You have $10,000 to invest. You will need the money you expect to earn 8% per year. How much will you years. What are you looking for? Use the FV formula: FV(rate,nper,pmt,pv) Compute
(Notice that the spreadsheet has the same sign conv the calculators wit
Supplementary formula sheet
1. The future value of $1 invested for t periods at a rate of r per period: Future value = $1 x (1 + r) t 2. The present value of $1 to be received t periods in the future at a discount rate of r: PV = $1/(1 + r)t
3. The relati
Appendix
Effect of a call provision
More on provisions
YTM and YTC Call provision Sinking fund provision
Allows issuer to refund the bond issue if rates decline (helps the issuer, but hurts the investor). Borrowers are willing to pay more, and lenders r
Traditional areas
3
Topic 1
0 OVERVIEW
Work with financial assets such as stocks and bonds Value of financial assets, risk versus return, and asset allocation Job opportunities
Stockbroker , financial planner Security analyst, portfolio manager And many m
CHAPTER 7 STOCK VALUATION AT RAGAN THERMAL SYSTEMS
1. The total dividend paid by the company were $108,000. Since there are 100,000 shares outstanding, the total earnings for the company were: Total earnings = 100,000($4.32) = $432,000 This means the payo
CHAPTER 8 BULLOCK GOLD MINING
1. An example spreadsheet is:
CHAPTER 8 C-2 Note, there is no Excel function to directly calculate the payback period. We used If statements in our spreadsheet. The IF statement we used is: =IF(-D8>(D9+D10+D11+D12+D13+D14),"G
CHAPTER 5 S&S AIRS MORTGAGE
1. The payment for a loan repaid with equal payments is the annuity payment with the loan value as the PV of the annuity. So, the 30-year loan payment will be: PVA = C(cfw_1 [1/(1 + r)]t / r) $25,000,000 = Ccfw_[1 1 / (1 + .06
Capital Budgeting Integrated Case
Allied Components Company
YourecentlywenttoworkforAlliedComponentsCompany,asupplierofautorepair partsusedintheaftermarketwithproductsfromDaimlerChrysler,Ford,andother automakers.Yourboss,thechieffinancialofficer(CFO),hasj
2010 Topic 5 Interest Rate theory and Bond Valuation
6-1
Part I
Interest Rate Theory
Determinants Determinants of interest rates The term structure and yield curves Investing overseas
6-2
Nominal vs. Real rates
r = represents any nominal rate r* = represe
Interest Rate &
Effective Rate of return
2-1
Classifications of interest rates
Nominal rate (INOM) also called the quoted or state rate. An annual rate that ignores compounding effects.
INOM is stated in contracts. Periods must also be given, e.g. 8% Quar
2010 Topic 1 Time Value of Money
Future value Present value Annuities Rates of return Amortization
2-1
Time lines
0
I%
1
2
3
CF0
CF1
CF2
CF3
Show the timing of cash flows. Tick marks occur at the end of periods, so Time 0 is today; Time 1 is the end of th
2010 Topic 0
0 OVERVIEW
Chapter Outline
1
Introduction The Goal of Financial Management The Agency Problem and Control of the Corporation
Traditional Financial Institutions
2
Companies that specialize in financial matters
Banks commercial and investment
C
(1.2) Corporate form of organization
i
Answer: c
MEDI UM
.
Which of the following statements is CORRECT? a. b. c. d. e. A hostile takeover is the main method of transferring ownership interest in a corporation. Unlimited liability and limited life are two
CASH FLOW ESTIMATION AND RISK ANALYSIS CHAPTER 12
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems Note to Professors: We designated many of these probl
CHAPTER 11 THE BASICS OF CAPITAL BUDGETING
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
NPV (constant cash flows; 3 years)
1
Answer: a
EASY
.
Thomso
CHAPTER 10 THE COST OF CAPITAL
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
Component cost of preferred stock
1
Answer: e
EASY
.
Klieman Companys pe
CHAPTER 9 STOCKS AND THEIR VALUATION
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
Expected dividend yield
1
Answer: a
EASY
.
If D1 = $2.00, g (which
CHAPTER 7 BONDS AND THEIR VALUATION
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
Bond valuation
1
Answer: a
EASY
.
The Carter Company's bonds mature
CHAPTER 4 ANALYSIS OF FINANCIAL STATEMENTS
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems Notes to Professors: A good bit of relatively simple arithme
CHAPTER 3 FINANCIAL STATEMENTS, CASH FLOW, AND TAXES
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems Notes to Professors: A good bit of relatively simp
CHAPTER 2 TIME VALUE OF MONEY
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
FV of a lump sum
1
Answer: a
EASY
.
What would the future value of $100 b
CHAPTER 1 AN OVERVIEW OF FINANCIAL MANAGEMENT
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
Note to Professors: We designated most of these questions as being MEDIUM. However, their difficulty as seen by students will depend on (1)
Chapter 11 The Basics of Capital Budgeting
LEARNING OBJECTIVES
After reading this chapter, students should be able to: Define capital budgeting, explain why it project proposals are generally classified. is important, and state how
List the steps involved