1
Practice Midterm Exam
Instructions:
1. You have 1 hour and 30 minutes.
2. You can use a calculator and a single sheet of 8-1/2 X 10 paper with notes. There is an annuity
table attached to the back of the exam for a total of 10 pages.
3. The exam has fou
Homework #3 Solution
1.
a) PV = $100,000
b) PV = 180000/1.12^5 = $102,137
c) PV = 11400/.12 = $95,000
d) PV = 19000 * A(1,12%,t=10) = 19000 * 5.65 = $107,350
e) PV = 6500/(.12-.05) = $92,857
Prize (d) is the most valuable since it has the highest present
Homework #3 (Due March 3 in Recitation Session)
1. As winner of a breakfast cereal competition, you can choose one of the following
prizes:
(a) $100,000 now
(b) $180,000 at the end of five years
$11,400 a year forever
(d) $19,000 for each of ten years
(e
Homework Assignment #4 (Due March 17 in Recitation Session)
1. You operate a firm which will last one year. At the end of the year, the firm will
generate its single cash flow. It will either be 140 or 40 each equally likely. (Assume all
cash flows are in
Homework #1 (Due Feb 23 in Class)
1. You are considering a project which generates $10,000 in 6 months and $20,000 in one
year and will run you $26,000 today. You know these cash flows are exact. You also have
the Treasury yield curve from the Wall Street
Homework #2 Solution
American Chemical Case
1. Brunswick and Southern are the "twins" for the Collinsville Investment since they are strictly
sodium chlorate producers. The average unlevered beta for these firms is 1.04 (see exhibit) and is
thus used as t
Homework #2 (Due Feb 21 in Class)
American Chemical Case Questions
1. Which firms are the "identical twins" of the Collinsville investment? Using the s for
those assets and the methodology learned in this course, determine the appropriate
discount rate fo
1
Practice Midterm Exam Solutions
1.
Comps
-Ve
Vd
%Eq
BetaA
FF
-80
18
.816
.73
IQ
-100
25
.8
.8 => Asset Beta = .77
Ra = 6 + 6 * .77 = 10.62%
ITS = 50*.08*.4=1.6
Year
Sales
Cannibaliztn
Synergy
Net Sales
Cogs
Op Exp
Overhead
NWC
IncNWC
Land
PPE
Depr
Opp C
Homework #1 Solutions
1. I (unrealistically) note that all rates are CBE, so assume the discount rate for the sixmonth cash flow is 4% CBE or 2% every 6 months.
To get the one year spot rate:
100 = 3/1.02 + 103/(1+x)
100 = 2.94 + 103/(1+x)
97.06 = 103/(1+
1
Homework #4 Solutions
1.
a) No. The current value of the firm is 90M (The average of 140 and 40). The value of the debt
is 70M (average of 100 and 40). The equity is the residual value of 20M. Since you have 2M
shares, the equity price is 10. Say you fi
CON101.
Req. 1
Present value
$750,000,000 x .67297
$ 18,750,000* x 16.35143
Issue price
=
=
504,727,500
306,589,313
$811,316,813*
*$750,000,000 x .05 x 1/2
*Using Excel or a financial calculator results in a
present value of $811,317,875 (rounded).
Req. 2
CONTINUING PROBLEM
CON4-1.
Adjusting Entries:
Debit
a.
b.
c.
d.
e.
f.
g.
h.
i.
Wages expense (+E, -SE)
Wages payable (+L)
7,500
Unearned revenue (-L)
Cleaning service revenue (+R, +SE)
Amount: $24,000 x 2/12 = $4,000 earned
4,000
Utilities expense (+E, -S
Req. 1
Pennys Pool Service & Supply.
Income Statement
For the Year Ended December 31, Current Year
Revenues
Sales revenue
$ 60,000
Expenses
Cost of supplies used
8,200
Wage expense
24,000
Other administrative expense
4,500
Total expenses
36,700
Pretax inc
CONTINUING PROBLEM
CON7-1.
Req. 1
ITEM A.
FirstIn, FirstOut (FIFO)
Cost of Goods Sold
Units Unit Cost Total Cost
40
$6
$240
80
8
640
40
9
360
Total
$1,240
ITEM B.
FirstIn, FirstOut (FIFO)
Cost of Goods Sold
Units Unit Cost Total Cost
40
$6
$240
80
5
400
4
Problem 1
P ( A B) 0.1
=
=0.5
P(B)
0.2
P ( A B) 0.1
=
=0.25
b. P ( B| A )=
P( A)
0.4
c. no, because P( AB) P( A) , and
a.
P ( A|B )=
P( B A) P( B)
Problem 2
P ( A )=P ( E1 ) + P ( E2 ) + P ( E3 ) =0.2+0.3+0.3=0.8
a.
P ( B ) =P ( E 2 ) + P ( E 3 ) + P ( E4
Problem 1
Firstly, as 4.5% is a very small proportion, women responded to the 100,000
questionnaires is a small number. Therefore, the sample doesnt have
representativeness. Besides, since the response is voluntary, women with
negative opinions are more l
Problem 1
74% (55% + 41% - 22%)
Problem 2
a)
b) 6% (4% + 3% - 1%)
4% MySpace
c)
94%
1%
Both
(100% - 6%)
Problem 3
a) 0.33 (57 / 171)
b) 0.35 (60 / 171)
c) 0.26 (45 / 171)
d) 0.42 (60 + 12) / 171)
Problem 4
24 (4 3 2 1) handshakes are exchanged.
Problem 5
Problem 1
x =68 . The mean of the sampling distribution of x should be the same as
1.
the mean of the population.
27
=
=4.025 . The sample number is 45, which is bigger than 30, so
n 45
we can assume that it is normal distribution.
x=
2.
3.
Because the
The unexamined life is not worth living
There is only one good, knowledge, and one evil, ignorance
Socrates (c. 469 - 399 B.C.)
Socrates was a hugely important Greek philosopher
from the Classical period. Unlike most of the
Pre-Socratic philosophers who c
1
On non-linear regression analysis
1. Non-linear regression means that the relationships
between the variables will no longer be of linear form.
2. In non-linear regression the right-hand side variables
may appear in squared, cubed, logarithmic, etc., fo