Introduction to Finance
BUSFIN 1030
Professor Schlingemann
Problem Set 2
Due: Wednesday, October 25 before 4 p.m. in Mervis 324 (Pat Koroly)
GROUP WORK (maximum of 5 students) is encouraged!
Note 1: All questions will be graded and need to be handed in.
P

College of Business Administration
University of Pittsburgh
Week 2
Computing Cash Flows
(Chapter 2/Chapter 3.1)
1
Why Do We Care About This Topic
Financial managers need accurate forecasts of cash flows to make accurate investment and
financing decisions

Current Ratio =
Quick Ratio =
Current Assets
Current Liabilities
Current Assets - Inventory
Current Liabilities
Total Debt Ratio =
Total Assets - Total Equity
Total Assets
Inventory turnover =
Cost of goods sold
Inventory
Long - term Debt Ratio =
Long - t

College of Business Administration
University of Pittsburgh
BUSFIN 1030
Introduction to Finance
VALUING BONDS AND STOCKS
(Chapter 7 & 8)
Why do we care about this topic?
Two major forms of financing for U.S. corporations.
Read and understand the Wall Stre

Formula Sheet
PV
FV
(1 r ) t
C
1
1
r 1 r t
t
1
1 1 g
PV growing annuity C
r g r g 1 r
C
PV growing perpetuity
r g
C
t
FVannuity 1 r 1
r
C
PV perpetuity
r
PVannuity
FV PV (1 r ) t
Cash Flows from Assets = Operating Cash Flow - Net Capital Spe

College of Business Administration
University of Pittsburgh
Introduction to Finance
(Chapter 1)
What is Finance?
The study of how people allocate scarce resources over time
Costs and benefits of financial decisions are:
spread out over time
not known with

Introduction to Finance
BUSFIN 1030
Professor Schlingemann
Problem Set 2
Due: Wednesday, October 25 before 4 p.m. in Mervis 324 (Pat Koroly)
GROUP WORK (maximum of 5 students) is encouraged!
Note 1: All questions will be graded and need to be handed in.
P

Answers to Web Problems on Diversification, CAPM, SML, and the Cost of
Capital
Problem 1.
a) E(RA) = 0.3*-0.25 + 0.2*-0.05 + 0.5*0.35 = 0.09
E(RB) = 0.3*-0.15 + 0.2*-0.01 + 0.5*0.12 = 0.013
E(RC) = 0.3*0.15 + 0.2*0.10 + 0.5*-0.25 = 0.06
b) SD(R A) = [0.3*

Why shareholders have control rights under normal circumstances and creditors have control rights under
a default or financial distress scenario.
Consider the following 100% equity firm, with total assets of $100. If the firm raises $1,000 in 1-year debt

College of Business Administration
University of Pittsburgh
Long-term Financing
BUSFIN 1030
Introduction to Finance
Corporate Long-term Debt
Debt is not an ownership interest in the firm.
- Creditors generally do not have voting rights.
Benefit: The paym

BUSFIN 1030
Intro to Finance
Andy Koch
Overview
Syllabus
What is finance? Why is it useful to learn about
finance?
A short background about corporations
Chapter 1
Creating a Business
You are an entrepreneur with an idea for a new
product or service, w

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Time Value of Money
Andy Koch
1
Time Value of Money
Chapter 5
Interest rates, compounding
Present and Future values
Chapter 6
Multiple repeating cash flows (annuities and
perpetuities)
2
Time Value of Money
Rational people prefer to have money now o

UNIVERSITY OF PITTSBURGH
COLLEGE OF BUSINESS ADMINISTRATION
BUSFIN 1030, INTRODUCTION TO FINANCE
COURSE SYLLABUS
Andy Koch
Spring 2015
Office: Mervis Hall 326
Unique 12619/12620
E-mail: [email protected]
Classroom: SENSQ 02400
Office Hours: Monday 11-1

Introduction to Finance
BUSFIN 1030
Summer 2015
Course Information
Instructor: Thuy Bui
Office: Mervis Hall 249
Email: [email protected]
Office Phone: 412-648-1647
Office Hours: Thursday 2:00 pm to 4:00 pm and by appointment
Course Description
Welcome to Int

Group Assignment 2
Chapter 9: The Cost of Capital
Due Tuesday July 14th at the beginning of class
In this assignment, you will estimate the Weighted Average Cost of Capital for two public
companies of your choice. The public companies that you choose have

BUSFIN 1030
Group Assignment 1
Chapter 3: Financial Statements and Ratio Analysis
Due Tuesday June 2nd at the beginning of class
In this assignment, you will perform the ratio analysis on two companies of your choices in an
industry from the provided list

Practice Problems: Final Exam
Chapter 7:
1) Nova Products Inc. recently paid its first annual dividend of $4 per share. The dividends
will then grow for the next 5 years at 8% rate. Starting year 6, it will grow at a 2% annual
rate forever. Calculate the

Midterm Exam on Tuesday, June
9th
Chapter 1 6
~35-40 multiple choice questions
Mix of conceptual and computational questions
Time to complete: 1 hour and 45 minutes (6:00-7:45pm)
Bring only calculator(s), pencils and Pitt ID
Extra office hours: 2-4p

Practice Problems Midterm
1) You can receive lottery winnings as $100 paid monthly for eternity or $4,000 paid yearly
for 15 years. If interest rates are 3.6% APR compounded monthly, which will you
choose?
Solution:
PV of first option:
Because compoundin

Final Exam on Tuesday, July 28th
Chapter 7 11
Mix of conceptual and computational questions
34 multiple choice questions
Time to complete: 2 hours (6:00-8:00pm)
Bring only calculator(s), pencils and Pitt ID
Formula sheets will be attached to your ex

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