FINC 4498
Fall 2013
Escobar
Homework 1 Finance Problems
Bob's Billiards has total assets of $8,000,000 and a total asset turnover of 2.9 times. If
the ROA is 11 percent, what is Bob's profit margin?
1
FINC 4498
Fall 2013
Escobar
Homework 4 Finance Problems
P5-8 Third edition
P5-13 Second edition
4.5%
6%
7.25%
8%
P5-4 Third edition
P5-9 Second edition
Hint: Find the total annual dividend first. Then
FINC 4498
Fall 2013
Escobar
Homework 2 Finance Problems
Why is the quick ratio a more appropriate measure of liquidity than the current ratio for a
large-airplane manufacturer?
It provides a better me
FINC 4498
Fall 2013
Escobar
Review Questions for Exam 1
A market in which the buyer and seller are brought together on a securities exchange to
trade securities.
What is the OTC market?
What is a deal
FINC 4498
Fall 2013
Escobar
Homework 3 Finance Problems
What is the average annual growth rate?
5.08%
6.24%
7.52%
9.62%
Preferred stock of Slow But Sure Inc., pays annual dividends of $1.50. These div
FINC 4498
Fall 2013
Escobar
Homework 5 Finance Problems
Answer problem P6-2 (both editions) of your book.
$0.15
$0.25
$0.45
$0.50
The answer is "the additional return that an investment must offer, re
FINC 4498
Fall 2013
Escobar
Review Questions for Exam 2
Answer problem P6-15 (both editions) of your book.
The risk premiums in each decade are 6.0%, 6.0%, 6.0%, and 6.0%. The main
lesson is that the
FINC 4498
Fall 2013
Escobar
Take Home Quiz 3
Investors who have the right to receive the cash that remains after a firm pays all of its
bills and makes necessary new investments in the business.
What
FINC 4498
Fall 2013
Escobar
Take Home Quiz 2
Which of the following is the same as taxable income?
EBIT
EBT
EBITDA
Gross profit
Which of the following are the residual claimants of a firm?
the supplie
FINC 4498
Fall 2013
Escobar
Review Questions for Exam 3
Use the table in problem P7-25 to calculate the beta of a portfolio invested equally in
stocks A, B ,C, and D.
0.5
0.85
1.05
2.15
Answer problem
FINC 4498
Fall 2013
Escobar
Take Home Quiz 1
Read Problem P2-2 in your book and answer letter b)
The FCF for the year ended December 31, is
$2,000
$5,200
$4,800
$1,500
Noncash charges, such as _, are
FINC 3412
Summer I 2011
Raegan
External Funds Required (EFR)
The estimated amount of external financing that a firm will require in the future:
EFR for Zinsmeister is $8,111,000. In pro forma balance
FINC 3412
Summer I 2011
Raegan
Quiz 2
Calculate the effective annual rate (EAR) associated with a 6 APR when interest
compounds monthly.
an infinite rate
6.168%
6.136%
6.090%
6.183%
Calculate the effe
FINC 3412
Summer I 2011
Raegan
Quiz 1
For the mortgage loan in question 3, how much would you save in interest payments
over the 30-year period, if you were able to negotiate an interest of 5%?
You wo
FINC 3412
Summer I 2011
Raegan
Cash Budget
For Farrell Industries ($ in thousands)
We can now construct the cash budget for Farrell Industries based on the cash
receipt and cash disbursement schedules
FINC 3412
Summer I 2011
Raegan
Schedule of Projected Cash Receipts
For Farrell Industries ($ in thousands)
Next consider the cash disbursements projections:
Purchases: The firms purchases average 70%
FINC 3412
Summer I 2011
Raegan
Quiz 3
The effective annual rate (EAR) is:
The annual rate to be used in continuous compounding situations.
The annual rate of interest in affect during the current year
FINC 3412
Summer I 2011
Raegan
Quiz 6
Refer to problem P2-10 of your book. The quick ratio of the Access Corporation is
1.04
0.38
0.58
The firm's managers use ratios to _.
generate an overall picture
FINC 3412
Summer I 2011
Raegan
Quiz 4
You are prepared to make monthly payments of $120, beginning at the end of this
month, into an account that pays 12 percent interest compounded monthly. How many
FINC 3412
Summer I 2011
Raegan
Quiz 8
Use the Income Statement and Balance sheet for the Buzz Coffee Shops, Inc.
Corporation in Problem P2-9 of your book. The net profit margin for the Buzz Coffee
Sho
FINC 3412
Summer I 2011
Raegan
Quiz 7
Refer to problem P2-10 of your book. The ROA of the Access Corporation is
11.3%
4.4%
18.6%
Assume you just started a new business and you are asking your supplier
FINC 3412
Summer I 2011
Raegan
Quiz 5
What is the present value of the following stream of cash flows? Use i = 8.25%
Year
CF
1
$500
2
$500
3
$500
4
$500
5
$600
6
$600
7
$600
8
$700
9
$700
10
$700
$2,5
FINC 2401
Spring 2013
Duarte
Raising Long-Term Financing
Long-term financing instruments: common and preferred stock, debt
Financial intermediaries: institutions that raise funds by selling claims on
FINC 2401
Spring 2013
Duarte
Capital Rationing
Equipment Replacement and Unequal Lives
A firm must purchase an electronic control device:
First alternative: cheaper device, higher maintenance costs, s
FINC 2401
Spring 2013
Duarte
Pro Forma Financial Statements
A forecast of what a firm expects its income statement and balance sheet
to look like a year or two ahead.
A sales forecast that relies heav
FINC 2401
Spring 2013
Duarte
Popular Growth Targets
Return on Investment
Firms that use this metric as a growth target attempt to maintain ROI above some
minimum hurdle rate and to grow it over time.
FINC 2401
Spring 2013
Duarte
Excess Capacity
NPV of leasing excess capacity (assume 10% discount rate):
o
The Human Face of Capital Budgeting
Managers must be aware of optimistic bias in the assumptio
FINC 2401
Spring 2013
Duarte
Sensitivity Analysis
Sensitivity Analysis
Table 10-4 Sensitivity Analysis of Skateboard Project
Scenario Analysis
Scenario analysis is a more complex form of sensitivity a
FINC 2401
Spring 2013
Duarte
Strategy and Capital Budgeting
Competition and NPV
Advocates of a positive NPV project should be able to articulate the
projects competitive advantage before running the n
FINC 2401
Spring 2013
Duarte
Conflicts of Interest
Investment banks cannot solve these conflicts of interest.
Instead, they must price new security issues to strike a balance between the revenue
maxim