Practice Set for Chapters 1,2,3
Please answer all of the following problems by typing the numerical solution into the space provided beneath each question. You
will want to review the solutions to the similar end of chapter problems be
Practice Set for Chapters 6 and 7
I STRONGLY ENCOURAGE YOU TO REVIEW THE END OF CHAPTER PROBLEMS AND EXCEL SOLUTIONS
(ATTACHED TO THE COURSE) BEFORE ATTEMPTING THESE EXERCISES. And I do not resort to all caps
Please answer all o
Chapter 5: Risk Analysis in Capital Budgeting
Shapiro: CHAPTER 5 QUESTIONS
1. Comment on the following statements:
a. Because our new expansion project has the same systematic risk as the firm as a
whole, we need do no further risk analysis on the project
CHAPTER 6: PROBLEMS
1. Ampex common stock has a beta of 1.4. If the risk-free rate is 8 percent, the expected market
return is 16 percent, and Ampex has $20 million of 8 percent debt with 10 years until
maturity. It has a yield to maturity of 12 percent a
Chapter 3: Estimating Project Cash Flows
Shapiro CHAPTER 3: ESTIMATING PROJECT CASH FLOWS
1. A new investment project is to demolish an existing gas station and construct a small
shopping mall. Which of the items should be treated as incremental
Chapter 4: Real Options and Project Analysis
Shapiro CHAPTER 4: QUESTIONS
1. Imagine that the price of copper rises to the point that the copper value of a penny is worth
more than $.01. As a result, pennies disappear from circulation. Your firm uses copp
Latin America had a very large interest in Nike, most likely due to increased marketing, but irregardless
there was a large demand, which also allowe Nike to expand internationally. Nike would also be able to
produce their product at a much lower c
Estimating Project Cash Flows
Shareholders are interested in how many additional dollars they
will receive in the future for the dollars they lay out today
What matters to them is not the projects total CF per perio
Final Exam Minicases/ Problems Chapters 11,12,16,17,18,21,25
Please type your numeric answers in the spaces below. Please do your own work and do
not share your answers with others. Thank you and good luck.
We will open a business that requires
Final Exam Chapter 11,12,16,17,18,21,25
Please Boldface and Underline the correct response. Thank you and good luck.
True False While there have long been attempts to reduce risk to concrete measures, we are not yet to the point where any
Earnings after tax
Depreciation equals asset repl.
Cash flow to capital
Cost of capital
Value of business
Answer Key Capital Budgeting Reading Quiz - Chapters 21 and 25
1. Why do companies like John Deere and Caterpillar run leasing subsidiaries?
They do this to sell more equipment. In addition, they have superior information about the resell market and addit
Capital Budgeting Reading Quiz - Chapters 21 and 25
Please type your answers in the spaces provided. Thank you and Good Luck.
Why do companies like John Deere and Caterpillar run leasing subsidiaries?
From the lessors point of view, are leases
INTRODUCTION TO CAPITAL BUDGETING
Chapter I Introd. to Capital
Investments expected to generate cash flows beyond the first year
Week 4 Class 3
Real Options and Project Analysis
Real Options and Project
Real Options and Project
Real Options and Project
Logan couls use a letter of credit that was issued by the bank on behalf of his distributor
that promises that the Sports Exports company will be paid once the shipping documents are
presented. This means that the letter holds the place of the dist
Oakley would have the more prominent agency problems than Berkley
because a decentralized agency facilitates better use of the local markets
information. This same advantage also lends to the disadvantage of
having agency problems and lack of commit
Fort Collins should invest cash into the US because using the $1 million would get you 8,333,333 pesos
only accumulating to 8,458,333. If it then converted back to dollars it would only go back to $845,333
which is less than the original value.
No, I dont believe so. Because the program is not designed to be flexible
the weights it has for certain values will not be country specific. This being
the case, they will definitely assign improper values to some critieria.
Some methods inclu
Only firms that deal with international transactions have to worry about Transaction exposure.
This is different than economic exposure where this includes any form where the business cash
flow would be affected. If competition increases in another
If the parent company is determining whether or not to make an investment, they have to look at it from the
perspective of what is best for the parent as a whole. It might benefit the subsidiary but might
not benefit the whole company. Other factor
4,405,286.34 Buy Thai baht from Minzu Bank
100,440.53 Sell thai baht to sobat bank
exchange for thai
convert to yen
convert yen to dollars
Expected depreciation is 4.05%
Demand for pounds should increase
supply of pounds for sale should decrease
if you have lowering interest rates then the pounds value should increase
I belive it has to do with supply and demand
ANSWER KEY Capital Budgeting Reading Quiz - Chapters 16, 17 and 18
Martin Corporation is financed with 40% debt and 60% common equity. The after tax cost of debt is 10% and the cost of
common equity is 14%. What is Martins weighted average cost of capi
ANSWER KEY - Practice Set Chapters 16,17,18
Please use the rate function in excel to solve this problem. Martin Inc.s bonds will mature in 10 years. The coupon
interest rate on the bonds is 6.75 percent, paid at the end of each year. The bonds have mat
Capital Budgeting Reading Quiz - Chapters 4, and 5
Please answer the questions below in the spaces provided. Thank you.
1.What is the difference between value and price?
2. What is the difference between the yield to maturity and the yield to call?
Answer Key Capital Budgeting Reading Quiz - Chapters 6 and 7
What type of company would be less interested in using the modified internal rate of return (a large company with a lot of
cash or a small private company that is reinvesting every dollar)?
Answers to the Chapter 6 and 7 End of the Chapter Questions:
6-1. Net present value, profitability index, modified profitability index, present value
payback, and internal rate of return, and modified internal rate of return. Present
value payback does no
Answer Key Capital Budgeting Reading Quiz - Chapters 1,2,3
1. What are agency problems, and between what two stakeholders do agency problems typically occur?
Agency problems occur when the agent (manager) is employed to act on behalf of the principal (the
Answers to Assigned End of Chapter Questions Chapters 4,5
4-1. Identical cash flows streams will have identical prices in a perfect market.
4-2. Price - the amount someone has paid in a recent transaction.
Bid Price - the amount someone is willing to pay