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Unformatted text preview: San Francisco State University 350 (17) Spring 2011 Name: MidTerm Exam A major key to doing well is to carefully read the question and think about what is a good answer. If you have any questions about what a question means, please ask me. Any complicated time value of money questions should start with your doing a timeline to make certain that you understand what is being asked for. You do not need to include these in your answer since I will grade on the final answer. All monetary answers have to be to the nearest penny (i.e. $0.00) and percentage answers to the nearest 1/100 of a percent (i.e. 9.24%). I will take off .1 points for every answer not to this degree of accuracy. Please write your name and your answers on the exam and turn it in. All questions count one point unless otherwise indicated. The total number of points possible is 21 and you have 2 hours to complete this exam. Some questions are more difficult than others so, as usual, the grading will be done on the curve. A good answer gets a good grade! Good luck! (1) You are offered the choice of $8,000.00 today, $15,655.00 in 7 years or $24,555.00 in 15 years. If you can earn 9.60% on money you save, how much is each due today and which would you choose? _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ (2) In 15 years you are considering retiring (finance has taken a toll) and buying a house in Koh Samui. The house you are considering currently costs $450,000.00 and is expected to increase in value each year at a rate of 8.50%. Assuming that you can earn 9.00% pa on your investments, how much must you save at the end of each of the next 15 years to be able to buy this house when you retire? Be careful. (2 Points) _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ ________________________________________________________________________________ 1 (3) Calculate the free cash flows for Smith Company for the year ended December 31, 2003, both from...
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 Spring '07
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