Sam Barker
FIN 310
Chapter 4
2) To find the FV of a lump sum, we use:
FV = PV(1 + r)t
a. FV = $1,000(1.05)10 = $1,628.89
b. FV = $1,000(1.07)10 = $1,967.15
c. FV = $1,000(1.05)20 = $2,653.30
d. Because interest compounds on the interest already earned, th
Ch 7
2. We will use the bottom-up approach to calculate the operating cash flow for each year. We also must
be sure to include the net working capital cash flows each year. So, the total cash flow each year will
be:
Year 0
Year 1
Year 2
Year 3
Year 4
Sale
SOLUTIONSTOWEEKTHREEASSIGNMENTS
1. Chapter 7 - Problem 2, 4, 6, 8, 10, 12 and 14
2. Chapter 8 - Problem 2, 6, 8 and 13
3. Chapter 9 - Problems 1, 2, 3, 9, 10, 13, 15 and 16
CHAPTER7
2.
We need to find the required return of the stock. Using the constant g
Ch16
FIN 610
DQ.1 The two principal reasons for holding cash are for transactions and compensating
balances. The target cash balance is not equal to the sum of the holdings for each reason
because the same money can often partially satisfy both motives.
1
FIN610
Week 4 Dis
Discuss some of the techniques available to
reduce risk exposures.
Why do creditors usually accept a plan for
financial rehabilitation rather than demand
liquidation of the business?
Risk control is a conscious act or decision not to act
FIN 610
Chapter 24
Chapter 24
24-1
Distribution of proceeds on liquidation:
1. Proceeds from sale of assets
2. First mortgage, paid from sale of assets
3. Fees and expenses of administration of bankruptcy
4. Wages due workers earned within 3 months
prior
Chapter 23
FIN610
23-1
If Zhao issues fixed rate debt and then swaps, its net cash flows will be: 7% + 6.8%
LIBOR = (LIBOR + 0.2%).
23-2
The price of the hypothetical bond is $1,000(89 + 8/32)/100 = $892.50. Using a financial
calculator, we can solve for
FIN 610
Case study
Paul Duncan, financial manager of Edusoft Inc., is facing a dilemma. The firm was
founded five years ago to provide educational software for the rapidly expanding primary
and secondary school markets. Although Edusoft has done well, the
BLACK SCHOLES OPTIONS PRICING MODEL Sample Problem
The first problem is a demonstration on how to plug in the numbers and
calculate the value of a Call option. The second problem is a demonstration
on how to calculate the value of a Put option. Refer to F
CAPITAL MARKET THEORY [Single versus Multi-factor models]
Calculating the Required Rate of Return
Business valuation utilizes capital market theory with single
factor (CAPM) and multi-factor (APT) models for estimating
the required rate of return used to
FORMULAS
Black Scholes Options Pricing Model where C = value of call
option; P = value of put option; N() = cumulative normal
density function; S = market price of stock on date call
option is written; X = call options exercise or strike price; =
standard
OPTIONS PRICING SUMMARY Instructor Notes
Simple Option Pricing Model where:
C=S-X
P=XS
C: Call Option
P: Put Option
S: Stock Price
X: Exercise or Strike Price
Under the Simple Model, C (Call Option) is in the money or
has positive intrinsic value when S >
Case Study
Week 3
A)
1 There is the person that borrows the asset the lessee and the person that owns it the lessor.
2 Operation lease is one that is for a period shorter than life of leased equipment and is
cancelable.
A financial lease is amortized over
HMWK 1
FIN610
Chapter 16: Problems
16-6, 16-7, 16-8, 16-9, 16-10, 16-11, and 16-12.
16-6
A. (30%*10)+(70%*50)=38 days
B. 38*150000/365=156,164.38
C. (30%*10)+(70%*45)=34.5 days 34.5*150000/365= 141,780.82 Therefore receivables
would be reduced by 14,384.0
Leah Kim
FIN610
Week 3
Summary
Preferred stock dividends are specified by contract, but they may be omitted without placing the
firm in default. Most preferred stock prohibits the firm from paying common dividends when
they are in the rears. Some preferre
Question 1
10 out of 10 points
Data on Liu Inc. for the most recent year are shown below, along with the inventory
conversion period (ICP) of the firms against which it benchmarks. The firm's new CFO
believes that the company could reduce its inventory en
Overview
SarbanesOxley contains 11 titles that describe specic mandates and requirements for nancial reporting. Each title
consists of several sections, summarized below.
1. Public Company Accounting Oversight Board (PCAOB)
Title I consists of nine sectio
Do you invest in the stock or bond markets? Is this something you would like to do?
Do you read the financial news?
Did you take the preliminary accounting course (ACC201)?
Have you ever accessed and tried to understand the financial statements of listed
Links Between Financial Statements
INCOME STATEMENT
Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses
Depreciation
BALANCE SHEET
Current Assets of
which:
Cash
Beginning Cash
Long Term Assets
Net income
Plus depreciation
+ or change in working cap
FIN631
April 21, 2016
Summary 3
Sample valuation problems provide a demonstration in practical application finance for a
wide variety of problem for personal and professional finance context. comparable value
analysis which we are able to look at pair gro
FIN 631
April 22, 2016
MIDTERM EXAM
1) List 3 reasons for diversifying a portfolio via international investing.
There are several reasons to diversify a portfolio with international investments. When
diversifying a portfolio with international securities
FIN 631 Security Analysis & Portfolio Management
(1)Using the Black Scholes Option Pricing Model, calculate the value of Call and Put
Options for a stock with the following information. Use the Power Point presentation
along with the Standard Normal Distr
Fin631
April 20,2 015
Given the following information, calculate: (a) current ratio,
(b) quick/acid-test ratio, (c) Total debt or leverage ratio, (d)
Return on Assets, (e) Net Margin, (f) Return on Equity, (g)
Asset Turnover, (h) Earnings Retention Ratio
HMWK 1
FIN674
Chapter 1: Question 11
The basic activities of banks are to be financial intermediaries accepting deposits and making
loans.
Chapter 2: Question 2
Yes, I am better off by taking the loan. If the loan amount is 5,000 and my interest is 4,500(
FIN674
June 12, 2016
HMWK 2
Chapter 7: Questions 4 & 10
4.How do standard accounting principals help financial market work more efficiently?
Having standardized accounting principals makes information about a company reliable and
available. This helps com
FIN674
June 17, 2016
Homework 3
Chapter 13: Questions 2 & 5
2. Identify the cash flows available to an investor in stock. How reliably can these cash flows be
estimated? Compare the problem of estimating stock cash flows to estimating bond cash flows.
Whi