FIN 515 Devry entire course DEVRY FIN 515 Week 4 Midterm | Page 3

Retained earnings at the end of 2009 were $700,000, but retained earnings at the
end of 2010 had declined to $320,000.
• The company does not pay dividends.
• The company’s depreciation expense is its only non-cash expense; it has no
amortization charges.
• The company has no non-cash revenues.
• The company’s net cash flow (NCF) for 2010 was $150,000.
On the basis of this information, which of the following statements is CORRECT?
(Points : 10)
(a) Prestopino had negative net income in 2010.
( b ) Prestopino’s depreciation expense in 2010 was less than $150,000.
(c) Prestopino had positive net income in 2010, but its income was less than its 2009
income.
(d) Prestopino’s NCF in 2010 must be higher than its NCF in 2009.
(e) Prestopino’s cash on the balance sheet at the end of 2010 must be lower than the
cash it had on the balance sheet at the end of 2009.
(3) TCO G) Beranek Corp. has $410,000 of assets, and it uses no debt—it is financed
only with common equity. The new CFO wants to employ enough debt to bring the
debt/assets ratio to 40%, using the proceeds from the borrowing to buy back
common stock at its book value. How much must the firm borrow to achieve the
target debt ratio? (Points : 10)
$155,800
$164,000
$172,200
$180,810
$189,851
(4) (TCO B) You deposit $1,000 today in a savings account that pays 3.5% interest,
compounded annually. How much will your account be worth at the end of 25 years?
(Points : 10)
$2,245.08
$2,363.24
$2,481.41
$2,605.48
$2,735.75
(5). (TCO B) You sold a car and accepted a note with the following cash flow stream
as your payment. What was the effective price you received for the car assuming an
interest rate of 6.0%?
Years: 0 1 2 3 4