1. According to the text, the primary goal for a firms financial managers is to:
Maximize the firms reported net income per share of common stock.
Minimize the price of the companys outstanding bonds.
Maximize dividends paid to stockholders
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
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
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
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
6-I-(6-I)x0.4=3, so I=1
Similar as in 3-1, so
Div= NI changes in RE = 50-(810-780) =20
A: issuing new common stock will immediately br
b. No, last years $50,000 expenditure is considered a sunk cost and does not represent an
Chapter 4 assignment solution
1/(1-DR)=2.4, so 2.4-2.4xDR=1, so
ROA=Profit margin x asset turnover, so 0.1=0.02x asset turnover, so asset
ROE=ROAx Equity Multiplier, so 0.15=0.1xEM, so EM=0.15/0.1=1.5