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Unformatted text preview: 1. Paulo Maldini has received the following three job offer, which one should he choose if his
opportunity cost (discount rate) is 12%. I (20 points) AC Milan '
$ 500,000 signing bonus. 700,000 for the ﬁrst two years and then $400,000 for the next three years. Bayeren FC .
$ 1,000,000 Signing bonus. $750,000 for the ﬁrst year and $350,000 for the next three years. Cardoba FC .
A signing bonus of $700,000. $500,000 as the ﬁrst year’s compensation and. this declines at a rate of 3% each year over the nex: 4 years (Le. years 2 through 5). ﬂiMILPrN 2. Assume that you buy ahouse at $250,000. You already have saved 20% out of this as down < payment. The res}; you ﬁnance using a 30 year mortgage (rate 4.25%). (20 points)
3. Draw the timeline for the mortgage .
0 , , t 3 Q o
. I 2 F Y1 M We we €950,949!) C  _
_.... 50,9«915
03 M} m b. What is your monthiy payment (write the formula and Show numerical substitutions)? r c. Write the Amortization schedule Ignontys three d 0111'. H M
Mme Tami WW 9" k elm/Ci
3 % [Calm—7&3 277517 70138 Gig 3‘3 (gar/’70. 4 mayo#3 74gth 705}? @398? 16183961”? t V \ 2* t
W . at»th we  WV 'd. What is the total interest you will pay over the life of the mortgage? ‘ m
w! e. What is the EAR for your mort age? a
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w f R 2W “x x: 1 e
gmﬂ 4933 E?”
4K ° if 3. 3) Draw the Business Cycle. Clearly mark the leading, coincident,_and lagging indicators.
Also, clearly mark the Bull and Bear markets and economic expansions and contractions in 3mm diagram and also indicate where you would see the upwardend domwaxd sloping yield curves.
(6 points) _ Sm Pica;
6139 P b) Write the Fisher Equation (and indicate what the alphabets in the equation stand for). l + E :l l l/ Ql— (2130mm) c) Provide the following current numbers I (2 points)
i) Prime Rate ‘g 3 ﬁ 2— ‘3 ii) Rate of Unemployment 4. Assume the following for Rambha Corp. 2002
Sales 6,000,000
COGS ' 2,000,000
Operating Expenses 1,700,000
Depreciation 300,000
Interest Expense 200,000
Tax Rate 30 % . Current Assets 150,000
Current Liabilities 170,000
Net Fixed Assets 1,350,000
Common Equity + Surplus ‘ 3,500,000
Dividends 0 ' All the following Questions gertain to 2002. 3) Draw the Income Statement for Rambha Inc. 2001 75,000 45,000 '1 ,275 ,000 3,400,000
0 (20 points) c) What is the increase in Net Workiﬂg Capital? f) What are the Cash Flows to Stockholders? ,_ \)‘I W .— Ne'}, NW (The company does not pay any dividends) .. M40
' t. 313—0wa '3qu o (M g) What are the cash ﬂows to Creditors? '
, M Rm 3
M S M]? 5" . +0 5. A) What is the Present Value of $5,000 that you are expecting to receive after 45 days?
Assume the discount rate to be 124596 compounded daily. (5 points) 5. B) You will be receiving $3000 in 5 months. If the appropn'ate discount rate is 4.5% 9 compounded. continuously, what is the PV of your cash ﬂow? (5 points)  "’
_ b
D 1’:  Wk 10 5. C) What is the EV of $200 three mohths from new, if the rate of compoundng is 5.5%
(compounded daily) (5 points) Mme) = (355973?) W15 I
20/0 F'VnsPY ﬁH 5. 1)) A11 eise same, if the discount rate decreases what wouhi be the effect on the PV of
an annuity? (2 points) CW ctr MVC 5. E) A11 else same, if the cash ﬂows are ﬁnther out into the future, what Would be the
effect on the PV of the cash ﬂows? 7 (2 points) 3) ame C 5. F) All else, same if the rate of discount increases, what would he the effect on the PV
of a single cash ﬂow to be received in the future (the time of receiving the cash flow stays
same). ' (1 point) 33wa 11 6. Assume that your contribution into a pension pan wiil be $6,000 at the end of the ﬁrst
year. If you expect that the contributions will increase at an annual rate of 4% and you
will be receiving 10% from your investments in the pension plan, how much will you
have at the time of your retirement 30 years from now? (10 points) 0 l l: QM’O
L—> ﬁeﬂi it p—
—— 60% M
0104909 '— F‘t # _ wk ‘ . Cg
"‘ Milo/6%? 12. ...
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 Winter '07
 Yatin
 Finance

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