mtexam2_f10

# mtexam2_f10 - Midterm Exam #2 Finance 325 October 28, 2010...

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Midterm Exam #2 Finance 325 October 28, 2010 N a m e : Exam Instructions: This exam should have 6 pages (including this one) and 6 questions. The point value is given for each problem. The entire exam is worth 100 points. You may use a calculator and the provided formula sheet on this exam. You must show your work in order to receive credit for your answers. Partial credit will be given for partially correct answers. If a question asks “Why/Explain”, you should give an explanation that would convince a skeptic. You may use the back of a page if you need additional space to write an answer. Suggestions: Use your time wisely. Move on to another problem if you feel like you’re stuck. You may ask me questions if you are unclear about a problem. I may be able to clarify the problem for you. GOOD LUCK!!

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1. You are trying to determine the share price of AWW, which is in the pet grooming business. It is not publicly traded, but you know that it has 200,000 shares outstanding, and has expected earnings this year of \$255,000 and expected cash flows of \$400,000. You find that publicly-traded pet grooming companies have an average P/E ratio of 34 and an average P/CF ratio of 29. What would be a good range of price estimates for the share price of AWW? (14 pts) 2. AWW (the same company from above) needs to purchase a new pet-drying machine. They
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## This note was uploaded on 08/05/2011 for the course COMM 298 taught by Professor Freedman during the Winter '09 term at UBC.

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mtexam2_f10 - Midterm Exam #2 Finance 325 October 28, 2010...

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