Exam 1B - Name ._ Peoplesoft Number University of Houston...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Name ._ Peoplesoft Number University of Houston C. T. Bauer College of Business Finance 3332 Spring, 2011 Exam 1B To receive full credit: 0 Show all work—equations in variable form & equations with numbers plugged in Clearly indicate your answer Financial functions may be used only for finding annuity factors All inputs to find annuity factor must be shown Carry all decimals, rounding only final answer Decimal places should be rounded to four places (two in percent form) Currency answers rounded to the nearest cent, where applicable Include applicable units ($, %, etc.) on answers 1. How much would Uncle Tiger be willing to pay for an investment with the following cash flow stream if his required return is 13 percent? (6) : 2&— W 4} (“Qt °" PV : f—L—LF + 5:; (\+L)L \\+n)3 5000 6000 _/'—_—. (M3)" * (in)? = 3016.13 *Q'S’Ltl-tAO filé‘iWCOABK 2. Daisy Mae borrowed $60,000 at an annual rate of 14 percent to be repaid with annual payments over the next 12 years. How much will be her annual payments? (8) v\ PVA=PmT'P\liFA;n l“: (5.66035 ‘4 IT, (90,000 = PmT~ Pm PAM.“ ,\ pvm _ (90 000 L9T9“"5'é‘°°3 PM" “Drew-W I if 3. For this problem, variable form equation is not required, but you must show equations with numbers plugged in where applicable. (10) A corporation had taxable income of $13,000,000. Over 18,333,333 35% X Taxable Income 0+) 3) What is the firm’s income tax liability? 3M ; ‘6, "{00, 000 + (35303000000 — io,ooo,oool = B’Uioopoo-r “050,000 : 4* 4,450,000. (2) b) What is the firm's marginal tax rate? W WTaleL, CL” c) What is the firm’s average tax rate? "—‘b‘q 5° '000 m I3’Ooo .000 ’— 4. How much should I pay for an investment which pays $9000 per year for 13 years, with the first payment beginning in 4 years, if my opportunity cost is 12 percent? (10) LAN Scull? m ONE ere? OR TWO. - |5N Pm» PM PA 1,)“ n, £/\r two)“ > —\ Pm‘V g V (e'qZ-bs- VT P‘l - : ‘1000. menu”) C M (W03 ; swan/M __—______——-"‘ \Hoflfi = l5 Lil. \“lol.3al WA" 5. How much must Tommy save each year if his account earns an annual rate of 4 percent and he wants to have $20,000 to pay for his daughter's wedding in 7 years? (8) FVA=~PMT«PVlFALH (makes) ‘ 20,000 ‘- PmT- FV\PA’04I1 *\ Pm". (OTF‘J: 1.30133 PmT; 10000 1&995 = éusazn‘l __________ 6. Hildegard is planning to repay a 12 percent loan which requires annual payments of $2000 per year. If she makes her payments at the beginning of each year, how much will be her annual payments? (4) 3; mm: 2‘00: -. mesnl 7. Refer to the following quotes to complete the sentence below. Australian Dollars to 1 Euro Dec. 29, 2010 0.7707 AUD/EUR _ Feb. 22, 2011 0 7334 AUD/EUR Over this roughly two-month period, the Australian Dollar has in value relative to the Euro. (4) 8. If Clayton saves $20,000 per year. how much will he have in 18 years if his account earns 8 percent compounded annually? (8) it"; :4 FVA = W01 FulPA cm ‘6 3/1 (31.4501) -—\ Pym = 20,000 a .081'8 FV": —, $1i+°|'004.6‘1 L_________________._L 9. Cody Ann sold her four-wheeler for $8000 and deposited the proceeds in a savings account. How much will she have in 9 years if her account earns 7 percent, compounded annually? (6) FV =WL\+'~Y‘ -. 90000.01)q : 0000(Légag) 10. A few months ago, Frank purchased 400 shares of stock for $60 per share, the stock is now worth $68, and he received a dividend check of $1200. What is his holding period return? (6) : BBQ - DP5 40° -3 : E+D—l5_ sea—34.90: \\ _ “i” is to 'gazzow-Mo 11. Rusty wants to have $100,000 in his account in 8 years. How much must he deposit today if his account earns 7 percent per year? (6) F" \00 000 PV : I 6 ':- \.._—-—-IO : Q (l.o‘l) \f—Hez / 12. How much is Candice willing to pay for an investment that promises to pay $50 per year . forever, if she requires a 16 percent return? (4) V CT. : 3;“:— -.\“’3\z.60 L/ Characterize each statement by circling T for True or F for False. (2 points each) T 1. Hetty Green, known as the Witch of Wall Street, didn't take her son to the doctor because she did not trust that he would be well cared for. GDP 2. If a corporation has $10.000 in dividend income. taxable income will decrease by $3000. 3000 T 3. The primary goal of the financial manager is to maximize the corporation's Net Income. T Q 4. Eurocurrency is a currency that is deposited in a European bank. @F 5. Financial intermediaries consist of companies such as commercial banks and thrift institutions. and they differ from financial middlemen in that they issue secondary claims to the ultimate lender rather than primary claims. (D F 6. The three basic forms of business ownership determine the liability, control, taxation, and capital access characteristics of a firm. CD F 7. Capital market efficiency implies that since there are no predictable patterns of security prices and interest rate movements over time, financing decisions based on market timing are not likely to be profitable. on average. T F 8. Given the following information concerning taxable income for a corporation which was formed in 2005, the firm's tax liability in 2006 would be $10,000. Taxable Income 2005 $50,000 — 50,000 ' 0 " 4 2006 80.000 — 60,000 ' ° ’ -2007 140,000 .. 2008 125,000 40,000 \\5 ,ooo Quasi... \vxcomL 2009 75,000 T 9. if I am interested in maximizing my wealth, and I have a choice of three cash payouts. I would prefer option two (2) if my opportunity cost is 20 percent. V 1) $2000 today as 2.000 2) $470.05 per year for ten years l‘l‘l o. (0“ 3) $12,201.88 to be received in ten years. \‘t'io. 61 T ® 10. The inverse relationship between interest rates and value implies that if interest rates increase. the value of an asset will increase, ceteris paribus. ‘l i, ...
View Full Document

This note was uploaded on 04/17/2011 for the course FINANCE 3332 taught by Professor Chisholm during the Spring '10 term at University of Houston.

Page1 / 5

Exam 1B - Name ._ Peoplesoft Number University of Houston...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online