Chapter 17: Common and Preferred Stock Financing
Chapter 17
Common and Preferred Stock Financing
Discussion Questions
17-2.
Why might a corporation use a special category such as founders stock in
issuing common stock?
Founders stock may carry special vot
Chapter 12: The Capital Budgeting Decision
Chapter 12
The Capital Budgeting Decision
Discussion Questions
12-1.
What are the important administrative considerations in the capital budgeting
process?
Important administrative considerations relate to: the s
Chapter 11: Cost of Capital
Chapter 11
Cost of Capital
Discussion Questions
11-1.
Why do we use the overall cost of capital for investment decisions even when
only one source of capital will be used (e.g., debt)?
Though an investment financed by low-cost
Chapter 10: Valuation and Rates of Return
Chapter 10
Valuation and Rates of Return
Discussion Questions
10-1.
How is valuation of any financial asset related to future cash flows?
The valuation of a financial asset is equal to the present value of future
Chapter 03: Financial Analysis
Chapter 3
Financial Analysis
Discussion Questions
3-1.
If we divide users of ratios into short-term lenders, long-term lenders, and
stockholders, in which ratios would each group be most interested, and for what
reasons?
Sho
Chapter 05: Operating and Financial Leverage
Chapter 5
Operating and Financial Leverage
Discussion Questions
5-1.
Discuss the various uses for break-even analysis.
Such analysis allows the firm to determine at what level of operations it
will break even (
Chapter 04: Financial Forecasting
Chapter 4
Financial Forecasting
Discussion Questions
4-1.
What are the basic benefits and purposes of developing pro forma statements and
a cash budget?
The pro-forma financial statements and cash budget enable the firm t
Chapter 4
Time Value of Money
Objectives
Be able to understand the concepts of lump
sums, perpetuities, annuities, annuity due s
and unlevel cash flows and calculate the PV
and FV of these cash flows.
Be able to adjust N, PMT, and I when the
compounding
Practice Quiz TVM
Name_
Choose the best answer. Read each question carefully and be sure you understand what the
question is asking.
1. Suppose you deposit $1,000 in an account today that pays 5% interest, compounded annually.
What will be the balance in
FIN 3213 Midterm Study Guide
=
Also note that this review is not exhaustive and you should refer to your class notes, past quizzes and slides for a full review.
1. * IRR is rate the makes investment cost equal to your CF.
2. Net Present Value Explained in
1
Class 2 Notes
FIN 3213
1. Roll. Who watched videos?
2. Ch.1 & 2 Go through slides -Ch. 2 Slides: 3 main Fin. Statements (#s 3-5,11, 12, 17,
23, 28, 30: Value=PV of all FCFs)
3. Ch. 9 Discussion Questions P. 276 (On Board)
4. Practice Problems 1 & 2 (Use
Ch. 7 Discussion Questions except 2 & 4
7-1.
In the management of cash and marketable securities, why should the primary concern
be for safety and liquidity rather than maximization of profit?
Cash and marketable securities are generally used to meet the
Class 1 Notes
1. Introduction - Nameplates/place cards. Professional (who I am), resume on BB.
2. Go through Syllabus
3. Textbook
4. Calculator Introduction & Mastery PV=FV; 5 keys; CF (NPV & IRR)
5. Helpful Hints
a. Google/youtube videos for additional o
Chapter 21: International Financial Management
Chapter 21
International Financial Management
Discussion Questions
21-1.
What risks does a foreign affiliate of a multinational firm face in todays
business world?
In addition to the normal risks that a domes
1.
Bond value (LO3) The Lone Star Company has $1,000 par value bonds outstanding at 9
percent interest. The bonds will mature in 20 years. Compute the current price of the bonds
if the present yield to maturity is:
a. 6 percent.
b. 8 percent.
c. 12 percen
Chapter 10
Valuation and Rates of Return
Discussion Questions
10-1.
How is valuation of any financial asset related to future cash flows?
The valuation of a financial asset is equal to the present value of future
cash flows.
10-2.
Why might investors dema
Solutions
Chapter 1
1-2
Value is measured as the present value of the cash flows that an investment is expected to
generate during its life. The three factors that determine value are: (1) the amount of the future
cash flows, (2) the timing of the future
Kevin Wallace
Ch.12 Homework
P.396-399
# 4,10,22,24
4.
Purchase price of the bond=$1,040
Current selling price of bond=$1,070
Face value of bond=$1,000
Coupon rate on bond=7%
Coupon payment for holding the bond=$1,000*7%=$70
a. Total dollar return on hold
Kevin Wallace
Grade = 45/50
Kevin - you were close on these and you seem to understand
how to work them. Good Job.
Ch.9 Homework
P.293-296
#4,19,25
4.
Value today of Year 1 cash flow = $4,200/1.14 = $3,684.21
Value today of Year 2 cash flow = $5,300/1.142
Ch.13 Homework
P.433-434
# 10,11,17,19,20
Grade = 40/50
10.
10. a.
This portfolio does not have an equal weight in each asset. We first need to find the
return of the portfolio in each state of the economy. To do this, we will multiply the
return of each
Ch.14 Homework
P.465-467
# 3,7,12,16,18
Grade = 40/50
3.
RE = .05 + 0.85(.08) = .1180 or 11.80%
And using the dividend growth model, the cost of equity is
RE = [$1.60(1.06)/$37] + .06 = .1058 or 10.58%
RE = (.1180 + .1058)/2 = .1119 or 11.19%
7.
a. 22x2-5
Ch.15 Homework
P.505-506
#2,4,9,12,14
Grade = 44/50
2.
a.
b.
c.
The maximum subscription price is the current stock price, or $53.
The minimum price is anything greater than $0.
Number of new shares = $40,000,000/$48 = 833,333 shares
Number of rights need
Kevin Wallace
Grade = 42/50
Ch.16 Homework
P.242-245
#3,6,9,12,17
3.
3.
a.
Since the company has a market-to-book ratio of 1.0, the total equity of the firm is
equal to the market value of equity. Using the equation for ROE:
ROE = NI/$250,000
The ROE for
Kevin Wallace
Grade = 48/50
Ch.17 Homework
P.573-575
#2,3,7,10,13
2.
Common Stock
Capital
285,000
Surplus
Retained
649,000
Earnings
Total
964,000
Owners
Equity
Current
Price
30,000
30
Small
Stock
dividend
a. When 10% Stock Dividend is declared, the follow
Kevin Wallace
Grade = 45/50
Ch.18 Homework
P.604-608
#2,7,10,13,14
2.
Net worth + Long term debt fixed assets working capital
= 10380+7500-2105-15190
= 585
If current liabilities are 1450, then current assets would be
Working capital = current assets curr