# Project #3717 - practical Financial Management Quiz #

# 5. Construct a pro forma income statement for the first year and second year for the following assumptions:

• Units of Sales in Year 1: 100,000
• Price per Unit: \$10
• Variable cost per unit: 30%
• Fixed Costs: \$120,000
• Income taxes: 15%
• Interest Expense: \$200,000
• In year 2, Price per unit increases to \$11.50, and unit of sales increases by 3%, all other assumptions remain the same.

# 6.  Calculate the sustainable growth based on the following information:

• Earnings after taxes = \$35,000
• Equity = \$100,000
• d=22.4%

# 7.  Calculate a table of interest rates for 5 years based on the following information:

• The pure interest rate is 2%
• Inflation expectations for year 1 = 3%, year 2 =4%, years 3-5 =5%
• The default risk is .1% for year one and increases by .1% over each year
• Liquidity premium is 0 for year 1 and increases by .2% each year
• Maturity risk premium is 0 for years 1 and 2 and .3% for years 3-5

 Subject Business Due By (Pacific Time) 04/01/2013 10:00 am
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