FINA 462
ETHICS CASE ASSIGNMENT
80 POINTS
Your name: Casey Papke
1.
What is a Ponzi scheme?
A Ponzi scheme is a scheme named after Charles Ponzi, who became infamous
for using the technique in 1920.(1) The scheme is a deceitful investment operation where
In-class practice problems: Chapter 8
1.
A diversified portfolio of risky securities has an expected return of 10% and standard
deviation of 16%. The risk-free rate is 6%. Suppose both Laura and Bob have $200 each
to invest, and they can borrow and lend a
SUBSTITUTE PROJECT FOR FINANCE CLUB ATTENDANCE
FALL 2014
FINA 462-SECTIONS 1 AND 2
20 POINTS MAXIMUM
Provide a summary of the article entitled Making Better Decisions about the Risk of
Capital Projects. The PDF for the papers is on the D2L website for the
Determination of tax:
Sales
Costs
Tax depreciation
Pretax profit
Tax
Working capital
Cash flow analysis:
Capital investment and disposal
Change in working capital
Sales
Costs
Tax
Operating cash flow
Net cash flow
Present value
Net present value
Year
0
Yea
Determination of tax:
Year
0
Cost savings
Incremental tax depreciation
Incremental pretax profit
Incremental tax
Cash flow analysis:
Incremental capital investment and disposal
Change in working capital
Cost savings
Incremental tax
Incremental operating c
CHAPTER 17
Does Debt
Policy Matter?
Topics Covered
The Effect of Financial Leverage in a
Competitive Tax-Free Economy
Financial Risk and Expected Returns
The Weighted Average Cost of Capital
A Final Word on After-Tax WACC
2
How Should We Finance Our
Asset
Determination of tax:
Sales
Costs
Tax depreciation
Pretax profit
Tax
Working capital
Cash flow analysis:
Capital investment and disposal
Change in working capital
Sales
Costs
Tax
Operating cash flow
Net cash flow
Present value
Net present value
Year
0
40,
CHAPTER 18
How Much
Should a
Corporation
Borrow?
Topics Covered
Corporate Taxes
Corporate and Personal Taxes
Cost of Financial Distress
Pecking Order of Financial Choices
The Tax Benefits of Debt
Financing
Debt financing has one important
advantage under
CHAPTER 3
Valuing Bonds
Topics Covered
Bond Valuation
Bond Prices and Interest Rates: Duration and
Modified Duration
The Term Structure of Interest Rates
Expectations Theory of the Term Structure
The Impact of Risk and Inflation on the Term
Structure
CHAPTER 4
The Value of
Common Stock
Topics Covered
How Common Stocks Are Traded
How Common Stocks Are Valued
Estimating The Cost Of Equity Capital
The Link Between Stock Price and Earnings per
Share
Valuing a Business by Discounted Cash Flow
2
Market Def
CHAPTER 6
Making Investment Decisions
with the Net Present Value
Rule
Topics Covered
Applying the Net Present Value Rule
IM&Cs Fertilizer Project
Investment Timing
Equivalent Annual Cash Flows
2
n
Ct
C1
C2
Cn
NPV
C0
.
t
2
(1r )
1r (1r )
( 1 r )n
t 0
W
In-class practice problems: Chapter 5
1.
ST Electronics has the following new projects. Cash flows are in $ millions. Fill in the
blanks.
Year
0
1
2
3
4
NPV(r=12%)
IRR
PI
Project A
-70
30
40
50
55
59.2
44%
0.8
Project B
-80
30
35
55
60
52.0
36%
0.6
Projec
Case Study
Bernie Madoffs Ponzi Scheme: Reliable
Returns from a Trustworthy Financial Adviser
By Denis Collins Denis Collins is a professor of management in the School of
Business at Edgewood College in Madison, Wisconsin. His research interests include
b
In-class practice problems: Chapter 7
1.
Stock V has the following returns over the last five years: -10%, 5%, 10%, 15%, and
25%. Assume the risk-free rate over this time period was 5%.
a.
What is the arithmetic average annual return for Stock V?
b.
What
CHAPTER 4
The Value of
Common
Stock
Topics Covered
How Common Stocks Are Traded
How Common Stocks Are Valued
Estimating The Cost Of Equity Capital
The Link Between Stock Price and
Earnings per Share
Valuing a Business by Discounted Cash
Flow
2
Market Defi
CHAPTER 3
Valuing Bonds
Topics Covered
Bond Valuation
Bond Prices and Interest Rates: Duration
and Modified Duration
The Term Structure of Interest Rates
Expectations Theory of the Term Structure
The Impact of Risk and Inflation on the
Term Structure
Real
CHAPTER 6
Making
Investment
Decisions with
the Net
Topics Covered
Applying the Net Present Value Rule
IM&Cs Fertilizer Project
Investment Timing
Equivalent Annual Cash Flows
2
n
Ct
C1
C2
Cn
NPV
C0
.
t
2
( 1 r )
1 r ( 1 r )
( 1 r )n
t 0
What Ct should b
CHAPTER 8
Portfolio
Theory and the
Capital Asset
Pricing Model
Topics Covered
Harry Markowitz And The Birth Of Portfolio
Theory
The Relationship Between Risk and
Return
Validity and the Role of the CAPM
Some Alternative Theories
2
Figure 8.1: Daily Price
CHAPTER 5
Net Present
Value and
Other
Investment
Topics Covered
A Review of The Basics [Net Present
Value (NPV)]
The Payback Period
Internal Rate of Return
Choosing Capital Investments When
Resources Are Limited
2
Net Present Value (NPV)
NPV is a DCF appr
CHAPTER 9
Risk and the
Cost of Capital
Topics Covered
Company and Project Costs of Capital
Measuring the Cost of Equity
Analyzing Project Risk
Certainty Equivalents
2
Company Cost of Capital
The company cost of capital is defined as
the expected return on
\In-class practice problems: Chapter 17
1.
ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure.
ABC is all equity financed with $600,000 in stock. XYZ uses both stock and perpetual
debt; its stock is worth $300,000 a
CHAPTER 5
Net Present Value and
Other Investment Criteria
Topics Covered
A Review of The Basics [Net Present Value
(NPV)]
The Payback Period
Internal Rate of Return
Choosing Capital Investments When Resources
Are Limited
2
Net Present Value (NPV)
NPV