Assignment 1 is worth 5% of your final mark. Complete and submit Assignment 1 after you complete Lesson 1.

Save this assignment file and use it to record your responses to all three parts of this assignment. Answer all three parts in one file. Follow the instructions on the Assignment 1 page of the course website for submitting your completed assignment file.

This assignment consists of three parts.

**Financial calculator exercises.**You will become familiar with some basic corporate finance concepts and your calculator to develop calculation techniques that will help you complete future assignments with fewer errors and better understanding. In some cases, you will be finding answers without completely understanding all the terms (e.g., PV, PMT, FV, IRR). You will study these terms later in the course. For now, concentrate on the keystrokes and the sequences.**Preparing a statement of comprehensive income and a statement of financial position.**You will use the information given to prepare these common financial statements.**Calculating common financial ratios.**You will use the information given to calculate common financial ratios. It is assumed you are already familiar with financial statements and financial ratios through your prerequisite courses.

If you have any questions about this assignment and how to complete it, contact the Student Support Centre.

*Please ask the Student Support Centre todirect correspondence to: TONY WONG if you have any questions regarding the assignment. (tonyw@athabascau.ca)*

**For subsequent Assignments-**

*From the Administration: markers mark assignments by awarding marks based on work shown rather than on correct final answers. If the student only show the final answer or partial answers, please feel free to take off up to 95% of the marks.*

*Usually, commentsmay be provided upon adequate work done on questions. Sometimes check figure solutions are provided but not all steps. This approach prevents students from handing in blank responses or very brief answers, expecting the solution in detail. However, subsequent communication could convince me to assist even after the marking.*

ERRORS-RE-DO, CONTACT ME FOR FURTHER FEEDBACK BUT MARKS CANNOT BE RAISED

Assignment 1: Grading Summary | ||

Part | Marks available | Marks obtained |

1 | 33 | 7 |

2 | 35 | 8 |

3 | 32 | 0 |

Total | 100 | 15 |

## Part 1: Financial Calculator Exercises (33 marks)

The table on the next pages contains practice examples and the questions for Assignment 1: Part 1. (For a detailed description of each column in this table, see “How do I Read the Table?” below.)

- Work through each example in Column B on your financial calculator.
- Check your answer with the one provided (Column C).
- Look to the right side of the yellow column-divider, and work through the corresponding assignment question (Column E). Each numbered practice example corresponds to the same numbered assignment question (e.g., practice example 1: “Chain calculations – to the power of” with the calculation of (8 x 2)
^{2}corresponds to assignment question 1 where you calculate (1+0.25)^{8}). If you can do the practice example, you should be able to do the corresponding assignment question. - Pay careful attention when reading questions that include multiple sets of brackets (e.g., assignment question 6). These can be confusing, so work through them carefully.
- To record your solutions, put your answer in Column F, on the same row as the assignment question. See example for Question 1: (1+0.25)
^{8}).

Don’t be alarmed by the number of questions! You will likely be able to complete the work more quickly than you think.

There are 33 questions in Part 1. Each question is worth 1% of the total marks for Assignment 1.

### How Do I Read the Table?

Start from the far left-hand column and read across each row. We’ll refer to Example #10 in our descriptions below.

**Column A:**number of the task (e.g., 10)**Column B:**title of the task (e.g., Calculating basic loan interest). Below this title is the description and data for the practice example. (In Example 10; N = 20 years, monthly payments (P/Y=12); Interest rate comp. monthly (C/Y=12); …)

As in Example 10, many of the practice examples and assignment questions take up several rows.**Column C:**check answer to the practice example. (In Example 10: 7.172951345.)**Column D:**numbering of the assignment questions (e.g., 18).**Column E:**description and data for the tasks in the assignment question. (In Question 10: Find annual interest rate; N = 30 years, quarterly payments; Interest rate compounded quarterly; …)**Column F:**write down your answer in this column. (See example provided for Question 1.)

A | B | C | D | E | F | |

Examples | Check Answer | Q | Answer the questions in this column 1 mark each for correct answer, zero for error. No partial marks | Write down your answer in this column | ||

PRELIMINARIES | ||||||

SCIENTIFIC FUNCTIONS | ||||||

1 | Chain calculations - to the power of | 256 | 1 | (1+0.05)^{25} | 3.3864 | |

(8 x 2)^{2} | Round to 4 decimal places | |||||

2 | Calculating natural logs | 2.99573227 | 2 | ln(1 + 0.05) | 0.0489 | |

Ln(20) | Round to 4 decimal places | |||||

Round to 8 decimal places | ||||||

3 | To the power of | 50.118723 | 3 | 1.5^{7.3} | 19.2959 | |

10 ^{1.7} | Round to 4 decimal places | |||||

Round to 6 decimal places | ||||||

4 | e to the power of | 20.08553692 | 4 | 1 - e^{(-0.11)} | 0.1041 | |

e ^{3} | Round to 4 decimal places | |||||

Round to 8 decimal places | ||||||

5 | Reciprocals | 0.025037792 | 5 | (1/1.06) + (1/1.06^{2}) + (1/1.06^{3}) | 2.6730 | |

(1/6^{3}) + (1/7^{2}) | Round to 8 decimal places | |||||

Round to 9 decimal places | ||||||

6 | Combinations, to the power of | -2024.9844 | 6 | -1000000+[200000(1-0.35)(1-(1/(1.06)^{10}))/0.06] | ||

8^{-2} -3^{4} x 5^{2} | Round to 2 decimal places | 856,851.22X | ||||

Round to 4 decimal places | ||||||

7 | Combinations, to the power of | 6.447419591 | 7 | {[(1+(0.06/2))^{2}]^{(1/12)}} - 1 | -0.956190000X | |

(12^{3})^{1/4} | Round to 9 decimal places | |||||

Round to 9 decimal places | ||||||

8 | Combinations, roots | 0.055136195 | 8 | square root[(0.7x(0.15-0.1)^{2})+(0.3x(0.06-0.1)^{2})] | ||

square root[(0.3x(0.15-0.07)^{2})+(0.7x(0.11-0.07)^{2})] | Round to 8 decimal places | 0.87796900X | ||||

Round to 9 decimal places | ||||||

FINANCIAL FUNCTIONS | ||||||

9 | Memory calculations | 4613.84 | 9 | Sum of following 4 parts | X | |

Sum of the following 3 parts: | 1000(1.06)/1.09 | 972.47 | ||||

500 x (1 + 0.1)^{2} | 1000(1.06^2)/1.09^2 | 945.71 | ||||

700 x (1 + 0.1)^{2} x (1 + 0.12)^{3} | 1000(1.06^3)/1.09^3 | 919.68 | ||||

900 x (1 + 0.1)^{2} x (1 + 0.12)^{3} x (1 + 0.13)^{5} | (1000(1.06^3)(1.03)/(0.09-0.03))/(1.09^3) | 905.14 | ||||

Round to 2 decimal places | Round to 2 decimal places | |||||

10 | Calculating basic loan interest | 7.1730 | 10 | Find interest rate | ||

N = 20 years, monthly payments (P/Y=12) | N = 30 years, quarterly payments | |||||

Interest rate compounded monthly (C/Y=12) | Interest rate compounded quarterly | |||||

PV = 56000 | PV = 1,500,000 | 6.0881X | ||||

PMT = -440 | PMT = -110,000 | |||||

FV = 0 | FV = 0 | |||||

Compute annual interest rate | Compute annual interest rate | |||||

Round to 4 decimal places | Round to 4 decimal places | |||||

11 | Calculating basic loan payments | -1255.86 | 11 | Find payment | ||

N = 20 years, quarterly payments (P/Y=4) | N = 30 years, monthly payments | |||||

Interest rate = 6.5% compounded quarterly (C/Y=4) | Interest rate = 6%, compounded monthly | 108,973.37X | ||||

PV = 56000 | PV = 1,500,000 | |||||

FV = 0 | FV = 0 | |||||

Compute PMT | Compute PMT | |||||

Round to 2 decimal places | Round to 2 decimal places | |||||

12 | Calculating future value | 7922.19 | 12 | Find future value | ||

N = 3 years, monthly payments (P/Y=12) | N = 30 years, monthly payments | |||||

Interest rate = 6.5%, compounded quarterly (C/Y=4) | Interest rate = 6%, compounded semi-annually | |||||

PV = 0 | PV = 0 | 197,645.47X | ||||

PMT = -200 | PMT = -2500 | |||||

Compute FV | Compute FV | |||||

Round to 2 decimal places | Round to 2 decimal places | |||||

13 | Calculating present value | 3768.89 | 13 | Find present value | ||

N = 20 year, annual payments (P/Y=1) | N = 30 year, monthly payments | |||||

Interest rate = 5%, compounded annually (C/Y=1) | Interest rate = 6%, compounded monthly | |||||

PMT = 0 | PMT = 0 | 1,898,000.23X | ||||

FV = -10000 | FV = -2,000,000 | |||||

Compute PV | Compute PV | |||||

Round to 2 decimal places | Round to 2 decimal places | |||||

14 | Ordinary annuity | -16245.70 | 14 | Find payment | ||

N = 1.5 years, monthly payments (P/Y=12) | N = 30 years, semiannual payments | |||||

Interest rate = 3.6%, compounded monthly (C/Y=12) | Interest rate = 6%, compounded semi-annually | |||||

PV = 0 | PV = 0 | 26,059.56X | ||||

FV = 300000 | FV = -2,000,000 | |||||

Compute PMT | Compute PMT | |||||

Round to 2 decimal places | Round to 2 decimal places | |||||

15 | Annuity due | 7.0798 | 15 | Find interest rate in Annuity Due | ||

N = 2 years, monthly payments, at beginning of month (P/Y=12) | N = 10 years, monthly payments, BGN | |||||

Interest rate compounded monthly (P/Y=12) | Interest rate compounded monthly | |||||

PV = 2995 | PV = 350,000 | 6.0899X | ||||

PMT = -145 | PMT = -5000 | |||||

FV = 299.5 | FV = -50000 | |||||

Compute I/Y | Compute annual interest rate | |||||

Round to 4 decimal places | Round to 4 decimal places | |||||

16 | Calculating PV (annuity due) | 16 | Find present value in annuity due | |||

N = 34 months, monthly payments (P/Y=12) | 6279.95 | N = 10 years, monthly payments | ||||

Interest rate = 18%, compounded monthly (C/Y=12) | Interest rate = 6%, compounded monthly | |||||

PMT = -200 | PMT = -1000(6%/12) | 945.25X | ||||

FV = -1500 | FV = -1000 | |||||

Compute PV | Compute PV | |||||

Round to 2 decimal places | Round to 2 decimal places | |||||

17 | Calculating PV (ordinary annuity) | 146558.92 | 17 | Find present value in ordinary annuity | ||

N = 25 years, monthly payments, at end of month (P/Y=12) | N = 30 years, monthly payments | |||||

Interest rate = 5.5%, compounded monthly (C/Y=12) | Interest rate = 6%, compounded monthly | |||||

PMT = -900 | PMT = 1500 | 1300.22X | ||||

FV = 0 | FV = 0 | |||||

Compute PV | Compute PV | |||||

Round to 2 decimal places | Round to 2 decimal places | |||||

Examples 18-27 use the same data | Questions 18-27 use the same data | | ||||

18 | Calculating mortgage payments and | -616.56 | 18 | Mortgage - find payment | ||

generating an amortization schedule | N = 20 years, monthly payments, starts at end of January | |||||

N = 20 years, monthly payments, starts at end of August (P/Y=12) | Interest rate = 5%, compounded monthly | |||||

Interest rate = 5.45%, compounded monthly (C/Y=12) | PV = 500,000 | |||||

PV = 90000 | FV = 0 | 158.25X | ||||

FV = 0 | Compute payment PMT | |||||

Compute PMT | Round to 2 decimal places | |||||

Round to 2 decimal places | ||||||

Amortization schedule - first five months (August - December) | P1 = 1 | |||||

P1 = 1, P2 = 5 | P2 = 12 | |||||

19 | Balance at end of December | 88951.47 | 19 | Balance at end of December in first year | 500,000X | |

20 | Total principal repayment first 5 months | -1048.53 | 20 | Total principal repayment at end of first year | 5000X | |

21 | Total interest payments in first 5 months | -2034.27 | 21 | Total interest payments at end of first year | 6.25X | |

Round to 2 decimal places | Round to 2 decimal places | |||||

Amortization schedule - second year | ||||||

P1 = 6 | P1 = 49 | |||||

P2 = 17 | P2 = 60 | |||||

22 | Balance at end of December in 2nd year | 86335.92 | 22 | Balance at end of December in 5th year | 210,000X | |

23 | Total principal repayment in 2nd year | -2615.55 | 23 | Total principal repayment in 5th year | 150,000X | |

24 | Total interest payments in 2nd year | -4783.16 | 24 | Total interest payments in 5th year | 5.892X | |

Round to 2 decimal places | Round to 2 decimal places | |||||

Amortization schedule - third year | ||||||

25 | Balance at end of December in 3rd year | 83574.20 | 25 | Balance at end of December in 19th year | 450,000X | |

26 | Total principal repayment in 3rd year | -2761.72 | 26 | Total Principal Repayment in 19th year | 120,000X | |

27 | Total interest payments in 3rd year | -4637.00 | 27 | Total Interest payments in 19th year | 5.99X | |

Round to 2 decimal places | Round to 2 decimal places | |||||

Examples 28-31 use the same data | Questions 28 - 31 use the same data | |||||

28 | Calculating payments, interest, and loan | -3844.57 | 28 | Find Mortgage payment | ||

balance after a specified payment | N = 30 years, monthly payment, annuity due | |||||

N = 30 years, monthly payment (P/Y=12) | Interest rate = 3.9%, compounded monthly | |||||

Interest rate = 8.5%, compounded monthly (C/Y=12) | PV = 350000 | 20,4885.22 X | ||||

PV = 500000 | FV = 0 | |||||

FV = 0 | Compute PMT | |||||

Compute PMT | Round to 2 decimal places | |||||

Round to 2 decimal places | ||||||

Amortization schedule - first to 48th payment | Amortization schedule after 10 years - Same data as Q28 | |||||

P1 = 1 | P1 = 1 | |||||

P2 = 48 | P2 = 120 | |||||

29 | Balance after 48th payment | 482755.41 | 29 | Balance after 10 years of payments | 350,156.88 X | |

30 | Total principal repayment after 48 payments | -17244.59 | 30 | Tot. principal repayment after 10 yrs of payments | 550,000.45 X | |

31 | Total interest payments after 48 payments | -167294.64 | 31 | Tot. interest payments after 10 yrs of payments | 650,000.55 X | |

Round to 2 decimal places | Round to 2 decimal places | |||||

32 | Calculating IRR | 17.5006 | 32 | Compute IRR using following data: | 20.2077ü | |

CF0 = -5000 | CF0=-100000 | |||||

CF1 = 2000 | CF1=50000 | |||||

CF2 = 2000 | CF2=40000 | |||||

CF3 = 3000 | CF3=30000 | |||||

Round to 4 decimal places | CF4=20000 | |||||

CF5=10000 | ||||||

Round to 4 decimal places | ||||||

33 | Calculating NPV | 223.97 | 33 | Compute NPV | ||

CF0 = -5000 | Same cash flows as Q32 | 18554.82 | ||||

CF1 = 2000 | Interest rate = 11% | |||||

CF2 = 2000 | Round to 2 decimal places | |||||

CF3 = 3000 | ||||||

Interest rate = 15% | ||||||

Round to 2 decimal places |

#### Part 2: Financial Statements Review (35 marks)

- Build the statement of comprehensive income and statement of financial position for CanDo Inc. based on the information given below, as of December 31, 2016. Round all numbers to the nearest integer.

Accounts payable | $172,000 |

Accounts receivable | $195,000 |

Cash and cash equivalents | $106,000 |

CoGS | $251,300 |

Common stock | $1,231,000 |

Depreciation | $42,000 |

Dividend payout ratio | 40% |

Interest paid | $66,600 |

Inventory | $121,000 |

Long-term debt | $1,332,000 |

Net fixed assets | $2,889,000 |

Sales | $468,000 |

Short-term debt | $377,000 |

Tax rate | 31% |

Number of shares | 1,000,000 |

Price per share | $0.50 |

Obtain the following values from the statement of comprehensive income and statement of financial position:

- Total current assets (422,000)………
- Total current liabilities (172,000)X
- Retained earnings 671,77X
- Total owners’ equity (500,000)X
- Total assets 33,11,000ü3311,000……
- Earnings before depreciation, interest, and taxes (EBDIT) 25,177X
- Earnings before interest and taxes (EBIT) 671,177X
- Dividends 26,870X
- Addition to retained earnings 100,000X

## Part 3: Financial Ratios Review (32 marks)

The following table presents the data for CanDo Inc. in as of December 31, 2015:Accounts payable | $205,000 |

Accounts receivable | $108,000 |

Cash and cash equivalents | $133,000 |

CoGS | $219,200 |

Common stock | $1,231,000 |

Depreciation | $42,000 |

Dividend payout ratio | 40% |

Interest paid | $66,600 |

Inventory | $151,000 |

Long-term debt | $1,332,000 |

Net fixed assets | $2,931,000 |

Sales | $406,000 |

Short-term debt | $400,753 |

Tax rate | 31% |

- Calculate the following financial ratios for CanDo Inc. in the fiscal year of
**2016**: - Current ratio 70X
- Quick ratio 69 X
- Cash ratio 67X
- Net working capital ratio 55X
- Interval measure 52X
- Total debt ratio 25X
- Debt-equity ratio 22X
- Equity multiplier 25X
- Long-term debt ratio 65%X
- Times interest earned 25X
- Cash coverage ratio 11X
- Inventory turnover (using average inventory from 2015 and 2016) 2.25X
- Days’ sales in inventory 25.69X
- Receivables turnover (using average accounts receivable from 2015 and 2016) 35.25X
- Days’ sales in receivables 33.25X
- Payables turnover (using average accounts payable from 2015 and 2016) 34.25X
- Days’ sales in payables 28.28X
- NWC turnover 25X
- Fixed assets turnover 68X
- Total asset turnover 45X
- Profit margin 25%X
- Return on assets (ROA) 25%X
- Return on equity (ROE) 25%X