Answers to Problems. 1. (3 points) An asset can be purchased today for $1,000 that will return a single cash flow of $2,500 in 10years. What is the annual percentage return?9.60%2. (3 points) A loan in the amount of $12,000 is to be repaid in 4 equal annual payments. The annual interest rate is 10%. Calculate the amount of the annual payment.$3,785.653. (3 points) An asset is expected to provide cash flows at the end of each year as shown below:Year Cash Flow 1 1,000 2 2,000 3 3,000 4 4,000The interest rate is 12%. Calculate the total present value of the cash flows.$7,164.664. (6 points) A savings account pays 8%, compounded quarterly.(a) If you deposit $1,000 in the account, what is your balance at the end of 5 years?$1,485.95(b) Calculate the effective annual rate earned on the account. 8.24%5. (6 points) You wish to retire in 30 years with an annual income of $40,000 per year, and you want to receive the income in a single payment at the beginning of each year. You expect to live 25 years after you retire. You expect to earn 9% on your retirement account.(a) How much do you need to accumulate at your retirement date? $428,264.47(b) You intend to fund your retirement account by making equal annual deposits at the end of each year for the next 30 years, starting now. How much must you deposit each year?$3,141.906. (10 points) Beta Testing Corp. is preparing a cash budget for the next quarter. The beginning cash balance on April 1 is $22,000. The minimum cash balance is $20,000. The results of the collections and payments worksheets are shown below:Month April May Collections 95,000 110,000Payments 109,000 114,000Net cash flow (14,000) (4,000)Beginning cash balance 22,000 8,000Ending cash balance 8,000 4,000Minimum cash balance 20,000 20,000Excess cash (required financing) (12,000) (16,000)a. Complete the cash budget by filling in the numbers.b. What is the maximum amount of financing required during the period?$16,000Dana Dairy ProductsIncome Statement For the Year Ended December 31, 2008_________________________________________________________________Sales Revenue $100,000Less: Cost of Goods Sold 87,000Gross Profits $ 13,000Less: Operating Expenses 11,000Operating Profits $ 2,000Less: Interest Expense 500Net Profits Before Taxes $ 1,500Less: Taxes (40%) 600Net Profits After Taxes $ 900Dana Dairy ProductsBalance Sheet as of December 31, 2008ASSETS_________________________________________________________________Cash $ 1,000Accounts Receivable 8,900Inventories 4,350 -------- Total Current Assets $14,250Gross Fixed Assets $35,000Less: Accumulated Depreciation 13,250Net Fixed Assets 21,750 -------- Total Assets $36,000Liabilities & Stockholders' Equity_________________________________________________________________Accounts Payable $ 9,000Accruals 6,675 Total Current Liabilities $15,675Long - term Debts 4,125 Total Liabilities $19,800Common Stock 1,000Retained Earnings 15,200 Total Stockholders' Equity $16,200 Total Liab. & S.E. $36,000Dana Dairy Products Key Ratios____________________________________________________________ Industry Actual Actual Average 2007 2008_________________________________________________________________Current Ratio 1.3 1.0 .91Quick Ratio 0.8 0.75 .63Average collection Period 23 days 30 days 32.5 daysInventory Turnover 18 19 20Debt Ratio 64.7% 50% 55%Times Interest Earned 4.8 5.5 4.0Gross Profit Margin 15.2% 12.0% 13%Net Profit Margin 1.0% 0.5% 0.9%Return on total assets 2.9% 2.0% 2.5%Return on Equity 8.2% 4.0% 5.6%7. (12 points) a. Complete the table above by calculation the ratios for Dana Dairy Products that are not provided.b. Use the ratios above to identify one category of expenses that is too high for Dana Dairy. State what your answer is based on.CGS: gross profit marginc. Use the ratios to identify one category of assets that is too high for Dana Dairy. State what your answer is based on.A/R: av collection