In-Class Examples
1. Blooper Industries: Calculate the project cash flows in each year and the project NPV and IRR.
The project requires an investment of $10 million. The equipment may be sold for $2
Finance(FNCE101)
Week 2
Financial Tools
Chapters 5, 6
Professor WANG Rong
1
TodaysAgenda
Simple Interest and Compound Interest
Future Value and Present Value
Perpetuity and Annuity
Growing Perpetuity
FNCE101
IN-CLASS EXERCISE
FREE CASH FLOW CALCULATION
The following details the 2005 financial statements for XYZ, Inc. (all the numbers are in
millions). Calculate the firms free cash flow assuming it
FNCE 101
Supplemental Reading
INTERNAL RATE OF RETURN: A CAUTIONARY TALE
Tempted by a project with high internal rates of return? Better check those interim cash flows again.
The McKinsey Quarterly, M
Finance(FNCE101)
Introduction
Financial Statements
Chapters 1,2,3
Professor WANG Rong
1
TodaysAgenda
Discussion of Syllabus
Introduction to Finance (Chapter 1)
Business forms
Financial managers
Age
Solutions to In-Class Examples
1. Blooper Industries
The project requires an investment of $10 million. The equipment may be sold for $2
million by the end of year 5.
The company applies straight-li
Solutions to Exam I, Finance 101
Part I
1.
6.
11.
16.
e
a
b
c
2.
7.
12.
17.
b
c
e
e
3.
8.
13.
18.
e
c
c
c
4.
9.
14.
19.
b
e
d
b
5.
10.
15.
20.
e
b
e
b
Part II
Question 1:
1. NPV for project 1 = pv(0.1
Part I: Multiple Choice Questions (60 points). Each question is worth 3 points. Please write down
your answers clearly on the answer sheet.
1.
Which of the following are advantages of the corporate fo