Your bank offers you a line of credit of $35,000 with an interest rate of 1.95 percent per quarter. The loan agreement also requires that 2 percent of the unused portion of the credit line be deposited in a non-interest-bearing account as a compensating balance. Your short-term investments are paying .17 percent per month. What is your effective annual interest rate on this arrangement if you do not borrow any money during the year? Assume any funds borrowed or invested use compound interest.

Maya’s Dive Shop has an accounts receivable period of 36 days. The estimated quarterly sales for this year, starting with the first quarter, are $6,800, $7,100, $8,200, and $6,400, respectively. What is the accounts receivable balance at the beginning of the third quarter? Assume a year has 360 days.

Which of the following are assumptions of the capital asset pricing model (CAPM)? I. A risk-free asset has no systematic risk. II. Beta is a reliable estimate of total risk. III. The reward-to-risk ratio is constant. IV. The market rate of return can be approximated.

Myers Storage purchased a parcel of land four years ago at a cost of $112,600. Today, the land has a market value of $136,600. At the time of the purchase, the company spent $8,400 to grade the land and another $11,500 to install electrical access. The company now wants to build a new facility on the site at an estimated cost of $522,700. What amount should be used as the initial cash flow for this project?

A stock had annual returns of 11.3 percent, 9.8 percent, −7.3 percent, and 14.6 percent for the past four years. Based on this information, what is the 95 percent probability range of returns for any one given year?

Your online store must charge its inventory purchases and cannot pay within the offered discount period. Which one the following credit terms is best for you?

A proposed three-year project will require $589,000 for fixed assets, $79,000 for inventory, and $43,000 for accounts receivable. Accounts payable are expected to increase by $47,000. The fixed assets will be depreciated straight-line to a zero book value over five years. No bonus depreciation will be taken. At the end of the project, the fixed assets can be sold for $225,000. The net working capital returns to its original level at the end of the project. The operating cash flow per year is $67,900. The tax rate is 21 percent and the discount rate is 12 percent. What is the total cash flow in the final year of the project?

Today, you sold 540 shares of stock and realized a total return of 7.3 percent. You purchased the shares one year ago at a price of $24 per share and have received a total of $86 in dividends. What is your capital gains yield on this investment?

An analyst wishes to estimate the amount of additional reward she will receive for investing in a risky asset rather than a risk-free asset. The minimum values she will need to know are: I. both assets’ standard deviations II. the risky asset’s beta III. the risk-free rate of return IV. the market risk premium

Assume an investment has cash flows of −$105,000, $140,000, $200,000, and $485,000 for Years 0 to 3, respectively. What is the NPV if the required return is 13.5 percent? Should the project be accepted or rejected?