Business Mathematics II – Final Exam Section 1 – Mathematical Problem Solving & Critical Thinking 1) The J.N.K. 6000 is a specialized piece of manufacturing equipment. The chief manager of the factory...

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Business Mathematics II – Final Exam Section 1 – Mathematical Problem Solving & Critical Thinking 1) The J.N.K. 6000 is a specialized piece of manufacturing equipment. The chief manager of the factory estimates its value to be $42,000. Knowing that he will need to replace the machine in 25 years, he sets up a sinking fund annuity that will pay out that amount of money at that time. A. The sinking fund has an interest rate of 8%, and the 25-year period requires a multiplication factor of 0.0139. What monthly payment is needed to reach $42,000 at the end of the period? 4 marks B. Explain why, after 25 years, $42,000 may not actually be enough to replace the J.N.K. 6000? 4 marks Begin Writing Here. 2) On 1 February 2016, Russell Construction bought a new forklift for $24,000. It has an expected useful life of eight years, and a residual value of $4000. Using the straight-line method, what is the yearly depreciation expense for the forklift? 4 marks Russell Construction’s parent company, A. T. & Love, conducts a financial audit on 28 June 2017. By how much has the value of the forklift depreciated from its purchase date to audit day? 6 marks 3) Describe two reasons why a financial officer would choose the declining balance method of depreciation over the more straightforward straight-line method. 4 marks Begin Writing Here. 4) Smith & Smith Toys is a small chain of six toy stores. The following chart is from their central warehouse’s inventory records. It lists monthly purchases of a stuffed toy, the Gao Panda. Smith & Smith buys the toys from its wholesaler for $3.40/unit. Complete the chart by calculating the total cost of buying the Gao Panda toys each month, and what each of the toys sold had cost Smith & Smith at wholesale. 10 marks How many Gao Panda toys remain in the Smith & Smith warehouse as of the end of this period, the ending inventory? 2 marks How many Gao Panda toys were sold throughout 2018? 2 marks What is the total cost of all the Gao Panda toys that Smith & Smith purchased in 2018? 3 marks What was the total cost of all the Gao Panda toys that Smith & Smith bought, and the total cost of all they sold in 2018? 3 marks 5) Carver Biotech (Stock Symbol: PNUT) has the following stock listing information. DIV: 1.04; LAST: 42.42 What do these acronyms mean? 2 marks DIV: LAST: What is the current stock yield for Carver Biotech (PNUT)? 4 marks Section 2 – Multiple Choice & Analysis Choose the best response to each question. Some questions will require further analysis. 1) What is the meaning of FIFO? 2 marks A list of standard financial obligations companies have regarding imports. The earliest goods that arrived at a store are the first goods available for sale. Fresh In a Fiery Outfit. First-In, First-Out method of inventory management. What are at least two classes of products are best suited to be stored and sold according to the FIFO method? Why? 5 marks Begin Writing Here. 2) What is the meaning of LIFO? 2 marks Last-in, Last-Out method of inventory management. The most recent arrivals to inventory are prioritized for sales. Last-in, First-Out method of inventory management. The oldest products in an inventory are most likely to sell. 3) What is the difference between “common stock” and “preferred stock”? 2 marks Preferred stock holders have no BoD voting rights, but are first in line for reimbursement in case of bankruptcy. Common stock holders receive higher regular dividend payments. Common stock is set aside in part for worker ownership. Preferred stock holders can ask for dividend payments whenever they wish. 4) What are the five main reasons why mutual funds have become so popular as financial investments? 3 marks Diversification, Contribution Matching, Inflating Scale of Net Worth, Low Fund Expenses, Global Trading Diversification, Professional Management, Liquidity, Low Fund Expenses, and Access to Foreign Markets. Global Panels of Experts for Advice, Professional Management, Low Fund Expenses, Diversification, and Liquidity. Diversifying Your Bonds, Total Transparency in Ownership, Low-Stress Investment Contexts, Low Fund Expenses, and High Fund Yields. Explain TWO of the main reasons for mutual funds’ popularity? 6 marks Begin Writing Here. 5) What does it mean when a bond sells as a premium? 2 marks The bond’s current interest rate is higher than when you first bought it. The bond sells for more of its face value, and yields a higher interest. The bond is more expensive to purchase, but offers higher payments. If the company’s bonds fall in value, premium bonds will fall more slowly.