22.The I.C. James Co. invested $10,000 six years ago at 5% per year simple interest. The I.M. Smart Co. invested $10,000 six years ago at 5% per year compounded annually. Which one of the following statements is true concerning these two investments?I. The I.C. James Co. has an account value of $13,400.96 today.II. The I.C. James Co. will have an account value of $13,400.96 six years from now.III. The I.M Smart Co. will earn $525 interest in the second year.IV. Both the I.C. James Co. and the I.M. Smart Co. will earn $500 interest in the first year.A)II, III and IV onlyB)II and IV onlyC)I and III onlyD)III and IV onlyE)I, III and IV only

23.The bonds of Microhard, Inc. carry a 10% annual coupon, have a $1,000 face value, andmature in four years. Bonds of equivalent risk yield 15% (per year compounded annually). Microhard is having cash flow problems and has asked its bondholders to accept the following deal: The firm would like to make the next three coupon payments at half the scheduled amount, and make the final coupon payment be $251. If this plan isimplemented, the market price of the bond will (rise/fall) to ___________. (Continue toassume a 15% required return.)

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CFIN300 Midterm Exam Fall 2007

24.Your older sister deposited $5,000 today at 8% per year compounded annually for five years. You would like to have just as much money at the end of the next five years as your sister. However, you can only earn 6% per year compounded annually. How much more money must you deposit today than your sister if you are to have the same amountat the end of five years?

25.Net income differs from operating cash flow due to the handling of:

26.Shirley adds $1,000 to her savings on the last day of each month. Shawn adds $1,000 to his savings on the first day of each month. They both earn an 8% per year compounded quarterly rate of return. What is the difference in their savings account balances at the end of 35 years?A)$13,923.34B)$15,794.64C)$16,776.34D)$14,996.47E)$12,846.88

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CFIN300 Midterm Exam Fall 2007Use the following to answer questions 27-30:KLM, Inc.2006 Income StatementNet sales$3,685Cost of goods sold$3,180Depreciation$104Earnings before interest and taxes$401Interest paid$25Taxable income$376Taxes$128Net income$248Dividends paid$60Addition to retained earnings$188KLM CorporationBalance Sheets as of December 31, 2005 and 20062005200620052006Cash$520$601Accounts payable$621$704Accounts rec.$235$219Notes payable$333$272Inventory$964$799Current liabilities$954$976Current assets$1,719$1,619Long-term debt$350$60Net fixed assets$890$930Common stock$800$820Retained earnings$505$693Total assets$2,609$2,549Total liabilities and Owner's equity$2,609$2,54927.What is the net capital spending for 2006?