Final_Review_Notes_FIN_351[1]

# Final_Review_Notes_FIN_351[1] - Final Exam Review Notes 1...

This preview shows pages 1–4. Sign up to view the full content.

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

View Full Document

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Final Exam Review Notes 1 Expectations • 50 Multiple Choice Questions: 20-22 questions from Chapters 8, 9, 10, 12, and 13. 20-22 questions from Chapters 16, 17, 20, and 21. 6-10 questions from Chapters 3 and 4. • Bring a green scantron, pencil, and calculator. • One cheat sheet allowed - two sided. • Entire Class Period to take the exam, 2 hours and 45 minutes. 1 2 Chapter 8 Example: A project life is 3 years. It requires a capital investment of 1,000. The expected cash flows are 500 for the next three years. The discount rate is 12%. Calculate NPV, IRR, payback, and PI. NPV =- 1000 + 500 1 . 12 + 500 1 . 12 2 + 500 1 . 12 3 = 200 (1) IRR =- 1000 + 500 1 + r + 500 (1 + r ) 2 + 500 (1 + r ) 3 = 200 (2) Payback = Year 1 =500, Year 2 =500 so 2 years. PI = PV I = 1200 1000 = 1 . 2 (3) 3 Chapter 9 The expected revenues are 10,000, expected expenses are 6,000. Project life is 3 years. Equipment costs 10,000 and depreciates straight line to 1,000 over the project life. Land is 1,000 and there is no net working capital investment. Tax rate is 35%. Equipment is sold for 2,000 at the end of year 3. Find initial outlay, operating cash flow, and non operating terminal year cash flow. Outlay = FCInv + NWCInv = 10 , 000 + 1 , 000 = 11 , 000 (4) CF = ( S- C- D )(1- T ) + D = (10 , 000- 6 , 000- 3 , 000) * (1- . 35) + 3 , 000 = 3650 (5) TNOCF = SALT + NWInv- T ( SalTBT ) = 2 , 000- . 35 * (2 , 000- 1 , 000) = 1 , 650 (6) 4 Chapter 10 Example as in Chapter 8: A project life is 3 years. It requires a capital investment of 1,000. The expected cash flows are 500 for the next three years. The discount rate is 12%. The 2 pessimistic case is a cash flow of 400 per year. What is the NPV now and how much does it differ from the base case?differ from the base case?...
View Full Document

## This note was uploaded on 09/06/2011 for the course FIN 351 taught by Professor Li during the Spring '09 term at S.F. State.

### Page1 / 8

Final_Review_Notes_FIN_351[1] - Final Exam Review Notes 1...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online