Time Value of Money
Answer Key
FI 3300
Summer 2002
1. B - this describes an annuity; a perpetuity lasts forever, not a fixed period of time.
2. A
3. B - this is essentially the same as 2. An increase in the number of compounding periods per year
will incr
Assignment 2.1
Prepare a multi-step income statement for Freida, Incorporated (a furniture retailer) for the
year ending December 31, 2013, given the information below:
Interest expense
Beginning inventory
Depreciation expense
Management salaries
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FINANCE EXAM 2 STUDY GUIDE (not in order)
1.
2.
3.
4.
What is the monthly depost? Find the pmt
What was your annual, compound return on this investment? Find the i/y
What is effective rate of interest? (1+.16/365)^365-1
In bond equationface value= FV (-10
Final Exam Fall 2012
1. The primary goal of a publicly-owned firm interested in serving its stockholders should be to
_.
a. maximize expected total corporate profit
b. maximize expected EPS
c. minimize the chances of losses
d. maximize the shareholder wea
Chapter 9 Notes
Stocks and Bonds
1. What is a bond?
a. A bond is a fixed-payment debt security.
b. Types of bonds:
i. Zero-coupon bonds: Pay the price today, get the face value at
maturity
ii. Coupon bonds: Pay the price today, get the face value at matur
Chapter 3 Notes
Earnings & Profit are accounting variables and are not perfectly correlated with economic
value. In finance, we care about value (=cash)!
What are some key elements related to cash flow management?
o Contracts with customers & suppliers: h
Final Exam Fall 2012
1. The primary goal of a publicly-owned firm interested in serving its stockholders should be to
_.
a. maximize expected total corporate profit
b. maximize expected EPS
c. minimize the chances of losses
d. maximize the shareholder wea
CHAPTER 2 Answers to Additional Problems and Questions
1. The definitions to all of these terms are in the chapter. If you dont know the definition of all
of these terms, look them up. You should be able to define each of these terms.
2. Net income = $18,
Quiz 3 Name:
F1 3300
Please show all of your work (Timeline and Equation).
Failure to do so will result in no credit regardless of your answer.
1) You want to purchase a perpetuity for your retirement that pays you $65,000 per year
forever. You want to r
1. You are offered a fixed annual payment of $300 starting one year from today and
continuing yearly until forever. If the discount rate is 6% p.a., what is the value today
(t=0) of these cash flows?
PV=300/0.06=5000
2.
If you deposit $700 per year beginn
Chapter 11
Advanced Topics in Capital Budgeting
Learning Objectives
Calculate the project cash flows using incremental
method
Mutually exclusive projects and equivalent annual
series
PV=sum of discounted future cash flows
In order to value any project, yo
Quiz 4 (Show your work to get credit)
First Name_
Last Name_
1. An investor will be willing to pay $_ today for a money machine that will produce $1,000
two years from today. Assume the appropriate interest rate is 10%.
PV =
FV
1000
=
=826.45
n
(1+r ) (1+
Chapter 4 Notes
Income Statement = Statement of the revenues the company brought in and the expenses
spent in a given year
The key here is to remember that this is not a statement of cash flows; for instance, you
do not pay depreciation, it is simply an a
Chapter 2 Notes
Basic Time Value of Money
Basic Concept: Money today is more valuable than money tomorrow!
o Why? I would rather have $100 today than $100 tomorrow because I can
invest the $100 today and get a larger amount of money tomorrow
Discounting:
Formula Sheet
Finance 3300
(Note: This sheet does not list many formulas that are important for the
exam)
1. Current Ratio =
Current Assets
Current Liabilitie s
3. Avg. Collection Period =
COGS
Inventory
5. Inventory Conversion Period=
11. ROE =
Inventory
Chapter 3 Notes
Time Value of Money
Remember, the key concept to remember is that money today is more valuable than
money tomorrow!
This concept is reflected in the basic present value equation:
( )
( )
(
)
The highest is r (which is the interest rate, di
U
Quiz 2 Name: i
F1 3300
Please show all of your work (timeline and equation). '
Failure to do so will result in no credit regardless of your answer.
1] What is the present value of$5,000 that is to be paid in 8 years if the appropriate
discount rate is 7
Practice Problem for Chapter 3
USE THE FINANCIAL DATA BELOW TO ANSWER QUESTIONS 1-5.
2011
2012
Accounts payable
200
500
Accounts receivable
600
550
Accruals
300
200
Accumulated depreciation
250
300
Additional paid-in capital
200
300
Cash
1,000
?
Common st
1 Tell Your Calculator Four and It Will Tell You the Fifth 0
You deposited $20,000 in the bank fifteen years ago. Today you have $109,471.32 in the
account (you did not make any other deposits or withdrawals during the fifteen year period).
You earned an
CHAPTER 8 Answers to Additional Problems and Questions
Problems:
1. A financial security is a contract between an individual (or organization) who needs money
and another individual (or organization) who provides the needed money. The contract
specifies t
CHAPTER 7 Answers to Additional Problems and Questions
Problems:
1. a more compounding periods per year creates a larger effective interest rate.
2. e
3. 17 years
4. 4.45%
5. $12,809.92
6. d
7. a
8. 19.56%
9. $704.00
10. e
11. e
12.
13. $15,129.38
14. $45
CHAPTER 4 Answers to Additional Problems and Questions
Problems:
1. A grocery store. Would you want to shop at a grocery store that had an inventory turnover
ratio of 2? That is, all items (fruit, meat, vegetables, etc.) turned over (i.e., sold) on averag
ECON 2100 Global Economy In-class Assignment 1 (10 points, 1 point each).
Bring the answers on a sheet of paper on Tuesday to the class, or you can send the scanned version
thought email.
Analyze how following events affect the market for oranges (answer
ECON 2100 Global Economy In-class Assignment 2 (10 points, 2.5 point each).
Assume an economy with 1 good: cups of coffee. Calculate the values for missing items (A,
B, C, D) in the following table. Assume 2013 is the base year. Show your calculations.
Ye
ECON 2100 Global Economy In-class Assignment 3 (10 points, 2.5 point each).
Assume a consumer basket with 2 goods: cups of coffee and muffins. Calculate the values
for missing items (A, B, C, D) in the following table. Assume 2013 is the base year. Show y
FI 3300 - CORPORATION FINANCE
Take-Home Problem Set Two (THPS-2)
Fall 2016
Directions: This problem set covers chapters 1, 3 and 4 in the textbook. Determine or compute an answer for each
question/problem. After you have computed an answer for every quest