Tutorial 5
Concept Questions
21.4.
Comment on the following remarks:
a.
Leasing reduces risk and can reduce a firm's cost of capital.
Leasing is a form of secured borrowing. It reduces a firms cost of capital only if it is cheaper
than other forms of secu
FIN 322 Tutorial Solutions Week 5
Chapter 13
Questions and Problems
11. Wewillbeginbyfindingthemarketvalueofeachtypeoffinancing.Wefind:
B=5,000($1,000)(1.05)=$5,250,000
S=175,000($58)=$10,150,000
And the total market value of the firm is:
V = $5,250,000 +
Tutorial 3
CP14.10
a) If the market is not weak form efficient, then this information could be acted on and
a profit earned from following the price trend. Under (2), (3), and (4), this
information is fully impounded in the current price and no abnormal p
FIN 322 Tutorial Solutions Week 3
Chapter 7
Questions and Problems
17. a. The base-case NPV is:
NPV = $1,350,000 + $315,000(PVIFA16%,10)
NPV = $172,466.66
b.
We would abandon the project if the cash flow from selling the equipment is
greater than the pres
FIN 322 Tutorial Solutions Week 4
Chapter 11
Questions and Problems
8. a. To find the expected return of the portfolio, we need to find the return of the
portfolio in each state of the economy. This portfolio is a special case since all three
assets have
Advance Corporate Finance Weekly Practice Questions (Solution Set)
Week 01: Chapter 5, 6 & 7
1. The possibility that more than one discount rate will make the NPV of an investment equal
to zero is called the _ problem.
A. net present value profiling
B. op
Solutions to Tutorial week 2:
CQ5.4; QP5.12; QP5.16; QP6.10; QP6.14; QP6.18
Note: You might see small differences for some solutions, it is because Im
using excel spread sheet and PVIFA formula to do the calculations. And you
may have a little bit differe
FIN 322 Tutorial Solutions Week 6
Chapter 16
Questions and Problems
EBIT and Leverage Money, Inc., has no debt outstanding and a total market value of $275,000.
Earnings before interest and taxes, EBIT, are projected to be $21,000 if economic conditions a
Advance Corporate Finance Weekly Practice Questions (Solution Set)
Week 03: Chapter 13, 14 & 16
1. The weighted average of the firm's costs of equity, preferred stock, and after tax debt is
the:
A. reward to risk ratio for the firm.
B. expected capital ga
Advance Corporate Finance Weekly Practice Questions (Solution Set)
Week 02: Chapter 10, 11 & 12
1. The average compound return earned per year over a multi-year period is called the _
average return.
A. arithmetic
B. standard
C. variant
D. geometric
E. re
Q
Titan Mining Corp. has 9.3 million shares of common stock oustanding and 260000 6.8%
outstanding, par value $1000 each. The common stock currently sells for $34 per share
and bonds have 20 years to maturity and sell for 104% of par. The market risk prem
Question
Nike Ltd is considering the manufacturing of a special running shoe. The chief economist of the company p
development (R&D) budget is $50000 annually in each of the next 4 years The manufacturing project : exp
expected life span of the machine 10
Q
QUESTION
1 Calculate the average return and the variance of a portfolio of 30% of GM corp and 70%
stocks, using the data beloq
GM
date
returns
AB returns
1 -11.54%
72.99%
2 -11.35% 121.76%
3
16.54%
15.11%
4
72.64%
-5.56%
5 -21.78%
51.63%
6
28.13%
43.56%
Q
The Saunders Investment Bank has the following financing outstanding. What is the WA
1 Debt. 40000 bonds with a 7 % coupon rate and a current price quote of 119.80; the bon
to maturity, 150000 zero coupon bonds with a price quote of 18.2 and 30 years un
15 Seger Inc., is an unlevered firm with expected annual earnings before taxes of $21 milli
The current required return on the firm's equity is 16%, and the firm distributes all its ea
at the end of each year. The company has 1.3 million shares of common
Q1
use the following data to compute the WACC for Cobra, Inc. at year end 2002
Cobra has 1500000 shares. The share price at the end of 2002 was $12.
Cobra's debt at year end 2002 is $44500000 and its debt at year end 2001 was $35000000.
the amount of inte
Q
1 KL holdings has a zero coupon bond issue outstanding with a $15000 face value that m
the current market value of the firm's assets is $15800. The standard deviation of the re
assets is 38% per year, and the annual risk free rate is 5% per year, compou
task 1
Wolfson corporation has decided to purchase a new machine that costs$3.2 million. The
straight-line basis and will be worthless after four years. Corporation tax 35%. The Sur b
for $3.2 million. The reapyment schedule is four yearly principal repay
STUDENT NAME
STUDENT ID
QUESTION 1
Han group a consumer electronics conglomerate is reviewing its annual budget in wireless
technology. Its considering investments in three different technologies to develop wireless
communication devices. Consider the fol
FIN 322 Tutorial Solutions Week 7
Chapter 18
Questions and Problems
10. The adjusted present value of a project equals the net present value of the project under all-equity
financing plus the net present value of any financing side effects. In the joint v
1. Assuming conventional cash flows, a payback period less than the projects life means that the
NPV
is positive for a zero discount rate, but nothing more definitive can be said. For discount rates greater
than zero, the payback period will still be less
Chapter 2
1. True. Every asset can be converted to cash at some price. However, when we are referring to a
liquid
asset, the added assumption that the asset can be quickly converted to cash at or near market value
is
important.
2. The recognition and matc
School of Accounting, Economics and Finance
FIN 322: Advanced Corporate Finance
Subject Outline
6 credit points
Subject Information
PSB Trimester 1, 2016
PSB Academy
On Campus
Full Time
Pre-requisites: FIN 222 or FIN 241 or FIN 252
Co-requisites: Nil
Rest
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Tutorial 4
PQ18.1
a. What is the maximum price that the company should be willing to pay for the new fleet of cars
if it remains an all-equity company?
The maximum price that the company should be willing to pay for the fleet of cars with all-equity
fundi
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