1. What is the future value of $100 invested at 5% for 6 years?
FV=100(1+5%)6=$134.01
2. What is the present value of $100 received in 6 years if the
interest rate is 5%?
PV=100/(1+5%)6= $74.62
3. What is the future value of $100 invested at the end of ea
PROBLEM 2-43 (35 MINUTES)
1.
LAREDO LUGGAGE COMPANY
SCHEDULE OF COST OF GOODS MANUFACTURED
FOR THE YEAR ENDED DECEMBER 31, 20X2
Direct material:
Raw-material inventory, January 1.
$
20,00
0
Add: Purchases of raw material.
90,00
0
Raw material available fo
Chapter 7
Stock and Stock Valuation
1
Equity
Equity
An ownership claim
Right to share profits
Types of equity
Common stock
Preferred stock
Convertible securities
2
Primary Market for
Equities
The first time shares are sold in the
market is an unseasoned o
CHAPTER 4
Time Value of Money
1
Time value of money
Future Value
Present Value
Annuity
Discounted Cash Flow
Rates of Return
What is the time value of
money?
A dollar received today is worth
more than a dollar received
tomorrow.
Why?
A dollar received toda
Chapter 5
Bonds, Bond Valuation, and
Interest Rates
1
Topics in Chapter
Key features of bonds
Bond valuation
Measuring yield
Assessing risk
2
Bond
Abondisadebtsecurity,inwhichtheissuer
owestheholdersadebtand,dependingonthe
termsofthebond,isobligedtopayint
Yongshi Mo
11797974
3/31/2016
Week 1 Assignment
1. Describe the major differences between mutual fund and hedge fund.
Mutual funds are corporations that accept money from savers and then use these funds to
buy financial instruments. These organizations po
04/04/2016
Week 2 Assignment
1. You are offered a T-note that pays $1,000 in 9 months (or 270 days) for $910. You have
$910 in a bank that pays a 5% nominal rate, with 365 daily compounding. You plan to
leave the money in the bank if you dont buy the risk
Capital structure theories:
These notes would be a substitute for the text. Since this is not a highly theoretical class,
we will be concerned with only introducing the theories of capital structure. The theories
of capital structure will be revisited and
Cost of bankruptcy
Bankruptcy costs
The cost of bankruptcy can be divided into two costs, direct costs and indirect costs.
Total bankruptcy costs equals the sum of the direct and indirect bankruptcy costs.
Indirect bankruptcy costs occur before a company
Estimating Project Cash Flows
The basic concept:
What we are trying to do here is decide whether a project is acceptable or not. Last week,
in capital budgeting techniques, we looked at several methods for evaluating projects.
NPV is the best one to use.
Merger/acquisition target valuation
The valuation of a merger target is very similar to corporate valuation, see week 5 notes.
After all, in both cases we are calculating the value of a firm. The main difference is that
merger deals are usually financed w
Leasing
Definition:
Leasing is an alternative to owning the asset through 100 % debt financing wherein the
lessor grants the use of a fix asset for a specific amount of time in exchange for payment
usually in the form of rent from the lessee.
Analysis:
Le
Corporate valuation
Those of you who took ECBU 500D with probably remember me explaining that the
price of any thing is the present value of future benefits. For example, the price of a chair
would be the present value of future benefits. The benefits bei
Risk and Return
These notes are an expanded version of the notes used in ECBU 500D. Very
important ideas have been added. Therefore, you may see some overlap with them.
In this topic we will look at the risk and return from the point view of personal
inve
Review Notes:
These notes are a review of topics that you have covered in the prerequisite courses. It is
provided because these tools are extremely important for the rest of this course. I
have included a large amount of information in these notes, howev
FIN 612 Managerial Finance
Week Six Assignment
Your assignment for this week is to complete the following questions and problems from Chapters 9 and 10. Please
submit your complete assignment in the course room by the due date.
Chapter 9 Problems
(9-1) Ca
11 Chapter model
2/15/2006
10/5/16 11:34 AM
Chapter 11. The Basics of Capital Budgeting
We used this model to create most of the chapter exhibits (Tables and Figures). We
pasted in a few dialog boxes for specific Excel functions and features and show them
Assume that you have been hired as a consultant by CGT, a major producer of chemicals
and plastics, the company has long term debt/equity ratio of 0.75.
The stock is currently selling for $15.25 per share, and its $1,000 par value, 20-year,
7.25% bonds wi
Ch12 In-Class Exercise Answer
1. Expected return on two stocks for two particular market returns:
Market Return
Aggressive Stock
Defensive Stock
5%
-2%
6%
25%
38%
12%
a. What are the betas of the two stocks?
b. What is the expected rate of return on each
Week 7 Assignment
Due 6:10PM 10/21/2015
Assume that you have been hired as a consultant by CGT, a major producer of chemicals and
plastics, the company has long term debt/equity ratio of 0.75.
The stock is currently selling for $15.25 per share, and its $
Study Guide for Final Exam
Ch 6 Risk and Return, CAPM
How to calculate the weighted average rate of return?
How to calculate the risk (variance and standard deviation)?
What is market portfolio? What is beta? How does beta measure market risk?
If you have
1. Professors Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of
$80,000 at age 65, the firm will pay the retiring professor $600 a month until death.
a. If the professors remaining life expectancy is 20 years, what is the mo
The TNC News Co. paid the last dividend of $2/share, and the dividend is expected to grow at a rate
of 20% over the next 3 years. It will then grow at a normal, constant rate of 4% for the future. The
RRR is 15%.
What should the stock price be today?
DIV1
ChengWei Xu
BUS 530
9/9/2015
Q1: Describe the major differences between mutual fund and hedge fund.
mutual fund: An investment vehicle that is made up of a pool of funds collected from
many investors for the purpose of investing in securities such as stoc
Week 3 Assignment
Your week 3 assignment is due 6:10 PM Thursday, 9/23/2015. Please type your answer on
the Microsoft Word file and hand it in class.
1. Five year ago, you invested in a 5% semi-annual coupon bond with a face value $1,000
for $910. Today,
Week 2 Assignment
1. You are offered a T-note that pays $1,000 in 9 months (or 270 days) for $910. You have
$910 in a bank that pays a 5% nominal rate, with 365 daily compounding. You plan to
leave the money in the bank if you dont buy the risk-free T-not
BUS 530 FINANCIAL MANAGEMENT
FINAL EXAM SAMPLE QUESTIONS
Multiple-Choice
(C) 1. Which of the following statements is CORRECT?
A. The beta of a portfolio of stocks is always smaller than the betas of any of the individual stocks.
B. If you found a stock wi
BUS 530 Week 6 Assignment
Please turn in your answer the first 10 minutes in class on 10/14/2014.
1. Expected return on two stocks for two particular market returns:
Market Return
Aggressive Stock
Defensive Stock
5%
-2%
6%
25%
38%
12%
a. What are the beta