# FIN 3331 AssignmentEmily Smith just received a promotion at

FIN 3331 AssignmentEmily Smith just received a promotion at workthat increased her annual salary to $42,000. She is eligible to participate inher employer’s 401(k) retirement plan to which the employer matches, dollar fordollar, workers’ contributions up to 5% of salary. However, Emily wants to buya new $25,000 car in 3 years, and she wants to have enough money to make a$10,000 down payment on the car and finance the balance. Fortunately, sheexpects a sizable bonus this year that she hopes will cover that down paymentin 3 years. A wedding is also in her plans. Emily and herboyfriend, Paul, have set a wedding date two years in the future, after hefinishes medical school. In addition, Emily and Paul want to buy a home oftheir own in 5 years. This might be possible because two years later, Emilywill be eligible to access a trust fund left to her as an inheritance by herlate grandfather. Her trust fund has $80,000 invested at an interest rate of5%. 1. JustifyEmily’s participation in her employer’s 401(k) plan using the time value ofmoney concepts by calculating the actual annual return on her owncontributions. She will contribute $1,000 per year to her 401(k) for 25 yearsand the employer will match dollar for dollar. Assume that her 401(k) earns 6%per year for 25 years and all contributions are made at the end of each year. 2. Calculatethe amount of money that Emily needs to set aside from her bonus this year tocover the down payment on a new car, assuming she can earn 4% on her savings.What if she could earn 10% on her savings? 3. Whatwill be the value of Emily’s trust fund in 36 years, assuming she takespossession of $20,000 in 2 years for her wedding, and leaves the remainingamount of money untouched where it is currently invested?4. Suggestat least two conditions that Emily and Paul could take to accumulate more fortheir retirement. 5. Supposethat Emily and Paul purchase a $200,000 home in 5 years and make $40,000 downpayment immediately. Find the monthly mortgage payment assuming that theremaining balance is financed at a 3% fixed rate for 15 years. What if its mortgageterm is 30 years? 6. Whatcan you conclude about the relationship between the mortgage term and theamount of the monthly payment? From Question 5, is the monthly payment with the30-year term half as large as the monthly payment with the 15-year term?Explain.Use the following information to answer the following questions. ABC, Inc. Income Statement (in thousands) December31, 2014Sales $200,000Costof goods sold 140,000Grossprofit on sales 60,000Operatingexpenses 56,000Operatingincome (EBIT) 4,000Interestexpense 1,000Earningsbefore tax 3,000Incometax 1,050Netincome available to common stockholders $1,950Numberof shares outstanding 1, 500 Marketprice per share $22 ABC, Inc. Balance Sheet (in thousands) December31, 2014AssetsCash $2,000Accountsreceivable 17,800Inventories 8,700Totalcurrent assets 28,500Grossfixed assets 70,000Accumulateddepreciation 26,500Netfixed assets 43,500Totalassets $72,000Liabilities and EquityAccountspayable $18,000Accruals 13,350Totalcurrent liabilities 31,350Long-termdebt 8,250Totalliabilities 39,600Commonstock (par value and paid in capital) 2,000Retainedearnings 30,400Totalstockholders’ equity 32,400Totalliabilities and equity $72,000IndustryKey Ratios Industry Average Ratios Current ratio 1.1Quick ratio 0.60DaysSales Outstanding (DSO) 25daysFixed assets turnover 5.8Total asset turnover 2.95Liabilities-to-assets ratio 65%Times-interest-earned 3.2Net profit margin 1.3%Return on equity 7.32%Price/earningsratio 20.38Market/bookratio 3.191. Calculate current ratio and acid test ratio forthe firm.2. Calculate DSO, fixed assets turnover, and totalasset turnover for the firm.3. Calculate liabilities-to-assets ratio andtimes-interest-earned ratio for the firm. 4. Calculate net profit margin and return on equityfor the firm.5. Evaluate the performance of the firm in thefollowing areas:LiquiditymanagementAssetmanagementDebtmanagementProfitabilitymanagementWhen youexplain the firm’s strength or weakness in each area, you must support yourarguments through the evaluative reasoning process by providing reasons,methods, criteria, or assumptions behind the claims made. 6. Deductive reasoning starts with a generalprinciple and deduces that it applies to a specific case. Deductive reasoningmoves with exacting precision from the assumed truth of a set of premises to aconclusion which cannot be false if those premises are true. Explain thedeductive reasoning process applied to analyze the firm’s performance.