Mid-term Solutions

# Mid-term Solutions - FIN 610 Midterm Exam Answersheet...

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FIN 610 Mid-term Exam Answersheet - Instructor Only Points Q # Answer 10 1 E 10 2 A 10 3 C 10 4 E 10 5 D 10 6 D 10 7 D 10 8 C 10 9 B 10 10 C 100

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Show your work for each problem showing formulas/functions Problem 1: Problem 2: Debt \$40 Equity \$100 The debt-equity ratio is .40 Debt-Equity Rati 0.40 Thus, if total debt is \$40, total equity is \$100 and total assets are \$140 Total Assets \$140 Total Debt Ratio: Total Debt/Asset 0.29 Problem 3: You buy an annuity which will pay you \$12,000 a year for ten years. The payments are paid on the 0.491650708 0.07 7.023581541 x (1+.07) 7.515232249 x \$12000 \$90,182.79 Problem 4: Based on the profitability index (PI) rule, should a project with the following cash flows be accepted if the discount rate is 8%? Why or why not? \$10,000 + \$7,300 + \$3,700 = \$9,259 + \$6,259 + \$2,937 = \$18,455.01 PI = \$18,455.01 \$18,600.00 Problem 5: Le Place has sales of \$439,000, depreciation of \$32,000, and net working capital of \$56,000. The Sales \$439,000 firm has a tax rate of 34% and a profit margin of 6%. The firm has no interest expense. What is the
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## This note was uploaded on 03/12/2012 for the course FIN 610 taught by Professor Khawaja during the Spring '08 term at University of Maryland Baltimore.

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Mid-term Solutions - FIN 610 Midterm Exam Answersheet...

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