Finance #4

Sources must be cited in APA format. Your response should be four (4) double-spaced pages; refer to the "Assignment Format" page located on the Course Home page for specific format requirements.

Part A

Consider the information below from a firm's balance sheet for 2011 and 2012.

Current Assets                        2012                2011            Change

Cash and Equivalents         $1,561             $1,800             -$   239

Short-Term Investments     $1,052             $3,010             -$1,958

Accounts Receivable          $3,616             $3,129               $   487

Inventories                           $1,816             $1,543               $   273

Other Current Assets          $   707             $   601               $   106

Total Current Assets           $8,752           $10,083             -$1,331

Current Liabilities

Accounts Payable                $5,173             $5,111               $     62

Short-Term Debt                  $   288             $   277               $     11

Other Current Liabilities   $1,401             $1,098               $   303

Total Current Liabilities    $6,862             $6,486               $   376

1.      What is the Net Working Capital for 2012?

2.      What is it for 2011?

3.      What is the Change in Net Working Capital (NWC)?

4.      Assuming the Operating Cash Flows (OCF) are $7,155 and the Net Capital Spending (NCS) is $2,372, what is the Cash Flow from Assets?

Part B

Assume that you are 23 years old and that you place $3,000 year-end deposits each year into a stock index fund that earns an average of 9.5% per year for the next 17 years.

1.      How much money will be in the account at the end of 17 years?

2.      How much money will you have in the account 15 years later at age 55 if the account continues to earn 9.5% per year but you discontinued making new contributions?

3.      How much money would you have at the end of 17 years if you had made the same number of deposits but at the beginning of the year instead of at the end of the year?

4.      How much money will you have in the account 15 years later at age 55 if the account continues to earn 9.5% per year but you discontinued making new contributions?

Part C

1.      a.   What is the possible range for a correlation coefficient?

b.      For purposes of diversification, what type of correlation coefficient among asset returns is preferred by investors? Provide a brief explanation.

2.      a.    Describe the two (2) investment rules identified in the text.

b.      Explain the validity of the following statement and provide one (1) supporting fact to justify your reasoning. "Investors do not like risk and will always choose the investment with the least risk."