35. Which of the following is a legitimate reason the valuation of common stock is generally harder
than the valuation of bonds?
I. Future cash flows on stocks are not known in advance.
II. Common stocks don't have a maturity date.
III. Common stock valua

Chapter 07 - Equity Markets and Stock Valuation
Chapter 07
Equity Markets and Stock Valuation
Multiple Choice Questions
1. What is the name given to the model that computes the present value of a stock by dividing
next year's annual dividend amount by the

Lecture 7
NPV Problems
Depreciation as tax shield
We already know that depreciation save you
money from taxes.
But what happen if you sell the asset.
If the market price (of selling the asset) is
greater that the book value, we have
depreciated the ass

City University of Hong Kong
Practice Final Examination
_
Course code & title: CB3410 Financial Management
Session
: ALL
Time allowed
: Be fast!
_
This paper has some pages (include the cover page)
_
1. The practice examination consists of two parts.
2. P

Chapter 05 - Discounted Cash Flow Valuation
Chapter 05
Discounted Cash Flow Valuation
Multiple Choice Questions
1. Travis is buying a car and will finance it with a loan which requires monthly payments of
$265 for the next 4 years. His car payments can be

Practice Problems
3. Global Toys, Inc., imposes a payback cutoff of three years for its international investment projects. If
the company has the following two projects available, should it accept either of them?
Year
0
1
2
3
4
Cash Flow
(A)
-$ 55,000
19,

Section I: This section comprises 30 MC questions. Each question is worth 2 points. Choose the closest
possible alternative.
1. Ten years ago, you invested $85,000 in Apples stock. Today, you can sell Apples stock for
$484,050. What has been the average

Solutions to practice problems for Lecture 7 (Chapter 8)
3.
Project A has cash flows of:
Cash flows = $19,000 + 27,000
Cash flows = $46,000
during the first two years. The cash flows are still short by $9,000 of recapturing the initial
investment, so the

Solutions to practice problems for Lecture 5 (Chapter 6)
1.
The yield to maturity is the required rate of return on a bond expressed as a nominal annual interest
rate. For noncallable bonds, the yield to maturity and required rate of return are interchang

Solutions to practice problems for Lecture 8&9
Chapter 9
7. To find the book value at the end of four years, we need to find the accumulated depreciation for the
first four years. We could calculate a table as in Problem 5, but an easier way is to add the

City University of Hong Kong
Department of Economics and Finance
CB 3410, Financial Management
Semester A, 2015/16
Class Time:
Section 1: Monday, 3:00-5:50pm
Section 2: Tuesday, 09:00-11:50am
Section 3: Wednesday, 09:00-11:50am
Venue:
AC1 LT-11
AC1 LT-7
A

Solutions to practice problems for Lecture 6 (Chapter 7)
4.
Using the constant growth model, we find the price of the stock today is:
P0 = D1 / (R g)
P0 = $3.65 / (.12 .051)
P0 = $52.90
5.
The required return of a stock is made up of two parts: The divide

Solutions to practice problems for Lecture 2 (Chapter 2)
15. Here we need to work the income statement backward. Starting with net income, we know that net
income is:
Net income = Dividends + Addition to retained earnings
Net income = $1,150 + 2,600
Net i

BETHESDA MINING case study
To analyze this project, we must calculate the incremental cash flows generated by the project. Since
net working capital is built up ahead of sales, the initial cash flow depends in part on this cash
outflow. So, we will begin

Group Assignment #2
Due date: Lecture 11 (should be submitted before lecture starting time).
(You are given three weeks to complete the assignment)
Department of Economics and Finance
CB3410, Financial Management
Semester A, 2015/16, Dr. Ryoonhee Kim
Read

Solutions to practice problems for Lecture 2 (Chapter 4&5)
Chapter4
9.
The time line is:
0
t
$35,000
$150,000
To answer this question, we can use either the FV or the PV formula. Both will give the same answer
since they are the inverse of each other. We

Formula Sheet
Financial ratios
Current ratio =
Cash ratio =
current assets
current liability
Quick ratio =
cash
current liability
Debt equity ratio =
Total debt ratio =
total debt
total equity
Times interest earned =
Inventory turnover =
EBIT
interest
Ca

Chapter 6: Interest Rates and Bond Valuation
CHAPTER 6
Interest Rates and Bond Valuation
I. DEFINITIONS
Topic: COUPON
1. The stated interest payment, in dollars, made on a bond each period is called the bond's:
A) Coupon.
B) Face value.
C) Maturity.
D) Yi

Chapter 13 - Leverage and Capital Structure
Chapter 13
Leverage and Capital Structure
Multiple Choice Questions
1. The use of borrowing by an individual to adjust his or her overall exposure to financial
leverage is referred to as:
A. M&M Proposition I.
B

Chapter 11 - Risk and Return
Chapter 11
Risk and Return
Multiple Choice Questions
1. Mary owns a risky stock and anticipates earning 16.5 percent on her investment in that
stock. Which one of the following best describes the 16.5 percent rate?
A. Expected

CHAPTER 9
THE COST OF CAPITAL
(Difficulty: E = Easy, M = Medium, and T = Tough)
Multiple Choice: Problems
Easy:
Cost of common stock
Answer: d Diff: E
1
.
Bouchard Company's stock sells for $20 per share, its last dividend (D 0)
was $1.00, and its growth

Introduction to Finance
BUSFIN 1030
Professor Schlingemann
Problem Set 3
SOLUTIONS
Problem 1:
You are deciding among three cars to use as a company car. The garage offers you a lease
deal and two different options for purchasing the car. You are completel

Chapter 09 - Making Capital Investment Decisions
Chapter 09
Making Capital Investment Decisions
Multiple Choice Questions
1. Any changes to a firm's projected future cash flows that are caused by adding a new project
are referred to as which one of the fo

City University of Hong Kong
Information on a Course
offered by Department of Economics and Finance
with effect from Semester B in 2013-2014
Part I
Course Title
:
Advanced Security Analysis and Portfolio Management
Course Code
:
EF4320
Course Duration
:
1

City University of Hong Kong
Information on a Course
offered by Department of Economics and Finance
with effect from Semester A in 2013/2014
Part I
Course Title
:
Derivatives Analysis and Advanced Investment Strategies
Course Code
:
EF4420
Course Duration

City University of Hong Kong
Information on a Course
offered by Department of Economics and Finance
with effect from Semester A in 2014/2015
This form is for completion by the Course Co-ordinator. The information provided on this form will be deemed
to be

City University of Hong Kong
Information on a Course
offered by Department of Economics and Finance
with effect from Semester A in 2014/2015
Part I
Course Title
:
Financial Systems, Markets and Instruments
Course Code
:
EF3333
Course Duration
:
one semest

Formula Sheet
Financial ratios
Current ratio =
Cash ratio =
current assets
current liability
Quick ratio =
cash
current liability
Debt equity ratio =
Total debt ratio =
total debt
total equity
Times interest earned =
Inventory turnover =
EBIT
interest
Ca

CHAPTER 4
9. Youre trying to save to buy a new $150,000 Ferrari. You have $35,000 today that can be
invested at your bank. The bank pays 3.2 % annual interest on its accounts. How long will it be
before you have enough to buy the car?
13. In 1895, the fir

CHAPTER 5
2. Investment X offers to pay you $3,700 per year for nine years, whereas Investment Y offers to
pay you $5,500 per year for five years. Which of these cash flow streams has the higher present
value if the discount rate is6%? if the discount rat

CHAPTER 9
7. An asset used in a four-year project falls in the five-year MARCS class for tax purposes. The asset has an
acquisition cost of $6,400,000 and will be sold for $1,530,000 at the end of the project. If the tax rate is 34%,
what is the after tax

Formula Sheet
Financial ratios
Current ratio =
Cash ratio =
current assets
current liability
Quick ratio =
cash
current liability
Debt equity ratio =
Total debt ratio =
total debt
total equity
Times interest earned =
Inventory turnover =
EBIT
interest
Ca

Solutions to practice problems for Lecture 10
Chapter 12
1.
With the information given, we can find the cost of equity using the dividend growth model. Using
this model, the cost of equity is:
RE = [$1.80(1.06)/$41] + .06
RE = .1065, or 10.65%
2.
Here we

CHAPTER 11
7. Based on the following information, calculate the expected return and standard deviation for the two
stocks.
Rate of Return if State
Occurs
Sate of Economy
Probability of State of Economy
Stock A
Stock B
Recession
0.15
0.2
-0.3
Normal
0.55
0