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INSTRUCTIONS:

Use the space beginning in Row 28 to create an amoritzation table model that will work for ANY ALLOWABLE values of th User-changeable inputs are in red. Create restrictions on the input cells that prevent users from entering values that are allowed.

The amount of the loan must be a positive number. The balloon payment must be a positive number or zero and must be less than the amount of the loan. The term of the loan can be 1, 2, 3, 4, or 5 years. The interest rate can be between 5% and 15%. The payment frequency can be annual, quarterly, or monthly. Use a drop-down list in Cell F24 with "Annual", "Quarterly" "Monthly" as the choices. Use the results from that cell to set the payment frequency for computation in the table.

Each row in your table should show the monthly payment, the interest portion of that payment, the principal portion of t payment, and the balance immediately following that payment for all payments within the term of the loan. Rows in the are beyond the term of the loan should show nothing (be blank) except for the payment number. All values in the table s positive numbers or zero.

INPUTS: Amount of Loan: Term of loan in years Annual Interest Rate on Loan: Balloon Payment Payment Frequency Payment Number 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Payment Interest

$250,000 2 9.50% $50,000

Principal

Balance

18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Y ALLOWABLE values of the inputs. m entering values that are not

with "Annual", "Quarterly" and putation in the table.

t, the principal portion of that m of the loan. Rows in the table that er. All values in the table should be

2 3 5

Nominal Annual Interest Rate

10.50%

INSTRUCTIONS: Create forumulas in cells D7 to D11 that compute the effective annual interest rates for the nominal rate input in D3 and the listed compounding frequencies .

Effective Annual Rate Annual Compounding Quarterly Compounding Monthly Compounding Daily Compounding Continous Compounding

ls D7 to D11 that annual interest rates for n D3 and the listed

Instructions: The inputs below represent a loan with monthly payments. The loan will have a required monthly payment, but the borrower can pay more than the required payment. The input for the supplemental monthly payment is the additional amount that will be paid each month that the loan is in effect.

Create a formula that computes the number of payments that will be needed to pay off the loan if the supplemental monthly payment is made throughout the life of the loan.
Also create whatever formulas are necessary to compute the difference between the total dollar amount of interest that would have been paid on the loan if only the required payments were made and the total dollar amount of interest that will be paid if the supplemental monthly payment is made every month.

Loan Amount Term in Years Annual Interest Rate Supplemental Monthly Payment

85,000 10 10.5% 500

Required regular payment on the loan not including the supplemental payment Number of payments needed to pay off the loan with the regular and supplemental payments made every month Difference between the total dollar amount of interest paid over this life of the loan with the regular payment and the dollar amount of interest that will be paid over the life of the loan if the regular and supplemental payments are made every month.

n will have a he required payment. amount that will be

be needed to pay off the life of the loan.

ence between the an if only the est that will be paid

ed regular payment on the loan luding the supplemental payment

er of payments needed to pay e loan with the regular and emental payments made every month

nce between the total dollar nt of interest paid over this life loan with the regular payment he dollar amount of interest that e paid over the life of the loan if gular and supplemental payments ade every month.

Each question on this page counts 3 points.

NOTE: There may be and probably are many ways to solve these problems. Any way that produces the correct answer, within any constraints stated with the problem, is acceptable. The sign of the answer does not matter as long as the number value of the answer is correct.

1.

Consider the following annual cash flows, each to be received at the end of a year. Year 1 2 3 4 5 6 7 Cost of the investment: Payment 2,000 <-- Input 2,000 2,000 2,000 2,000 2,000 4,000 <-- Input $12,000

$ $ $ $ $ $ $

The cash flows in years 1 through 6 will always be equal, but the cash flow in year 7 can be any number, including a negative number. In the yellow cell below, create ONE formula that computes the average annual rate of return on the investment. You formula must work for any values of the inputs.

2.

Consider the following annual cash flows, each to be received at the ends of years. Year 1 2 3 4 5 6 Payment

7 8 9 10 11 12 13 14 15 Required annual return:

$ $ $ $ $ $ $ $

5,000 <-- Input 5,000 5,000 5,000 5,000 5,000 5,000 5,000 12%

The cash flows in years 8 through 15 will always be equal. In the yellow cell below, create ONE formula that computes the dollar value of the investment today. NO NOT use the =NPV() function. Your formula should correctly reference the input cells above.

3.

Consider the following cash flow timeline: 0 1 $100 2 3 4 5 6

Time:

$200

$X

$X

$X

$500

The total present value of all 6 cash flows, including the three missing ones, is $1,800 if the discount rate is 10% per year compounded annually. The three missing cash flows, represented by $X in the timeline, are all identical amounts. In the space below, create whatever formulas are needed to find the value of $X. There are no inputs so you can hard-code the numbers in the formulas but the formulas must be shown.

4.

In the yellow cell below, create ONE formula that will return the Net Income from the table at the right for the year given in the input cell. Input Cell for Year Net Income 8

Year 1 2 3 4 5

6 7 8 9 10 In the green cell below, create a formala that extrapolates the linear trend from the 5 years of sales and uses it to estimate 2010 sales. Year 2005 2006 2007 2008 2009 2010 Sales 1,685,000 1,925,000 2,542,000 2,246,000 3,625,000

5.

$ $ $ $ $

Sales 2500 3000 3250 4000 4500

CGS 1800 2200 2400 3100 3300

EBIT 300 315 325 400 430

Net Income 125 150 162 200 225

5200 5900 6500 8000 9250

3900 4400 4800 6000 6900

450 500 550 590 700

260 295 325 400 475

You need forecast the 2010 pro forma income statement and balance sheet for the firm whose 2008 and 2009 income statements and balance sheets are given here. Inputs are provided for most items in the Inputs section below.
The cost of goods sold in 2010 is expected to change with sales by 110% of the two-year arithmetic average of the proportion of this item in relation to sales for 2008 and 2009. Selling and G&A Expenses, Accounts receivable, Inventory, and Accounts Payable are expected to change with sales at 100% of the two-year arithmetic average of their percentage of sales for 2008 and 2009. The firm has planned an investment of $150,000 in new equipment in 2010. This equipment will be depreciated at $20,000 per year. Depreciation on existing Plant/Equipment will be the same as it was in 2009. Interest expense for 2010 is computed on the 2009 ending balances in Short Term Notes Payable and Long Term Debt. Inputs for those interest rates are provided in the Inputs section.

Complete the pro-forma income statement and balance sheet for 2010 using the information above, the inputs below, and the values that are given in the statements. The 2010 projected statements should accurately adjust for any changes in the inputs.
Compute the excess or deficit of financing for 2010 in the yellow box at the bottom of the Balance Sheet. This number should be positive if the firm will have more financing than is needed, and it should be negative if the firm has less financing than is needed.

INPUTS Percent Change in Sales from 2009 Interest Rate on Short Term Notes Payable Interest Rate on Long Term Debt Tax Rate for 2010 Common Stock Dividend for 2010 Expected addition to Plant and Equipment in 2010 Additional depreciation on new Plant/Equip in 2010 5.000% 6.000% 8.500% 35.0% $30,000 $150,000 $20,000

Income Statement
2008 Sales Cost of Goods Sold Gross Profit Selling and G&A Expenses Fixed Expenses Depreciation Expense EBIT Interest Expense Earnings Before Taxes 3,514,000 2,284,100 1,229,900 350,000 120,000 30,000 729,900 56,000 673,900 2009 3,795,120 2,656,584 1,138,536 325,000 125,000 32,500 656,036 62,900 593,136 2010

110,000

Taxes Net Income

235,800 438,100

207,600 385,536

Balance Sheet
Assets Cash and Equivalents Accounts Receivable Inventory Total Current Assets Plant & Equipment Accumulated Depreciation Net Fixed Assets Total Assets Liabilities and Owner's Equity Accounts Payable Short-term Notes Payable Other Current Liabilities Total Current Liabilities Long-term Debt Total Liabilities Common Stock Retained Earnings Total Shareholder's Equity Total Liabilities and Owner's Equity Excess/(Deficit) Financing for 2010 2008 52,000 406,000 854,000 1,312,000 429,000 126,000 303,000 1,615,000 130,000 179,000 118,000 427,000 614,000 1,041,000 395,000 179,000 574,000 1,615,000 2009 98,036 520,000 875,000 1,493,036 580,000 158,500 421,500 1,914,536 180,000 210,000 85,000 475,000 500,000 975,000 395,000 544,536 939,536 1,914,536 2010 98,036

210,000 85,000 500,000 395,000

hose 2008 and 2009 in the Inputs section

ithmetic average of es, Accounts year n investment of ear. Depreciation on omputed on the nterest rates are

ion above, the nts should

Balance Sheet. This d be negative if the