Beta=percent of stock or business multiplied by the beta
Required Rate of Return=Risk Free Rate + (Mkt Rate Risk Free Rate)X Beta
If Risk Free Rate increases, Mkt rate must increase also (and vice versa)
Expected Future Stock Price=D0(1+g)n/rs-g
rs=rRF+b(
FIN 5437 FINANCE I: Asset Valuation, Risk and Return Course Syllabus Summer A 2012 Term
COURSE INSTRUCTOR Professor John C. Banko, Ph.D., CFA Lecturer of Finance Office: David Stuzin Hall, Room 331
Office Hours: Monday & Wednesday, 10:00a 11:00a, or by ap
Capital Budgeting - Solutions
1.
Your company is thinking about taking on an investment project that will require an
initial outlay of $1,500,000 at time period zero. You believe that this project will
produce expected after-tax cash flows (point estimate
Cost of Capital - Solutions
1.
When calculating a WACC for a company with preferred stock, there is no need to
adjust the cost of the preferred stock to reflect the tax exclusion of 70% of the
preferred stock dividend.
*
A.
B.
2.
A firm can only have one
Time Value of Money - Solutions
1.
Given an equivalent number of payments and interest rates, the future value of an
annuity due is typically a little more that the future value of a regular annuity.
*
A.
B.
2.
The future value of an annuity due will alwa
FIN 5437 Spring 2011
1.
Annual Bond
Interest rate
Coupon rate
Payment
Face value
Maturity
Solutions to Midterm Exam
6.0%
9.0%
$90
$1,000
10
7.0%
Value
Value
10-year coupon $1,220.80 $1,140.47
10-year zero
$558.39
$508.35
% Chg
-6.5802%
-8.9624%
2. Stateme
FIN 5437 Spring 2011
Solutions to Final Exam
1. Mortgage
$175,000
30
12
6.00%
Term in years
Payments per year
Nominal rate
a. Calculate effective interest rate
EAR =
(1 + INOM/M)M
1
EAR =
1.061677812 1
EAR =
6.17%
b. Calculate monthly payments
N
I/YR
PV
F
FCF=Free Cash Flow
EPS=earnings per share
Firms create value when ROIC > WACC
Securitization-process in which financial institutions transform illiquid loans
into tradable securities
FV=PV(1+i)n
PV=FVn/(1+i)n
Ordinary Annuity-payment at end of period
Annu
Finance 5437 Finance I
Final Examination
Professor J. Houston
Spring 2011
Name:
Instructions:
In the short answer sections of this exam BRIEFLY (but clearly) explain your reasoning. In the
problems that require calculations, please indicate your final ans
Review Problem #1: TVM
Seth and Connie would like to start saving for their son Josephs college
education. Joseph just turned 10 at t = 0, and he will be entering college
8 years from now (at t = 8). College tuition and expenses at State U. are
expected t
Hewlett-Packard 12C Tutorial
To begin, look at the face of the calculator. Every key (except the arithmetic function keys in the far right column and the five keys on the bottom left row) has two or three functions: each key's primary function is noted in
12 Chapter model
2/16/2006
3/16/2015 9:51
Chapter 12. Cash Flow Estimation and Risk Analysis
This worksheet contains a model to analyze BQC's new computer control project. Models for analyzing
real options, replacement decisions, projects with unequal liv
Securitization
Traditional Banking
Financial institution has the incentive to monitor the borrowers risk.
Effective transformation of illiquid loans into liquid deposits.
Financial institution fails if its assets are worth less than its deposit obligatio
Consider the following bond:
3-year bond with a FV=1000
8% annual coupon and the YTM=8%
P = 80/(1.08) + 80/(1.08)2 + 1080/(1.08)3 = 1000
DURATION=[1*80/(1.08) + 2*80/(1.08) 2 + 3*1080/(1.08)3]/P
=2.78
Q: What is the duration of a three-year zero?
To immun
WEB EXTENSION
5C
A Closer Look at Bond Risk:
Duration
T
his extension explains how to manage the risk of a bond portfolio using the concept of duration.
5.1 BOND RISK
In our discussion of bond valuation in Chapter 5, we discussed interest rate and reinves
Growing Annuities
Professor Joel F. Houston
University of Florida
1
Growing Annuities
The term growing annuity is used to
describe a series of payments that grow at
a constant rate.
Often used in financial planning, where a
prospective retiree wants to de
FIN 5437 Spring 2015
Practice Problem Set #1, Chapters 1 5
Note: You are not required to work these problems. They have been provided so you can
determine whether you are having difficulties with the chapter concepts. The answers are
provided in a separat
Finance 5437 Finance I
Midterm Examination
Professor J. Houston
Spring 2011
Name:
Instructions:
In the short answer sections of this exam BRIEFLY (but clearly) explain your reasoning. In the
problems that require calculations, please indicate your final a
Finance 5437: Finance 1
Fall 2015
Worksheet #15
After a successful college football career, Tim Turbo partners with Danny Waffle
(naming themselves TD Industries) to manufacture and distribute fruit pies. TD is
considering the development of a new buckeye
Finance 5437: Finance 1
Fall 2015
Worksheet #14
1.
Reading Foods is interested in calculating its weighted average cost of capital (WACC).
The companys CFO has collected the following information:
The target capital structure consists of 40% debt, and 60%