Homework 1

Homework 1 - E Consider the following stream of uneven...

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MGMT 411 Fall 2009 1 MGMT 411 Homework 1 Due Tues. Sept. 8 Please provide BRIEF explanations where needed. 1. Corporate Finance A. List three key corporate finance decisions and BRIEFLY describe each one? B. List the famous MM propositions and the assumptions of the MM model. C. Suppose that a firm has a debt-to-equity ratio of 2, a WACC of 8% and the cost of debt is 2%. Find the cost of equity capital. 2. Time Value of Money A. N=20, PV=20, i=20. What is FV? B. N=20 years, M=20 compounding periods per year, FV=20, i=20. What is PV? C. Calculate the PV of a 20 year $20 annuity due assuming a 20% interest rate. D. You take out a loan for $200,000 to finance your first home. Your annual interest rate is 12% and you decide to finance the loan over a 20 year period. What is your monthly payment?
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Unformatted text preview: E. Consider the following stream of uneven annual cash flows: 2000, 7000, 7000, 3000, 15000 Assume an initial investment of 20,000 and calculate the IRR of the project. F. Use a 13% discount rate to calculate the NPV of the project in part E. 3. Set up the amortization table for question 2D in Excel. A. Use the ‘Goal Seek’ feature in Excel to solve for the interest rate that would make the balance at year 5 equal to $190,000. B. Using the numbers from 2D and your amortization table, solve for the initial loan amount that would make the year 10 interest equal to $1,000. 4. Chapter 1 problems 6, 10 &14 5. BRIEFLY tell me how financial assets allow society to make the most of the economy’s real assets? 6. Chapter 2 problems 9a, 10, 12 &13...
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This note was uploaded on 11/03/2009 for the course MGMT 411 taught by Professor Clarke during the Spring '09 term at Purdue.

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