UNIVERSITY OF BRITISH COLUMBIA
COMM298: Midterm Exam October 2014
Instructions:
Please provide your solutions ONLY in the lined pages provided. Show calculations.
No books, notes, or electronic devices (other than a calculator) are to be used.
Name:
_
Stu
Question 1 Solution
To compound monthly, remember to divide the interest rate by 12 (6%/12 = 0.50%) and the number of
periods will be 2 years times 12 months (2*12 = 24 periods).
FV = PV * (1+r)t = 50,000 * (1
UNIVERSITY OF BRITISH COLUMBIA
COMM298: Midterm Exam October 2014
Instructions:
Please provide your solutions ONLY in the lined pages provided. Show calculations.
No books, notes, or electronic devices (other than a calculator) are to be used.
Name:
_
Stu
Time Value of Money
Calculating Future Values
Q: Compute the future value of $ 1,000 compounded annually for
a. 10 years at 6 percent.
b. 10 years at 9 percent.
c. 20 years at 6 percent.
Calculating Present Values
Q: For each of the following, compute the
Introduction to Finance
Making Capital Investment Decisions
COMM 298
Outline
1
Introduction
2
Garbage Truck Mini-Case
COMM 298
Making Capital Investment Decisions
1 / 28
Outline
1
Introduction
2
Garbage Truck Mini-Case
COMM 298
Making Capital Investment D
Cost of Capital
Problem Set
Question 1. The Down and Out Co. just issued a dividend of $2.40 per share on its
common stock. The company is expected to maintain a constant 5.5 percent growth rate in
its dividends indenitely. If the stock sells for $52 a sh
COMM298: INTRODUCTION TO FINANCE
Outline & Syllabus
COURSE GOALS
To provide an overview of the valuation of financial assets, corporate investment decisions, and
financial management.
To enable students to develop the necessary quantitative skills to anal
1. The Starr Co. just paid a dividend of $1.90 per share on its stock. The dividends are
expected to grow at a constant rate of 5 percent per year, indefinitely. If investors require a
12 percent return on the stock, what is the current price? What will t
Chapter 7: Net Present Value and Other Investment Rules
7.1 Fuji Software Inc. has the following mutually exclusive projects.
Year
Project A
0
$10,000
1
6,500
2
4,000
3
1,800
a. Suppose Fuji's payback period cut-off is two years.
Which of these two projec
Chapter 7: Net Present Value and Other Investment Rules
7.1 Fuji Software Inc. has the following mutually exclusive projects.
Year
Project A
0
$10,000
1
6,500
2
4,000
3
1,800
a. Suppose Fuji's payback period cut-off is two years. Which
of these two projec
Chapter 6: How to Value Bonds and Stocks
What is the price of a 10-year, zero coupon bond paying $1,000 at maturity if the YTM is
a. 5 percent?
b. 10 percent?
c. 15 percent?
The price of a pure discount (zero coupon) bond is the present value of the par.
EXECUTIVE SUMMARY
We now examine one of the most important concepts in all of corporate finance: the relationship
between $1 today and $1 in the future. Consider the following example. A firm is contemplating
investing $1 million in a project that is expe
The Starr Co. just paid a dividend of $1.90 per share on its stock. The dividends are expected to
grow at a constant rate of 5 percent per year, indefinitely. If investors require a 12 percent return
on the stock, what is the current price? What will the
The Starr Co. just paid a dividend of $1.90 per share on its stock. The dividends are expected to
grow at a constant rate of 5 percent per year, indefinitely. If investors require a 12 percent return
on the stock, what is the current price? What will the
Question 1 Solution
To compound monthly, remember to divide the interest rate by 12 (6%/12 = 0.50%) and the
number of periods will be 2 years times 12 months (2*12 = 24 periods).
FV = PV * (1+r)t = 50,000 * (1+.005)24 = 56,357.99
Recall that the future va
WEEK 5 CLASS 1 - FEB.2ND (Mon) Class Starts Here
Risks%Associated%with%Inves2ng%in%Bonds%
Core%Concept:%
A. Describe%theNULLarious%risks%associated%with%inves8ng%in%
bonds.%
B. Calculate%rate%of%return%(TWR)%on'onds%
- Coupon Interest
- Compounding > Inte
Feb. 25th (Wed) Week 7 Class 2 Starts Here.
Equity'Analysis'and'Valua/on!
* Equity > could be preferred stocks, could be common stocks
'
I.'Overview'of'Equity'Securi/es'
T
Core'Concepts:'
!
A. Discuss!the!various!types!of!equity!securi4es.!
B. Compare!and
Calculating Returns
Suppose a stock had an initial price of $92 per share, paid a dividend of $1.45 per share during the year, and
had an ending share price of $104. Compute the percentage total return.
Calculating Returns
Rework the problem above, but th
Introduction to Finance
Investment Decision Rules
COMM 298
Outline
Payback Period
Discounted Payback Period
Net Present Value (NPV)
Protability Index (PI)
Internal Rate of Return (IRR)
Modied Internal Rate of Return (MIRR)
Capital Budgeting Decision Crite
Introduction to Finance
Stock Valuation
COMM 298
Outline
Introduction
The Dividend Discount Model
2
The Big Picture
Assets
Assets
Liabilities & Shareholders Equity
Debt
Equity
3
What is a Stock/Equity?
4
What is a Stock/Equity?
Another form of nancing.
Ho
Time Value of Money
Core Concepts:
A. Solve time value of money questions involving present
value and future value of lump sums and annuities, assuming
various compounding periods.
B. Distinguish between a stated annual rate and an effective
annual rate a
Risks Associated with Investing in Bonds
Core Concept:
A. Describe the various risks associated with investing in
bonds.
B. Calculate rate of return (TWR) on bonds
Rate of Return (TWR)
Bond returns consist of:
1. Coupon interest
2. Compounding (Interest o
Calculating Returns
Suppose a stock had an initial price of $92 per share, paid a dividend of $1.45 per share during the year, and
had an ending share price of $104. Compute the percentage total return.
The return of any asset is the increase in price, pl
The Starr Co. just paid a dividend of $1.90 per share on its stock. The dividends are expected to
grow at a constant rate of 5 percent per year, indefinitely. If investors require a 12 percent return
on the stock, what is the current price? What will the
Chapter 6: How to Value Bonds and Stocks
What is the price of a 10-year, zero coupon bond paying $1,000 at maturity if the YTM is
a. 5 percent?
b. 10 percent?
c. 15 percent?
Microhard has issued a bond with the following characteristics:
Par: $1,000
Time
Chapter 7: Net Present Value and Other Investment Rules
7.1 Fuji Software Inc. has the following mutually exclusive projects.
Year
Project A
0
$10,000
1
6,500
2
4,000
3
1,800
a. Suppose Fuji's payback period cut-off is two years. Which
of these two projec
COMMERCE 291 Lecture Notes 2017 Jonathan Berkowitz
Not to be copied, used, or revised without explicit written permission from the copyright owner.
Summary of Lectures 19 and 20
Inference so far:
One-sample z-test and CI for one proportion p
One-sample t-
COMMERCE 291 Lecture Notes 2017 Jonathan Berkowitz
Not to be copied, used, or revised without explicit written permission from the copyright owner.
Summary of Lectures 21 and 22
Introduction to Statistical Models (Chapter 16, Sections 1 and 2)
One major t
COMM 298 Final Exam Formula Sheet
Discounting: PV = FV(1+ r)"
Compounding: FV = pv(1+ r)
Present Value of an n-payment annuity of $A =A[ r
1(1+r)"]
Future Value of an n-payment annuity of $A =A [W]
Present Value of a perpetuity of $A = A
r
Converting APR