Final exam
Place your answers in the space below. Show your work i.e. formulae used and substitution.
1. (7 pts) What are the differences between accounting profits and cash flow?
Accounting profits:
SolutiontoHomework07
Ch.8.Q1,Q3,Q4,Q9;P14,P11,P16,P19,P22,P25,P27,P30
Questions:
1. What are the two parameters for selecting investments in the finance world?
How do investors try to get the most out of their investment with regard to these
two parameter
SolutiontoHomework03
Ch.3.P910,P12,P16,P18,P20,P23,P26
Problems:
9. Present Value (with changing years). When they are first born, Grandma gives every
grandchild a $2,500 savings bond that matures in eighteen years. What is the present value of
each of th
SolutiontoHomework06
Ch.7.Q1,Q3,Q6,Q7;P18
Questions:
1. What are three key features of common stock?
There are many features to choose from but here is a list of three key features:
(1) Residual Claim, the common stock shareholder is entitled to all asset
SolutiontoHomework09
Ch.10.Q1,Q3,Q4,Q7;P7,P12,P15
Questions:
1. How is cash flow different from profit or net income?
Cash flow refers to the amount of cash received or spent in a specific period while
profit or net income is an accounting measure of perf
Business Finance
FIN 310, Fall 2012
Abu Jalal
Suffolk University
Chapter 9
Capital Investment Decisions
Relevant Cash Flows
The cash flows that should be included
in a capital budgeting analysis are those
that will only occur if the project is
accepted
Business Finance
FIN 310, Fall 2012
Abu Jalal
Suffolk University
Chapter 5
Discounted Cash Flow Valuation
Multiple Cash Flows FV
Example 1
You think you will be able to deposit
$4,000 at the end of each of the next
three years in a bank account paying
8%
Business Finance
FIN 310, Fall 2012
Abu Jalal
Suffolk University
Chapter 11
Risk and
Return
Expected Returns
Expected returns are based on the
probabilities of possible outcomes
In this context, expected means
average if the process is repeated
many times
SolutiontoHomework08
Ch.9.Q1,Q3,Q6,Q7;P1,P710,P18,P19
Questions:
1. How does a business determine if a project (new product or service) is
worthwhile?
Projects are accepted or rejected based on the use of one of many capital budgeting
models. Using the ca
Business Finance
FIN 310, Fall 2012
Abu Jalal
Suffolk University
Chapter 6
Interest Rates and Bond
Valuation
Bond Definitions
Bond
Debt contract
Interest-only loan
Par value (face value)
Coupon rate
Coupon payment
Maturity date
Yield or Yield to maturi
Business Finance
FIN 310, Fall 2012
Abu Jalal
Suffolk University
Chapter 7
Equity Markets and Stock
Valuation
Features of Common Stock
Voting
Rights
Proxy voting
Classes of stock
Other Rights
Share proportionally in declared
dividends
Share proportion
Business Finance
FIN 310, Spring 2012
Abu Jalal
Suffolk University
Chapter 8
Net Present Value and Other
Investment Criteria
Good Decision Criteria
We need to ask ourselves the
following questions when evaluating
decision criteria
Does
the decision rule
Business Finance
FIN 310, Fall 2012
Abu Jalal
Suffolk University
Chapter 2
Financial
Statements,
Taxes, and Cash
Flow
Balance Sheet
The balance sheet is a snapshot of
the firms assets and liabilities at a
given point in time
Assets are listed in order of
Business Finance
FIN 310, Fall 2012
Abu Jalal
Suffolk University
Chapter 4
Time Value of
Money
Basic Definitions
Present
Value earlier money on a time
line
Future Value later money on a time line
Interest rate exchange rate between
earlier money and la
Formulasheet
Interest rates
m number of periods per year (e.g. m=12 if the period is a month)
!
= 1 +
1
APR = interest rate per periodm
(1+r)=(1+r*)(1+h),
r* - real interest rate; h - rate of inflation.
r =
Finance-200/ (previously 310 - FA/13)
Notes and guide
-> Dont forget formula sheet without variable names (for exam)
These are from chapters 1, 3, 4 from Brooks: Financial Fundamentals
II. Ch1 Notes:
Learning Obj
SUFFOLK UNIVERSITY
SAWYER BUSINESS SCHOOL
BUSINESS FINANCE
FIN 310 BE
FALL 2013
Course Catalogue Description
A study of the functions of business finance. Covers basic financial principles such as time
value of money, risk and return tradeoffs, and asset
Sample Midterm
Instructions:
Please do not open the examination until you are told to do so.
Closed books and closed notes
You may use any of the formulas provided on the Formula Sheet (last page of the
exam).
Calculators are allowed.
Total time: 1 h
SolutiontoHomework02
Ch.3.Q2,Q46,Q9;P14,P6
Questions:
2. What does the term compounding mean?
Compounding means that interest earned in a prior period earns interest in the current
period.
4. What happens to a future value as you increase the interest (gr
SolutiontoHomework05
Ch.5.P13,P5,P7
Ch.6.Q1,Q2,Q5,Q7;P110,P12,P14
Ch.5.P13,P5,P7
Problems:
1. Periodic interest rates. In the following table, fill in the periodic rates and the effective
annual rates.
APR
8%
9%
7.5%
4.25%
Compounding
Per Year
2
4
12
365
SolutiontoHomework01
Ch.1.Q38,Q10,Q11
3. What are the four areas of finance? Give an example of a financial activity that
would fall into each area.
Area One: Corporate Finance the financial activities that support the operations of
a business. A typical
Discount rates, Finance 310
(Refer to formula document, or exams posted for computing details)
Premise: A company needs to choose between machine A and machine B to
purchase and install. The machines perform the same
Risk and Return Notes
o
o
o
o
For preferred stocks:
R =dividend/price but dividend = dividend rate * par value
Return= profit/original cost
Loss/original cost
Holding period of return (HPR): calculating return
Finance 310: A design-thinking outline
Introduction:
Granted both the very theoretical nature of the subject, and the deductive reasoning
required, its vital to underline the need for you students, to have a rewarding
Midterm 2
Place your answers in the space below. Show as much as possible from your work i.e. formulae used and substitution.
1. (16 pts) Caribbean Shore Co. just issued some new preferred stock. The issue wil
Business Finance
FIN 310, Fall 2012
Abu Jalal
Suffolk University
Chapter 12
Cost of Capital
Why Cost of Capital Is Important
We know that the return earned on assets
depends on the risk of those assets
The return to an investor is the same as the
cost t