This preview shows pages 1–2. Sign up to view the full content.
FIN 610 Midterm 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
This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentShow your work for each problem showing formulas/functions
Problem 1:
Problem 2:
Debt
$40
Equity
$100
The debtequity ratio is .40
DebtEquity 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
This is the end of the preview. Sign up
to
access the rest of the document.
 Spring '08
 Khawaja

Click to edit the document details