FIN 500 SEU Financial Ratios and Basics of Time Value of Money Excel Worksheet

Module 4 Critical Thinking Assignment:

Financial Ratios and Basics of Time Value of Money (TVM)

*Complete the problems from Module 3 and Module 4 in an Excel spreadsheet. Be sure to show your work to receive credit; no hard keys.

Problem 4-1: Compound Interest

To what amount will the following investments accumulate?

a. 4,500 SAR invested for 8 years at 10% compounded annually

b. 10,000 SAR invested for 10 years at 10% compounded annually

c. 8,000 SAR invested for 7 years at 12% compounded annually

d. 20,000 SAR invested for 6 years at 5% compounded annually

Problem 4-2: Future value calculations

You are hoping to purchase a house in the future and recently received an inheritance of 100,000 SAR.

You like to use your inheritance for a down payment for the house.

a. If you use your inheritance in an account that generates 6% returns compounded annually, how many years will it take before your money grows to 750,000SAR?

b. If you let your money grow for 15 years at 8%, how much will you have in your account?

Problem 4-3: Present value calculations

What is the present value of the following future amounts?

a. 15,500 SAR received from 5 years from now at 8%.

b. 105,500 SAR received from 10 years from now at 10%

c. 35,500 SAR received from 15 years from now at 12%.

d. 10,500 SAR received from 8 years from now at 7%.

Problem 4-4 Financial Ratios

The Balance Sheet and the Income Statement for ABC Manufacturing Corporation are as follows:

DATA (All amounts in SAR unless otherwise indicated, all sales are on credit and no hard keys.)

Balance Sheet:

ABC Corporation Balance Sheet

2019

Cash

310

Accounts receivable

685

Inventories

600

Other current assets

105

Total current assets

1,700

Gross fixed assets

3,750

Accumulated depreciation

-1,500

Net fixed assets

2,250

Total assets

3,950

LIABILITIES (DEBT) AND EQUITY

Accounts payable

350

Short-term notes payable

250

Total current liabilities

600

Long-term debt

950

Total liabilities

1,550

Common stock (par & paid in capital)

1,050

Retained earnings

1,475

Total common equity

2,400

Total liabilities and equity

3,950

ABC Corporation Income Statement

2019

Sales

6,000

Cost of goods sold

-3,700

Gross profits

2,300

Operating expenses:

Selling and G&A expenses

-820

Depreciation expenses

-340

Total operating expenses

-1,160

Operating income (earnings before interest and taxes)

1,140

Interest expense

-200

Earnings before taxes

940

Income taxes

-230

Net Income

710

Number of shares (thousands)

160

Dividends (thousands)

120

Market price per share

40

Calculate the following ratios:

Current ratio

Acid-test ratio

Days in receivables

Days in inventories

Operating return on assets

Operating profit margin

Total asset turnover

Fixed asset turnover

Debt ratio

Times interest earned

Return on equity

Earnings per share

Dividends per share

Price/Earnings

Book value per share

Market/Book

Problem 4-5: Present value of annuity calculations

What is the present value of a 5-year annuity that pays 800SAR, given a 8% discount rate?

Problem 4-6: Future value of annuity calculations

Find the future value at the end of year 5 of an annuity that pays 800SAR

per year for 5 years compounded at 8% annually. What would be the future value of this annuity?

Problem 4-7: Annuity Payments

You want to have 1,000,000SAR in 30 years by making equal end-of-the-year deposits into a tax-deferred account paying 7.75% annually. What annual amount should you deposit?

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