# Generally Accepted Accounting Principles and Future Value

3-5 ROE Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of 2. 0. Its sales are $100 million and it has total assets of $50 million. What is its ROE? Return on common equity= net income available to common stockholders/common equity 3-6 Du Pont Analysis Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the companyâ€™s total assets turnover? What is the firmâ€™s equity multiplier? 3-7 Current and Quick Ratios Ace Industries has current assets equal to $3 million. The companyâ€™s current ratio is 1. , and its quick ratio is 1. 0. What is the firmâ€™s level of current liabilities? What is the firmâ€™s level of inventories? Problems (pp. 165-167) 4-1 Future Value of Single Payment If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years? $10,000*. 10=$1,000; $1,000*5 years =$5,000; $10,000+$5,000=$15,000 4-2 Present Value of Single Payment What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually? 4-6 Future Value: ordinary Annuity versus Annuity Due

What

...is the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this were an annuity due, what would its future value be? 4-13 Present Value of an Annuity Find the present value of the following ordinary annuities (see the Notes to Problem 4-12). A. $400 per year for 10 years at 10% B. $200 per year for 5 years at 5% C. $400 per year for 5 years at 0% D. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due. 4-14 PV Uneven Cash Flow Stream Find the present values of the following cash flow streams.

The appropriate interest rate is 8%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculatorâ€™s cash flow register, you must enter CF0=0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Chapter 4 Tool kit. )

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