MGMT 332 Corporate Finance I
Final Exam Review
Module 1, Chapter 1 & 2
What is finance? How does this field affect the activities in which businesses partake?
What function doe
a. Present Value= $3,039.79
b. Present Value= $3,039.79
Present Value= $3,039.79
d. In all findings the answer is the same.
Dollar price of the bond= $977.08
Bonds current yield= 5.83%
The bond is selling at a discount because it is selling lower than its face value.
The current yield being 5.83% is less than the yield to maturity at 6.034% because the
Kelsey Drums, Inc., is a well-established supplier of fine percussion instruments to
orchestras all over the United States. The companys class A comm. Management expects
to continue to pay at that amount for the near future. Sally Talbot purchased 10
Micro-Pub, Inc., is considering the purchase of one of two microfilm cameras, R and S.
Both should provide benefits over a 10-year period, and and each requires an initial
investment of $4,000. Management has constructed the accompanying table of est
Net proceeds= $980
Year 0= 980, years 1-14= 120, year 15= 1,000
After tax= 7.375% , before tax= 12.291%
After tax= 7.354%, before tax- 12.256%
I would prefer the cost of debt calculated in part c since it is not an approximation and
a. Payback period= 6 years
b. Yes, the company should accept this payback period because it is two years before their
maximum payback period of 8 years.
a. Project A= -5135.54 9(reject), Project B= 53887.93 (accept), Project C -8368.2 (reject)
Less variable cost (B)
Breakeven point (units)
Breakeven point in $
B )Ranking of firm in terms of their risk
Rank in terms of risk
Janes total cash inflow = $5,000, Janes total cash outflow = $4,357
Net cash flow for the month of August = $643
No shortage for the month
A prudent strategy would be for Jane to take her surplus and invest it in a short-term invest at
1. How large a sum must Sunrise accumulate by the end of year 12 to provide the
20-year, $42,000 annuity? They must accumulate $ 313,716.63 to provide the
20-year, $42,000 annuity.
2. How large must Sunrises equal, annual, end-of-year deposits into the ac