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BDCDB BCEAE 1. The changes in a firm's future cash flows that are a direct consequence of accepting a project are called _ cash flows. A. net present value B. incremental C. stand-alone D. after-tax E. erosion 2. Which one of the followin

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HADM 2222 Fall 2009, Prof. Q. Ma Homework assignment #4 [Due 11:59 a.m. Friday, October 16, 2009, Statler 435 drop box] 1. What is the IRR of the following set of cash flows? Year Cash Flow 0 -18,000 1 9,800 2 7,500 3 7,300
Solution: The

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HADM 2222 Fall 2008, Prof. Q. Ma Homework assignment #6, #7 combined [Due 10 a.m. Wednesday, November 18, 2008, Statler 435 drop box]
1. A stock has an expected return of 13 percent, the risk-free rate is 4.5 percent, and the market risk

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HADM 2222 Fall 2009, Prof. Q. Ma Homework assignment #2 [Due 10 a.m. Wednesday, September 16, 2009, Statler 435 drop box]
1. Seaborn Co. has identified an investment project with the following cash flows. If the discount rate is 10 percen

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HADM 2222 Fall 2009, Prof. Q. Ma Homework assignment #3 [Due 10 a.m. Wednesday, October 7, 2009, Statler 435 drop box] 1. Spears, Inc., has an odd dividend policy. The company has just paid a dividend of $7.00 per share and has announced

EQ 23
Amortized Loan with Fixed Payment: Consider a 10 year loan with annual payments. The interest rate is 8% and the principal amount is $50,000. r PV T C 8% $50,000 10 $7,451
Amortization Table r= 8% Column (1) Column (2) Column (3) Column (4) Column (

Last Class
Discounted Cash Flow Valuation
Be able to compute
The FV (PV) of multiple cash flows FV, PV, r, C, and T of level cash flows APR, EAR Loan payments
0
T Time Line
PV
FV
Understand
How loans are amortized or paid off How interest rates are quoted

HADM 2222 Fall 2009, Prof. Q. Ma Practice Problems for Prelim I
1. Investment X offers to pay you $7,000 per year for eight years, whereas Investment Y offers to pay you $9,000 per year for five years. Which of these cash flow streams has the higher prese

Bond Valuation & Interest Rates
Bond
Bond valuation Bond features and types yp Bond market
Bond Example
Marriott International issues bonds to finance its expansion into emerging markets. From each bond issued, it borrows a face value of $1,000 for 20 yea

Stock Valuation
Stock valuation
General rule Dividend growth models
Cash Flows for Stockholders
If you buy a share of stock, you can receive cash in two ways
The company pays dividends You sell your shares, either to another investor in the market or back

H ADM 2222, Fall 2009 Prof. Q. Ma, QM26@cornell.edu Office: Statler Hall 435 B 255-8140; 255-1277 (fax) SYLLABUS H ADM 2222 FINANCE Fall 2009
Instructor: Teaching Assistants:
Lead Teaching Assistant: Administrative Assistant: Class Time/Location:
Prof. Qi

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HADM 2222 Fall 2009, Prof. Q. Ma Homework assignment #1 Solutions
Interest First City Bank pays 6% simple interest on its savings account balances, whereas Second City Bank pays 6% interest compounded annually. If you made a $5,000 deposi

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HADM 2222 Fall 2009, Prof. Q. Ma Homework assignment #5 [Due 10 a.m. Wednesday November 4, 2009, Statler 435 drop box] 1. Consider the following information State Probability X Z_ Boom .25 15% 10% Normal .60 10% 9% Recession .15 5% 10% Wh

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HADM 2222 Fall 2009, Prof. Q. Ma Homework assignment #8 [Due 10 a.m. Wednesday, December 2, 2009, Statler 435 drop box] 1. Stock in Country Road Industries has a beta of 1.25. The market risk premium is 7 percent, and T-bills are currentl

Name: _
NetID: _
HADM 2222 Prelim I Prof. Ma Tuesday, September 22, 2009 7:30 p.m. 9:30 p.m.
Name (please print): Cornell ID: NetID: _ _ _
Instructions: - Print your name and ID on all pages. - Close book, close notes. - One or multiple financial calculat

1. [Future Value] Five friends all open investment accounts today. Which one will withdraw the
largest amount of money from their account assuming that they each withdraw their funds at the
end of their initial investment period?
Anthony invests $1,000 fo

Time Value of Money Question
You are offered two options to receive a cash payment.
Option A: $100 today Option B O i B: $107 i f in future year t
General Question
Earlier time
Later time
Time Line
Which one is more valuable to you?
$ (PV)
$ (FV)
Prof. Q.

CHAPTER 1 INTRODUCTION TO CORPORATE FINANCE
Answers to Concepts Review and Critical Thinking Questions 1. Capital budgeting (deciding whether to expand a manufacturing plant), capital structure (deciding whether to issue new equity and use the procee

CHAPTER 6 B-65
CHAPTER 6 DISCOUNTED CASH FLOW VALUATION
Answers to Concepts Review and Critical Thinking Questions 1. The four pieces are the present value (PV), the periodic cash flow (C), the discount rate (r), and the number of payments, or the l

B-54 SOLUTIONS
CHAPTER 5 INTRODUCTION TO VALUATION: THE TIME VALUE OF MONEY
Answers to Concepts Review and Critical Thinking Questions 1. The four parts are the present value (PV), the future value (FV), the discount rate (r), and the life of the in

B-114 SOLUTIONS
CHAPTER 7 INTEREST RATES AND BOND VALUATION
Answers to Concepts Review and Critical Thinking Questions 1. No. As interest rates fluctuate, the value of a Treasury security will fluctuate. Long-term Treasury securities have substantia

CHAPTER 12 B-203
CHAPTER 12 SOME LESSONS FROM CAPITAL MARKET HISTORY
Answers to Concepts Review and Critical Thinking Questions 1. They all wish they had! Since they didn't, it must have been the case that the stellar performance was not foreseeable

B-144 SOLUTIONS
CHAPTER 9 NET PRESENT VALUE AND OTHER INVESTMENT CRITERIA
Answers to Concepts Review and Critical Thinking Questions 1. A payback period less than the project's life means that the NPV is positive for a zero discount rate, but nothin

CHAPTER 10 B-163
CHAPTER 10 MAKING CAPITAL INVESTMENT DECISIONS
Answers to Concepts Review and Critical Thinking Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will be used in a project. The rel

CHAPTER 11 B-183
CHAPTER 11 PROJECT ANALYSIS AND EVALUATION
Answers to Concepts Review and Critical Thinking Questions 1. Forecasting risk is the risk that a poor decision is made because of errors in projected cash flows. The danger is greatest wit

CHAPTER 8 B-135
CHAPTER 8 STOCK VALUATION
Answers to Concepts Review and Critical Thinking Questions 1. The value of any investment depends on its cash flows; i.e., what investors will actually receive. The cash flows from a share of stock are the d

Chapter 15 EQ # 1: Cost of Equity DGM 1.1. A firm is expected to pay a dividend of $3.50 per share in one year. This dividend, along with the firm's earnings, is expected to grow at a rate of 7% forever. If the current market price for a share is $7

1/22/08 Role of the Financial Manager o Firm Organization Real Assets: it has value because it cost that much Financial Assets: It has value because it will generate income o Finance vs. Accounting? Accountants: past, record-keeping Finance: futu

3/25/08 Risk Aversion o There is a human distain for risk o We will pay for no risk (ex. insurance) o The more risky something is, the more compensationhigher stakes o When potential payouts are large, need a lot of compensation because of higher opp