV at t=0 of unknowns $2,272.18

Value of unknowns at t=1 $2,499.40

Value of X's $788.49

4. In the yellow cell below, create ONE formula that will returnt e rom t e ta e at t e rig t or t e year

given in the input cell. [3 Points]

Input Cell for Year 5

NET INCOME 225

In the green cell below, create a formula that extrapolates the linear trend from the

5. 7 years of sales and uses it to estimate 2012 sales. [3 Points]

Year Sales

2005 1,345,000$

2006 1,472,000$

Time: 0 1 2 3 4 5 6 7 8

$500 $500 $X $X $500 $5$500$X$X


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2007 1,725,000$

2008 1,654,000$

2009 1,925,000$

2010 2,164,500$

2011 2,045,000$

2012 2,287,929$


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ear a es et ncome

1 2500 1800 300 125

2 3000 2200 315 150

3 3250 2400 325 162

4 4000 3100 400 200

5 4500 3300 430 225

6 5200 3900 450 260

7 5900 4400 500 295

8 6500 4800 550 325

9 8000 6000 590 400

10 9250 6900 700 475

9

00 $750

10

$500


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2011 2012 2013

Sales 3,514,000 3,795,120 3,908,974Cost of Goods Sold 2,284,100 2,656,584 2,770,485

Gross Profit 1,229,900 1,138,536 1,138,489

Selling and G&A Expenses 350,000 375,000 387,795Fixed Expenses 120,000 125,000 130,000Depreciation Expense 30,000 32,500 75,000

EBIT 729,900 606,036 545,694Interest Expense 56,000 62,900 45,090

Earnings Before Taxes 673,900 543,136 500,604Taxes 235,800 207,600 170,205

Net Income 438,100 335,536 330,398

Assets 2011 2012 2013

Cash and Equivalents 52,000 118,036 118,036

Accounts Receivable 406,000 540,000 503,917

Inventory 854,000 740,000 856,095

Total Current Assets 1,312,000 1,398,036 1,478,048

Plant & Equipment 429,000 580,000 830,000

Accumulated Depreciation 126,000 158,500 233,500

Net Fixed Assets 303,000 421,500 596,500

Total Assets 1,615,000 1,819,536 2,074,548

Liabilities and Owner's Equity

Accounts Payable 130,000 150,000 149,556

Short-term Notes Payable 179,000 210,000 190,000

Other Current Liabilities 118,000 85,000 95,000

Total Current Liabilities 427,000 445,000 434,556

Long-term Debt 614,000 500,000 525,000

Total Liabilities 1,041,000 945,000 959,556

Common Stock 395,000 395,000 395,000

Retained Earnings 179,000 479,536 409,934

Total Shareholder's Equity 574,000 874,536 804,934

Total Liabilities and Owner's Equity 1,615,000 1,819,536 1,764,490

Excess/(Deficit) Financing for 2013 (310,058)$

Income Statement

Balance Sheet


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TRUE 1.

TRUE 2.

FALSE 3.

FALSE 4.

FALSE 5.

C 6.

A.

B.

C.

D.

E.

A 7.

A.

B.

C.

D.

E.

FALSE 8.


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E 9.

A.

B.C.

D.

E.

TRUE 10.

1 TRUE

2 TRUE

3 FALSE

4 FALSE

5 FALSE

6 C

7 A

8 FALSE

9 E

10 TRUE


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Objective Section - 20 Points Possible-2 Points for each incorrect answer.

For True/False questions, enter TRUE or FALSE in the yellow cell.

For multiple choice questions, enter the letter of the best reponse in the yellow cell.

the discount rate decreases as the risk of an investment increases.

as the discount rate increases, the present value of an investment increases.

as the discount rate increases, the future value of an investment increases.

A and B are both correct.

A and C are both correct.

It will increase.

It will remain unchanged.

It will decrease.

Two of the above.

None of the above.

For all positive discount rates,

The expected rate of return on an investment is the rate that makes the present value of

the expected cash inflows equal the present value of the expected cash outflows. (True or

false?)

A series of identical cash flows that are expected to occur at equal time periods for a

specified number of periods is a annuity. (True or false?)

The future value of a current deposit decreases as the expected rate of inflation

increases, other things equal. (True or False?)

According to financial theory, investors who take more risk make higher returns than

those who take less risk. (True or false?)

The beta () coefficient is a measure of a stock's total risk or variance when it is held in

isolation.

Today is January 1st. You have an investment account with a current balance of $10,000.

The interest rate on the account is 12.5% per year compounded daily. Suppose you

withdraw exactly $1,133.25 on Dec. 31st of each year and leave the rest of the money in

the account to gain interest. If you observe the account balance on January 1st of each

year, which of the following best describes the behavior of the account balance over

time?

In a world with no risk and no inflation, rational investors would not require any interest

to lend their money to someone else for a period of time. (True or False?)


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Accounts receivable

Account payableInventory

Cost of Goods Sold

All of the above would typically maintain the same percentage relationship to sales.

DO NOT CHANGE ANYTHING BELOW THIS LINE

When projecting pro-forma income statements and balance sheets using the percent of

sales method, which of the following are typically not assumed to maintain the same

percentage ralationship to sales over time?

The effective annual interest rate on a loan can never be less than the "nominal" or

"stated" rate on the loan. (True or false?)


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Exam 2 Summer 2012 Solved