2093 MIDTERM

Student’s Name: AKSHIT GOYAL

ID # : 2020060472
(Please Print)

Course: BUSI 2093 Class Section: H

Date: August 9, 2021 Time: 3:00 AM

Professor: Izzy Elkhazin Duration: 2.75 hours

General Instructions
 Do not open this exam paper until told to do so.

 Absolutely NO TALKING and/or PEERING over your neighbours’ paper. The invigilator will
confiscate your paper, and you will receive an automatic Zero on your exam.

 No papers, cellphones, briefcases, or any other cases are allowed at student desks while
the examination is in progress. No books, notes, formula sheets, electronic dictionaries etc.
are allowed unless specified by the examining instructor.

 Coats, jackets, or any other article of clothing not being worn may not be left
at student desks during the examination.

 Student must place his/her student I.D. card face up on the desk in the right-hand corner.
No student will be allowed to write an examination without her/his student I.D. card.

 Students are allowed to start writing their exam up to one-half hour after the scheduled
start time. No student will be allowed to leave the examination room while exam is in
progress unless he/she is prepared to hand in their exam.

Professor Use Only

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MIDTERM: VERSION 3
Instructions and Submission
Units 1 – 5
Time: 2.75 hours
Worth 20% of final grade

Rubric
QUESTIONS
Question 1 /10
Question 2 /10
Question 3 /10
Question 4 /10
Question 5 /10
Question 6 /10
Question 7 /15
Question 8 /15
Question 9 /10
Total /100

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Question 1:
Time: 15 minutes
Total: 10 marks

Sristee Inc. had an operating cash flow of $1200, change in net working capital of
$150 and cash flow from assets of $720. In addition, it had deprecation of $130, and
a beginning fixed asset value of $630. Given this information, calculate the
company's ending fixed asset value. Show calculations in detail

Cash flow- 1200

NWC- 150
CASH FLOW FROM ASSETS -720
DEPRECIATION- 130
BEGINNING FIXED ASSET VALUE- 630

Cash Flow from Assets = OCF - CAPEX - Change in NWC

$720 = $1200 - CAPEX - $150

$720 = $1050 - CAPEX

CAPEX = $1080 - $720 = $330

CAPEX = Ending Fixed Assets + Depreciation - Opening Fixed Assets

$330 = Ending Fixed Assets + $130 - $630

$330 = Ending Fixed Assets - $500

Ending Fixed Assets = $500 + $360 = $810

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Question 2:
Time: 15 minutes
Total: 10 marks

Amandeep Corporation purchased a long-term asset for $100,000. The asset has a
20% CCA rate. At the end of year 4, Amandeep sold the asset for 35,000. Given this
information, determine the value of the terminal loss or recapture at the end of year
4. Show calculations in detail.

Amount $

Year 1 Depreciation        10,000 =100000*20%*50%

Year 2 Depreciation        18,000 (100,000 - 10,000 ) *20%

Year 3 Depreciation        14,400 (100,000 - 18,000 - 10000) *20%

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Year 4 Depreciation        11,520 (100,000 - 18,000 - 10,000-14400) *20%

Total Depreciation        53,920

Book value at end of year 4        46,080 (100000- 53,920 )

Less: Sale Consideration        35,000

Terminal Loss $ 11,080

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Question 3:
Time: 15 minutes
Total: 10 marks

Calculate the internal growth rate given the following information: equity $300,000;
total assets $400,000; net income $100,000; dividends paid $38,000. Show
calculations in detail.

Return on Asset = Net Income / Total Assets

= $100,000 / $400,000

Return on Asset = 0.25

Retention Ratio = (Net Income - Dividend Paid) / Net Income
= ($100,000 - $38,000) / $100,000

= $62,000 / $100,000

Retention Ratio = 0.62

Internal Growth Rate = (ROA . b) / 1 - (ROA . b)
= (0.25 * 0.62) / 1 - (0.25 *0.62)

= 0.155 / (1 - 0.155)

Internal Growth Rate = 0.1834 or 18.34%

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Question 4:
Time: 15 minutes
Total: 10 marks

Harmohit collects old model cars. One model increases in value at a rate of 8.5% per
year. Today, the model is worth $1,780. How much additional money can Harmohit
make if she waits 4 years to sell the model rather than selling it 2 years from now?
Show calculations in detail.

present value= 1780

future value= present value*(1+r)^n

where r= interest rate ; n=no of years

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future value at 2nd year= 1780*(1+8.5%)^2 = 2095.4605

future value at 4th year= 1780*(1+8.5%)^4= 2466.8285

Additional gain by holding to 4 year= 2466.8285- 2095.4605- $371.368

Question 5:
Time: 15 minutes
Total: 10 marks

Six years ago, Jason Distributors purchased a mailing machine at a cost of $374,000.
This equipment is currently valued at $174,300 on today's statement of financial
position but could actually be sold for $212,500. This is the only fixed asset the firm
owns. Net working capital is $132,500 and long-term debt is $83,700. What is the
book value of shareholders' equity? Show calculations in detail

Book value of mailing machine = $174,300

Mailing machine is the only fixed asset of the company.

Thus, fixed assets = $174,300

Net working capital = $132,500

Long term debt = 83,700

Book value of stockholders' equity = Fixed assets + Net working capital - Long term debt

= 174,300 + 132,500 – 83,700

= $223,100

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Question 6:
Time: 15 minutes
Total: 10 marks

A) Rajvi invests $5,600 in an account that pays 5.25% simple interest. How much
money will she have at the end of six years. Show calculations in detail (5 marks)

a. Simple interest=Principal*Interest rate*Time period

=5,600*5.25%*6

=$1764

Future value=Principal+ Simple interest

=5600+1764

=$7,364

B) Rajvi then goes on to invests $4,200 in an account that pays 6.15% simple
interest. How much more could she have earned over a seven-year period if the
interest had compounded annually? Show calculations in detail (5 marks)

Simple interest=Principal*Interest rate*Time period

=(4200*6.15%*7)

=$1808.1

For compound interest:

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We use the formula:  

A=P(1+r/100)^n  
where   
A=future value  
P=present value  
r=rate of interest
n=time period.   

A=4200*(1.0615)^7

=4200* 1.5185880902

=$6378.07 (APPROX)

Hence interest=A-P

=6378.07-4200

=$2178.07 (Approx)

Hence excess interest= 2178.07- 1808.1

= $369.97 (Approx)

Question 7:
Time: 25 minutes
Total: 15 marks

A Hong Kong firm has a debt-equity ratio of 65 %, a total asset turnover of 1.41, and a profit
margin of 8.9 %. The total equity is $673,500. What is the amount of the net income? Show
calculations in detail

Step 1 : Calculate Debt using Debt-Equity Ratio

Debt-Equity Ratio = Debt/Equity

0.65 = Debt / $673,500

Therefore,

Debt = Debt-Equity Ratio * Equity

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Debt = 0.65*$673,500

Debt = $437,775

Step 2 : Calculate Total Assets

Total Assets = Debt + Equity

Total Assets = $437,775+$673,500

Total Assets = $1,111,275

Step 3 : Calculate Sales Using total Assets turnover

Total Assets Turnover = Sales/ Total Assets.

Sales = Total Assets * Total Assets Turnover

Sales = $1,111,275*1.41

Sales = $1,566,897.75

Step 4 : Calculate Net Income From Profit Margin

Profit Margin = Net Income/Sales

Therefore,

Net Income = Sales * Profit Margin

Net Income = $1,566,897.75*0.089

Net Income = $139,453.89975

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Question 8:
Time: 25 minutes
Total: 15 marks

A Lahore firm has a net income of $35,000 which provides a 16% return on assets. The firm has
a debt-equity ratio of .41. What is the return on equity? Show calculations in detail

Statement showing computations

Particulars Amount

Net Income 35,000

Return on Assets 16%

Assets = 35,000/16% 2,18,750

Debt Equity ratio = 0.41

Debt = 0.41 Equity

.41Equity + Equity = Assets

Equity = 2,18,750/1.41 155,141.84397

Return on Equity = 35,000 / 155,141.84397 22.56%

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Question 9:
Time: 15 minutes
Total: 10 marks

2017 2018
Sales $2,900 $3,300
COGS 2,030 2,310
Interest 410 420
Dividends 56 79
Depreciation 290 330
Cash 251 151
Receivables 243 413
Current liabilities 908 1,107
Inventory 1,016 901
Long-term debt 3,200 3,100
Net fixed assets 6,000 5,700
Tax rate 34% 34%

What is the change in net working capital during 2018? Show calculations in detail

2017 2018
CASH $251 $151
RECIEVABLES $243 $413
INVENTORY $1016 $901
TOTAL CURRENT $1510 $1465
ASSETS
TOTAL CURRENT $908 $1107
LIABILITIES

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CHANGE IN NET WORKING CAPITAL- -$244.00

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