MGFC10H3 (Intermediate Finance) Assignment 1.
Prof. Michael Hasler
Department of Management UTSC
Due Date: In class on October 5, 2017
Number of pages including the title page: 16
Please answer all th
Capital Structure: Part I
Does the financing mix of a firm matter?
Can we increase the value of the firm by
replacing its debt with equity? Or vice versa?
If yes, what determine the optimal capital
Capital Structure: Part II
Why dont we observe 100% debt financing
in the real world?
Whats missing?
How firms establish their capital structure
in practice?
1
Outline
Review
Costs of financial D
Valuation and Capital Budgeting for Levered
Firms
12-1
There are three different methods to calculate the NPV
of a project:
Adjusted Present Value (APV) method
Weighted Average Cost of Capital (WAC
Assignment 2 (MGFC30, September 2017)
SOLUTIONS
1.
2.
a.
b.
c.
3.
a.
First calculate the price changes and then regress changes in spot price on changes on
futures price. The regression coefficient is
MGFC10H3 (Intermediate Finance)
Class Problems on Dividend Policy
Instructor: Syed W. Ahmed
QUESTION 1:
ABC Corporation, of which Catherine owns 460 shares, will pay a $2 per share dividend one year f
Chapter 13
COST OF CAPITAL
Risk, Return & Capital Budgeting
0
Outline
The Cost of Common Equity
Dividend Growth Model
Capital Asset Pricing Model
Beta Estimation
Cost of Debt
Cost of Preferred Equity
MGFC10H3 (Intermediate Finance) Solutions to
Assignment 1.
Prof. Michael Hasler
Department of Management UTSC
Due Date: In class on October 5, 2017
Exercise 1. Efficient Frontier (Total of 36 points)
MGFC10H3 (Intermediate Finance) Assignment 2.
Prof. Michael Hasler
Department of Management UTSC
Due Date: In class on November 23, 2017
Number of pages including the title page: 20
Please answer all
MGFC10H3 (Intermediate Finance)
Final Exam
ASSIGNMENT 2
Professor:
Date: August 13, 2013
Due Date: November 29, 2013
By 12 noon
Syed Ahmed
STUDENTS NAME:_
Last
First
Middle
STUDENTS I.D. NO.:_
QUESTIO
Chapter 13: Risk, Return, and Capital Budgeting
13.3 We have the information available to calculate the cost of equity using the CAPM and the dividend
growth model. Using the CAPM, we find:
rS = 0.05
MGFC10H3 L02, L03, & L04
Intermediate Finance
Midterm Exam
October 31, 2015
9-11am
Prof. Michael Hasler
Last Name:llllllllllllllllllllllllllllllllllll
First Name:llllllllllllllllllllllllllllllllllll
S
MGFC10H3 L01 & L02
Intermediate Finance
Midterm Exam
March 1, 2014
5-7pm
Prof. Michael Hasler
Last Name:llllllllllllllllllllllllllllllllllll
First Name:llllllllllllllllllllllllllllllllllll
Student #:l
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
C
B
C
D
C
B
E
A
D
C
Question 1
First find the possible values of the call at expiration and work backward.
Cuu = Max(100 70, 0) = 30
Cud = Cdu = Max(65 70, 0) = 0
Cdd =
MGFC10
2017 Fall
Solution to Assignment 2
Question 1
(a)
(i) First possible outcome: Year 0: 6%, Year 1: 7.4%, and Year 2: 9%. Probability: 0.24
If interest rate is 9% at the end of year 2, P2 = 70/0.
1.
Which of the following strategies will give you $0 for stock price less than $40, additional
$2 for every dollar increase in stock price from $40 to $50, and $20 for stock price greater
than $50?
A
MGFC10H3 (Intermediate Finance)
Review Problems with solutions on Dividend Policy
Prof. Syed W. Ahmed
QUESTION 1:
Sajitha Radhakrishnan owns 1000 shares of Byron Lee & Jason King Limited (BLJK). BLJK
Chapter 19: Dividends and Other Payouts
Different Types of Dividends
Standard Method of Cash Dividend Payment
The Benchmark Case: An Illustration of the Irrelevance
of Dividend Policy
Repurchase of Sh
Chapter 20: Issuing Equity Securities to the Public
20.1 a.
The new market value will be the current shares outstanding times the stock price plus the rights
offered times the rights price, so:
New ma
Chapter 23: Options and Corporate Finance: Basic Concepts
23.1 a.
Because the option will be exercised with certainty, the value of the call is the stock price minus
the present value of the exercise
Chapter 16: Capital Structure: Basic Concepts
16.6 a. The income statement for each capitalization plan is:
I
EBIT
Interest
NI
EPS
$12,000
2,000
$10,000
$ 6.67
II
$12,000
3,000
$9,000
$ 8.18
All-equit
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
A
B
C
D
E
C
C
E
E
B
Question 1
(a)
VU 50,000 * 25
160,000 * 1 0.25
r0 rS 0.096
r0
(b)
VL VU TC B 1,250 ,000 0.25 * 200 ,000 1,300 ,000
(c)
1,300,000 200,000
P
P 26
20
1. The problem of using the overall firm's beta in discounting projects of different risk
is:
A) the firm would accept too many high-risk projects.
B) the firm would reject too many projects.
C) the f
Chapter 17: Capital Structure: Limits to the Use of Debt
17.3 a.
The interest payments each year will be:
Interest payment = 0.08($70,000) = $5,600
This is exactly equal to the EBIT, so no cash is ava
Chapter 19: Dividends and Other Payouts
19.4 To find the new stock price, we multiply the current stock price by the ratio of old shares to new
shares, so:
a. $78(3/5) = $46.80
b. $78(1/1.15) = $67.83
Chapter 22: Leasing
22.7 a.
b.
Since the lessee has an effective tax rate of zero, there is no depreciation tax shield foregone. Also, the aftertax
lease payment is the same as the pretax payment, and