# Finance

## You purchased an asset exactly one year ago for \$75,000. You have been depreciating it under the MACRS three-year schedule (assume these depreciation percentages: Yr 1: 33.3%, Yr 2: 44.5%, Yr 3: 14.8%, and Yr 4: 7.4%). You have an offer to sell this asset for \$65,000. Your tax bracket is 30%. What will be your cash flow after taxes?

EXPERT ANSWER Book value as on date of sale=cost-Accumulated depreciation =\$75000*(1-0.333)=\$50,025 Hence gain on sale=(65000-50025)=\$14975 Hence cash flow=Sale proceeds-(gain on sale*Tax rate) =65000-(14975*30%) =\$60,507.50

## A Moving to another question will save this response. Question 9 of 11 estion 9 10 points Save Answe The World Income appreciation fund currently trades for a market price of \$21.89. The fund has assets worth \$8.5 billion and 400 million shares outstanding. Does the fund have any front-load, if yes how much? 5.29% GA OB. 3.01% No front-load c. OD 4.29% Moving to another question will save this response. Question 9 of 11 tv X W

EXPERT ANSWER NAV = Assets / shares NAV = 8,500,000,000 / 400,000,000 NAV = 21.25 Offering price = NAV(1 – front load) 21.89 = 21.25(1 – front load) 1.0301 = 1 – front load Front load = 0.0301 or 3.01%

## S18-06 Calculating Cycles [LO1] Consider the following financial statement information for the Newk Corporation Beginning Ending Item Inventory Accounts \$ 11,718 5,860 7,930 \$14,865 6,127 8,930 receivable Accounts payable \$127,382 76157 Credit sales Cost of goods sold Calculate the operating and cash cycles,. (Use 365 days a year. Do not rounc intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) days days Operating cycle Cash cycle

EXPERT ANSWER Average Inventory = (Beginning Inventory + Ending Inventory) / 2Average Inventory = (\$11,718 + \$14,865) / 2Average Inventory = \$13,291.50 Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2Average Accounts Receivable = (\$5,860 + \$6,127) / 2Average Accounts Receivable = \$5,993.50 Average Accounts Payable = (Beginning Accounts Payable + …

## 4. Other friends hear about this and decide they want to do the same for their daughter. They were also able to establish a college fund that earns 8% compounded annually. The made the first payment on her 5th birthday. They can pay R7000 each year. However, for various reasons they could only contribute R3000 on her 10th birthday. They paid R7000 again from her 11th birthday to her 15th birthday.

EXPERT ANSWER Solution: No. of total payment=12 Future value is calculated as follow: =Payment*(1+interest rate)^no. of years =7000*(1+0.08)^12+7000*(1+0.08)^11+7000*(1+0.08)^10+7000*(1+0.08)^09+7000*(1+0.08)^08+3000*(1+0.08)^7+7000*FVAF(8%,5) =7000*2.5182+7000*2.3316+7000*2.1589+7000*1.9990+7000*1.8509+7000*1.7138+3000*1.5869+7000*5.8666 =R133,833.70