Corporate Finance
Problem Set #1-1 Solutions
#1.
D/E=0.25
D/(D+E) = 0.2 E/(D+E) = 0.8
WACC = [.8 x .12] + [.2 x .07 x (1-0.4)] = .1044 or 10.44%
5
NPV - $30 million
t 1
#2.
(a)
$8 million
= $11,535 Reject the project
(1 0.1044) t
average rD = (-0.05 + 0

Corporate Finance - Problem Set #1
1. [10 points] Sydney Industries, Inc., is considering a new project that costs $30 million. The project
will generate after-tax (year-end) cash flows of $8 million for five years. The firm has a debt-to-equity
ratio of

Optimal Leverage
Case Discussion: American Home
Products
Paul H. Malatesta
1
What is the business of American
Home Products?
1981 sales exceed $4 billion
Prescription drugs
Proprietary drugs
Food, house wares, household products
Well known brands inc

Marriott Corporation
The Weighted Average Cost of Capital
5/4/2015
Paul H. Malatesta
1
The Pillars of Marriotts
Corporate Strategy
Invest to increase shareholder value
Optimize the use of debt
Manage rather than own hotels
Repurchase undervalued shares
5/

Seasonal Financing
Case Study: Polar Sports, Inc.
4/8/2015
Paul H. Malatesta
1
Polar Sports Business
Very competitive
Unpredictable demand. Sales of individual
product items volatile.
Highly seasonal demand. 80% of sales
occur from September through Ja

7.
The current ratio is measured as:
A. current assets minus current liabilities.
B. current assets divided by current liabilities.
C. current liabilities minus inventory, divided by current assets.
D. cash on hand divided by current liabilities.
E. curre

51. Your firm has total assets of $1,400, fixed assets of $600, long-term debt of $700, and short-term
debt of $100. What is the amount of net working capital?
A. $0
B. $100
C. $600
D. $700
E. $800
52. Knight Insurance has shareholders' equity of $136,900

71.
What concerns might a loan officer have when loaning funds to a sole proprietor that he or she
might not have when loaning funds to a corporation?
The existence and viability of a sole proprietor is dependent upon one individual. Should that
individua

TOPIC: MARKET VALUE RATIOS
TYPE: CONCEPTS
66.
The three parts of the Du Pont identity can be described as:
A. operating efficiency, asset use efficiency, and profitability.
B. financial leverage, operating efficiency, and profitability.
C. the equity mult

92.
Sometimes when businesses are critically delinquent on their tax liabilities, the tax authority
comes in and literally seizes the business by chasing all of the employees out of the building
and changing the locks. What does this tell you about the im

SECTION: 2.2
TOPIC: NONCASH ITEMS
TYPE: CONCEPTS
38.
Fixed costs include:
A. raw materials.
B. manufacturing wages.
C. management bonuses.
D. office salaries.
E. shipping and freight.
Ross - Chapter 002 #38
SECTION: 2.2
TOPIC: FIXED COSTS
TYPE: CONCEPTS
3

Chapter 2 Key
1.
The financial statement summarizing the value of a firm's equity on a particular date is the:
A. income statement.
B. balance sheet.
C. statement of cash flows.
D. cash flow statement.
E. dividend statement.
Ross - Chapter 002 #1
SECTION:

49.
A firm has net working capital of $820. Long-term debt is $3,260, total assets are $5,920 and
fixed assets are $3,410. What is the amount of the total liabilities?
A. $2,440
B. $4,080
C. $4,130
D. $4,230
E. $4,950
Current assets = $5,920
$3,410 = $2,5

57.
Given the tax rates as shown, what is the average tax rate for a firm with taxable income of
$218,740?
A. 25.38 percent
B. 28.43 percent
C. 30.67 percent
D. 31.34 percent
E. 39.00 percent
Tax = .15($50,000) + .25($25,000) + .34($25,000) + .39($118,740

Marketing Research
Final Exam - Topic List
Chapter 1:
The Marketing Research Process
Ethics in Marketing Research
Chapter 2:
The Problem Formulation Process
Research Proposal
Chapter 3:
Types of Research Designs
Types of Exploratory, Descriptive and Causa

Step 1: State the null hypothesis
Step 2: State the alternative hypothesis
Step 3: Decide on the significance level
Step 4: Give your decision rule (e.g. if p-value is less than 0.05 then
Reject Null Hypothesis OR if t-value is > Critical value then Reje

Correlation and Regression
Product Moment Correlation
The product moment correlation, r, summarizes the
strength of association between two metric (interval or
ratio scaled) variables, say X and Y.
It is an index used to determine whether a linear or
st

Cross tabulation
Multivariate technique used to study relationship between two categorical variables
The test generates cross tabulation table with cells for every combination of categories of
the two variables
Each categorical variables has two levels

RES202 MARKETING RESEARCH
Quarter 4 2016
Unit Guide
RES202 MARKETING RESEARCH
QUARTER 4 2016
About Marketing Research
Contacts
Below is a list of contacts for this unit. Please liaise directly with your unit instructor regarding
appropriate consultation t

100.What is the cash coverage ratio for 2007?
A. 8.74
B. 8.80
C. 11.64
D. 11.82
E. 12.31
101.What is the return on equity? (Use 2007 values.)
A. 17.82 percent
B. 18.47 percent
C. 27.70 percent
D. 29.96 percent
E. 35.63 percent
102.What amount should be in

80. What is the cash flow from assets for 2007?
A. $211
B. $281
C. $293
D. $801
E. $871
81. What is net new borrowing for 2007?
A. $46
B. $39
C. $0
D. $39
E. $46
82. What is the cash flow to creditors for 2007?
A. $1
B. $5
C. $34
D. $56
E. $77
83. What is

25.
Which one of the following statements concerning net working capital is correct?
A. The lower the net working capital the greater the ability of a firm to meet its current
obligations.
B. The change in net working capital is equal to current assets mi

94.
Taylor's Men's Wear has a debt-equity ratio of 55 percent, sales of $587,000, net income of
$63,400, and total debt of $196,000. What is the return on equity?
A. 15.80 percent
B. 17.79 percent
C. 18.03 percent
D. 19.41 percent
E. 19.58 percent
Return

103.
What is the amount of the net cash from investment activity for 2007?
A. $37,300
B. $41,800
C. $46,400
D. $52,000
E. $52,400
Cash flow from investment activity = $121,800
$84,500 + $9,100 = $46,400
AACSB TOPIC: ANALYTIC
Ross - Chapter 003 #103
SECTIO

13.
The difference between a firm's current assets and its current liabilities is called:
A. operating cash flow.
B. capital spending.
C. net working capital.
D. cash flow from assets.
E. cash flow to creditors.
Ross - Chapter 002 #13
SECTION: 2.1
TOPIC:

Ross - Chapter 002 #64
SECTION: 2.4
TOPIC: CASH FLOW TO CREDITORS
TYPE: PROBLEMS
65.
Hi-Performance Motors has net income of $62,408. The firm pays out 55 percent of the net
income to its shareholders as dividends. During the year, the company sold $125,0

82.
What is the cash flow to creditors for 2007?
A. $1
B. $5
C. $34
D. $56
E. $77
Cash flow to creditors = $38
( $39) = $77 (See problem 81.)
AACSB TOPIC: ANALYTIC
Ross - Chapter 002 #82
SECTION: 2.4
TOPIC: CASH FLOW TO CREDITORS
TYPE: PROBLEMS
83.
What i

64. Morrison's Corner Bakery has beginning long-term debt of $23,509 and ending long-term debt of
$19,847. The beginning and ending total debt balances are $26,847 and $24,613, respectively.
The interest paid is $1,988. What is the amount of the cash flow

Introduction to the Cost of
Capital
Case Study: Hong Kong Dragon
Airlines Limited (A)
4/28/2015
Paul H. Malatesta
1
Background
Hong Kong Dragon Airlines needs to acquire a
spare engine to support its fleet of Airbus A320
aircraft.
There are three option

44.
On a common-base year financial statement, all accounts are expressed relative to the base:
A. year amount.
B. amount of sales.
C. amount of total assets.
D. net income.
E. net cash flow.
Ross - Chapter 003 #44
SECTION: 3.2
TOPIC: COMMON-BASE YEAR FIN

54.
Mansfield Enterprises currently has a total asset turnover of 1.21. Which one of the following
set of circumstances must increase this ratio regardless of the size of the changes that occur?
Assume that all else remains constant.
A. decrease in sales

73.
What is the cash flow to creditors for 2007?
A. $353
B. $210
C. $300
D. $510
E. $647
Cash flow to creditors = $210
( $300) = $510 (See question 72.)
AACSB TOPIC: ANALYTIC
Ross - Chapter 002 #73
SECTION: 2.4
TOPIC: CASH FLOW TO CREDITORS
TYPE: PROBLEMS

85.
Big Foot Wholesalers has sales of $1,387,400, costs of goods sold of $891,400, inventory of
$188,936, and accounts receivable of $94,800. How many days, on average, does it take the
firm to sell its inventory assuming that all sales are on credit?
A.

32.
The market-to-book ratio is measured as:
A. the market value of total assets divided by the book value of total assets.
B. the market value of inventory divided by the book value of inventory.
C. net income divided by the market value per share.
D. ma