1. According to the text, the primary goal for a firms financial managers is to:
a.
b.
c.
d.
e.
Maximize the firms reported net income per share of common stock.
Minimize the price of the companys outstanding bonds.
Maximize dividends paid to stockholders
Questions
7-4
The price of the bond will fall and its YTM will rise if interest rates rise. If the bond still has a
long term to maturity, its YTM will reflect long-term rates. Of course, the bonds price will be
less affected by a change in interest rates
Chapter 2
2-4
A money market transaction occurs in the financial market in which funds are borrowed
or loaned for short periods (less than one year). A capital market transaction occurs in
the financial market in which stocks and intermediateor long-term
FI3300 Fall 2007
Exam Two
1) You are considering buying a new car. The sticker price is $20,000 and you have $2,000 to put toward a
down payment. If you can negotiate a nominal annual interest rate of 12 percent and you wish to pay for
the car over a 5-ye
1. Which of the following statements is most correct concerning a project with normal cash flows
(i.e., a cash outflow in Year 0 followed by cash inflows in all subsequent years)?
a. If the NPV of a project is positive then the payback period rule will al
FI3300 Fall 2006
Exam Two
Solutions
5) A $1,000 par value bond has coupon rate of 6% and the coupon is paid semi-annually. The bond
matures in 40 years and has a required rate of return of 10%. Compute the current price of this bond.
FV = 1000, PMT = (100
Chapter 3 assignment solution
3-2
EBIT-interest tax=NI
So,
6-I-(6-I)x0.4=3, so I=1
3-3
Similar as in 3-1, so
7.5-DA-2-(75-DA-2)x0.4=1.8
Solve equation,
DA=2.5
3-4
Div= NI changes in RE = 50-(810-780) =20
3-7
A: issuing new common stock will immediately br
121
a. Equipment
NOWCInvestment
Initialinvestmentoutlay
$9,000,000
3,000,000
$12,000,000
b. No, last years $50,000 expenditure is considered a sunk cost and does not represent an
incrementalcashflow.Hence,itshouldnotbeincludedintheanalysis.
c. Thepotentia
Chapter 4 assignment solution
4-2
1/(1-DR)=2.4, so 2.4-2.4xDR=1, so
DR=0.5833
4-3
ROA=Profit margin x asset turnover, so 0.1=0.02x asset turnover, so asset
turnover=0.1/0.02=5
ROE=ROAx Equity Multiplier, so 0.15=0.1xEM, so EM=0.15/0.1=1.5
4-5
BV=20, MV/BV