TOPIC 4
Answers to Assignment
24. The time line is:
0
120
PV
$75,000
To find the PV of a lump sum, we use:
PV = FV / (1 + r)t
PV = $75,000 / (1.0057)120
PV = $37,918.16
25. The time line is:
0
45
PV
$
FIN 2001 Financial Management
1
Lecture 11
Risk and Return
2
Key Concepts and Skills
Know how to calculate expected
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Understand the impact of
diversification
Understand the systematic risk
prin
FIN 2001 Financial Management
1
Lecture 6
Interest Rates and Bond
Valuation
2
Key Concepts and Skills
Know the important bond features and
bond types
Understand bond values and why they
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Unde
FIN 2001 Financial Management
1
Lecture 5
Discounted Cash Flow Valuation
2
Key Concepts and Skills
Be able to compute the future value of
multiple cash flows
Be able to compute the present value of
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FIN 2001 Financial Management
1
Lecture 12
Cost of Capital
2
Key Concepts and Skills
Know how to determine a firms cost
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Know how to determine a firms cost
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Know how to determi
FIN 2001 Financial Management
1
Lecture 7
Equity Markets and Stock
Valuation
2
Key Concepts and Skills
Understand how stock prices depend on
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Be able to compute sto
FIN 2001 Financial Management
1
Lecture 10
Some Lessons from Capital
Market History
2
Key Concepts and Skills
Know how to calculate the return on
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Understand the historical returns on
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FIN 2001 Financial Management
1
Lecture 4
Introduction to Valuation: Time
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2
Key Concepts and Skills
Be able to compute the future
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TOPIC 3
Answers to Concepts Review and Critical Thinking Questions
1.
a. If inventory is purchased with cash, then there is no change in the current ratio. If
inventory is purchased on credit, then th