Sol Ex FIN320F10-10

Sol Ex FIN320F10-10 - Section I (5 point Fill-in the blank)...

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Solutions--Exam 1 Finance 320-10 Fall 2010 Section I (5 point Fill-in the blank) shareholder’s wealth, real, after-tax, timing, risk Section II Problems (15 point each) 1. The direct quote indicates how many units of the domestic currency are needed to buy one unit of the foreign currency. The indirect quote indicates how many units of the foreign currency may be purchased with one unit of the domestic currency. The quotes in dollars for the two dates are: Date Direct Quote Indirect Quote September 30, 2009 $1.4253/euro Euro.7016 /$ September 20, 2010 $1.3062/ euro euro .7656/$ The US$ appreciated against the euro during this period. The direct quote shows that the dollar appreciated because in 2010 it took less dollars to buy one euro than in 2009 (1.3062 versus 1.4253). The indirect quote shows that the dollar appreciated because in 2010 a dollar bought more eruo than it did in 2009 (.7656 versus .7016). The German exporter would benefit because his beer is now less expensive and he will sell more. For example if his beer cost 30 euros a case the price would have gone down from $42.76 per case to $39.19 per case. The US importer would gain for the same reason. He will sell more of the now less expensive German beer. 2. INCOME STATEMENT Sales 4300 Cost of Goods Sold (3100) Gross Profit 1200 Depreciation (275) S & A E (325) EBIT 600 Interest (100) EBT 500 Taxes (150) Net Income 350 BALANCE SHEET Cash 55 Accounts Payable 300 Accounts Receivable 420 Notes Payable 80 Inventory 500 Total Current Assets 975 Total Current Liabilities 380 Long-Term Assets 1555 Long-Term Liabilities 400 Total Liabilities 780 Common Stock 300 Retained Earnings 1450 Total Equity
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Sol Ex FIN320F10-10 - Section I (5 point Fill-in the blank)...

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