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# FIN 370 - MyFinanceLab Week 2 - Answers and Explanations

## Description

# MyFinanceLab Answers and Explanations

The following study guide is designed to help finance students solve lab problems in week 2.

## What can you expect from this study guide?

- Week 2 MyFinanceLab Solutions and Explanations
- Instant Download in .docx Format
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### 10 NEW Formulas and Calculators Added in 2017

- What is the value at the end of year 8 of a $1,200 deposit at the beginning of year 1 and another $800 deposit at the beginning of year 5 if the interest rate is 6%?
- What is the present value of a $1,400 deposit at the end of year 1 and another $700 deposit at the end of year 5 if the interest rate is 8%?
- Given a 5 percent interest rate, compute the year 6 future value of deposits made in years 1, 2, 3, and 4 of $1,200, $1,300, $1,400, and $1,500.
- What is the future value of a $750 annuity payment over 7 years if the interest rate is 5%?
- What is the present value of a $750 annuity payment over 7 years if the interest rate is 5%?
- If the present value of an ordinary, 6-year annuity is $9,500 and the interest rate is 8.5 percent, what’s the present value of a annuity due with the same terms?
- Assume that you contribute $100 per month to a retirement plan for 15 years. Then you are able to increase the contribution to $350 per month for the next 25 years. Given an 7 percent interest rate, what is the value of your retirement plan after the 40 years?
- You wish to buy a $20,000 car. The dealer offers you a 4-year loan with a 7 percent APR. If you do not make any downpayment, what is the monthly payment?
- For the loan in Question #8, how would the payment differ if you paid interest only? What would happen when the loan matures at the end of year 4?
- A small business owner visits her bank to ask for a loan. The owner states that she can repay a loan at $1,000 per month for the next three years and then $1,500 per month for two years after that. If the bank is charging customers 5.5 percent APR, how much would it be willing to lend the business owner?

### Week 2 Finance Lab Study Guide Contents

Over 20 powerful solution calculators included in the week 2 guide. Fully updated for the new classroom format!

- (Preparing common-size financial statements) Carver Enterprises
- (Analyzing common-size financial statements) Carver Enterprises
- (Using common-size financial statements) The S&H Construction Company
- (Liquidity analysis) Airspot Motors, Inc.
- (Future value) Compound Interest
- (Future value) Leslie Mosallam
- (Related to the Business of Life: Saving for Your First House) Future Value
- (Future value) Bob Terwilliger
- (Calculating expected revenues)Crusick Distribution Company
- (Forecasting cash flows using the expected value) Peterson Trucking
- (Financial Forecasting) Zapatera Enterprises
- (Solviog for i) Lance Murdock
- (Forecasting revenues using scenario analysis) Floating Homes, Inc
- (Break-even analysis) Farrington Enterprises
- (Break-even analysis) Marvel Manufacturing
- (Corporate income tax) Meyer Inc. has taxable income
- (Analyzing the quality of firm earnings) Kabutell, Inc. had net income
- All present value, future value, complex annuity calculators, etc.

### Week 2 Assignment Preview

**S&H Construction Company Problem**

(Using common-size financial statements) The S&H Construction Company expects to have total sales next year totaling $14,500,000. ln addition, the firm pays taxes at 35 percent and will owe $286,000 in interest expense. Based on last year's operations the firm's management predicts that its cost of goods sold will be 60 percent of sales and operating expenses will total 26 percent. What is your estimate of the firm's net income (after taxes) for the coming year?

**Zapatera Enterprises Problem**

(Financial Forecasting) Zapatera Enterprises is evaluating its financing requirements for the coming year. The firm has only been in business for one year, but its CFO predicts that the firm's operating expenses, current assets, net fixed assets, and current liabilities will remain at their current proportion of sales. Last year Zapatera had $12.27 million in sales with net income of $1.24 million. The firm anticipates that next year's sales will reach $14.56 million with net income rising to $2.13 million. Given its present high rate of growth, the firm retains all of its earnings to help defray the cost of new investments.

**Templeton Extended Care Problem**

**Bond Value Problems**

b. A new common stock issue that paid a $1.84 dividend last year. The firm's dividends are expected to continue to grow at 6.6% per year forever. The price of the firm's common stock is now $27.91.

**Cost of Capital Problem**

**+ Get all Week 2 Answers on the Full Study Guide.**