(1) Book Value Debt/Equity Ratio = 2500/2500 =
Market Value of Equity = 50 million * $ 80 =
Market Value of Debt = .80 * 2500 =
Debt/Equity Ratio in market value terms =
(2) Book Value Debt/(Debt+ Equity) = 2500/
Problem 1 a. False. The dividend discount model can still be used to value the dividends that the company will pay after the high growth eases. b. False. It depends upon the assumptions made about expected future growth and risk. c. F
Taco Mac Nutritional Information
These values are based on our exact recipe. If the recipe is altered in any way, it will change the nutritional value.
All values are based on current products used but are subject to change based on availability of produc
Hugh Rockoff of Rutgers University, The Wizard of Oz as a Monetary Allegory, Journal of
Political Economy, Vol. 98, 1990, pp. 739-760.
The Wizard of Oz is perhaps the best-loved American children's story. The movie, starring Judy
Risk in Practice: Solutions to Problems
Problem 1 a. Expected Return to Short-term Investor = 5.8% + 0.95 (8.5%) = (I am using the historical premium of 8.5% to estimate expected returns) b. Expected Return to Long-term Investor = 6.4% + 0.95 (5.5%) = c.
Solutions to Present Value Problems
Present Value: Solutions
Problem 1 a. Current Savings Needed = $ 500,000/1.110 = b. Annuity Needed = $ 500,000 (APV,10%,10 years) = $ $ 192,772 31,373
Problem 2 Present Value of $ 1,500 growing at 5% a year for next 15
FNCE 3010 (Durham). Fall 2011. Exam 1. Form A.
Multiple choice (3 pts each)
1. All else equal, the internal growth rate increases when the:
(a) retention ratio decreases.
(b) dividend payout ratio increases.
(c) net income decreases.
(d) Solution: total
Dividend Framework: Solutions
a. Dividend Payout Ratio = (2 * 50)/480 =
b. Free Cash Flows to Equity this year
- (Cap Ex - Depr ) (1-DR)
- (Chg in WC) (1-DR)
Dividends as % of FCFE = 100/235 =
Chapter 20: Solutions
Firms usually do not change their dividends very frequently. This is what is meant by "sticky" dividends.
Part of the reason for "sticky" dividends is that firms are reluctant to cut divid
To examine global control systems for foreign operations.
To discuss performance evaluation for foreign operations.
To consider the significance of national tax systems on internationa
To explain how to compute the weighted average cost of capital and its
component costs of capital
To discuss how corporate and country characteristics influence the cost of capital
To describe the forces that lead company officials to focus on the possibilities of
To explain standard cash flow analysis for foreign projects.
To examine various c
To evaluate the arguments for and against foreign direct investment.
To list and describe modes of foreign investment.
To discuss foreign direct investment in the Third World.
To determine the risk associated with investing in securities from different
markets and denominated in various currencies.
To calculate the return associated with investing in securities from d
To describe the importance of working capital management and the constraints of
current asset management.
To list different channels available to move funds from one country to another.
To list and discuss the internal sources of funds for financing foreign investment.
To identify the principal instruments used by banks to service a multinational
company's request for a loan.
To describe the three important documents in foreign trade and reasons for
To list 14 steps necessary to complete a typical international trade.
To define countertrade and describe the spe
To discuss issues relating to all aspects of the Eurocurrency market: creation of
Eurodollars, their uses, and Eurodollar instruments.
To explain three Euronote issue facilities: Euronotes, Eurocom
To list and discuss the three types of foreign exchange exposure.
To discuss the various alternatives in transaction exposure management, including
hedges and swaps.
To describe th
To describe how exchange rate changes are measured.
To explain why companies forecast exchange rates.
To explain why no one should pay for currency-forecasting services if foreign
exchange markets are p
1. To describe the origins of the swap market and its growth.
2. To discuss two major types of financial swaps-interest rate swaps and currency
3. To compute the appropriate payments and receipts associated with a
1. To discuss the currency futures market and its participants.
2. To distinguish between currency forward and futures contracts.
3. To explain how to read currency futures and options quotes.
4. To describe
To describe the size of the foreign exchange market.
To list major participants in the foreign exchange market and their functions.
To distinguish between the spot and forward marke
To provide an overview of a successful foreign exchange system.
To explain how currency demand and supply are determined to achieve
equilibrium in the foreign exchange market.
To present a histo
To define the balance-of-payments accounts.
To discuss the actual balance of payments.
To explain the means for correcting a balance-of-payments deficit.
Overview of the Balance of Paymen
Chapter 2: Problems and Questions
1. The objective of decision making in corporate finance is
(e) to maximize firm value / stock prices.
2. For maximization of stock prices to be the sole objective in decision making, and to be
socially desirable, the f
To identify economic motives for companies to sell their goods and services to
To discuss benefits of open trade and reasons for protectionism.
To list and discuss th
Study Guide to Accompany
Global Corporate Finance:
Text and Cases
Daniel W. Baack
St. Louis University
University of Detroit Mercy
Copyright Dan Baack and Stacey Banks, 2006.
First published 2006
All rights reserved. Instructo
Capital Structure Choices
a. Annual tax savings from debt = $ 40 million * .09 * .35 =
b. PV of Savings assuming savings are permanent = $ 40 million * .35 =
c. PV of Savings assuming savings occur for 10 years = $ 1.26 (PVA,9%,10) =
d. PV of Sa