Project 1
Stocks and Bonds
MBA 8135
1. Companies often buy bonds to meet a future liability or cash outlay. Such an investment
is called a dedicated portfolio since the proceeds of the portfolio are dedicated to the
future liability. In such a case, the p
GSU, Department of Finance, AFM
Spring 2015
- Capital Budgeting Practice Problems page 1
Corporate Finance
MBA 8135
Capital Budgeting
1.
An investment cost $10,000 with expected cash flows of $3,000 for 5 years. The discount rate is 15.2382%.
The NPV is _
MBA 8135
page - 1 -
Final Exam Practice Questions B
MBA 8135: Final Exam Practice Questions B
1. The primary goal for a firm's financial managers is to:
a. Maximize earnings per share.
b. Maximize long run profits.
c. Minimize firm risk.
d. Maximize share
Georgia State University
Department of Finance
MBA 8135 - Corporate Finance
Sample Cumulative Final Exam SOLUTION KEY
Part I: Multiple Choice Questions circle the letter of the most correct answer for each question.
Record only one answer for each questio
Quiz 4 MC Solutions
Question 1): Answer choice 2)
In this problem, your estimates of the number of motorcycles sold per year, the cost of
producing a motorcycle, the price for which you sell each motorcycle, and fixed costs
are all subject to a margin of
TestId: 201
For each problem, choose the answer choice that best answers the question.
Name
_
1 _
2 _
3 _
TestId: 201
TestId: 201
Question 1)
Stock X has an expected return of 9% and a return standard deviation of 34%. Stock Y has an expected
return of 13
TestId: 201
For each problem, choose the answer choice that best answers the question.
Name
_
1 _
3 _
2 _
4 _
TestId: 201
TestId: 201
Question 1)
I bought a stock two years ago for $18. In the first year, the stock paid a $1 dividend. At the end of the
fi
Name:
MBA 8135
Fall 2015 MM1
CRN 86105
Final Exam
10/6/2015
Question 1 (3 points): You are considering investing in two different stocks. Stock A is a wellestablished very large firm that operates many high-end hotels and resorts across the U.S. The secon
TestId: 2001
For each problem, choose the answer choice that best answers the question.
Name
_
1 _
8 _
2 _
9 _
3 _
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4 _
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5 _
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7 _
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TestId: 2001
TestId: 2001
Question 1)
A firm is considering a project that is expected to gene
Name:
MBA 8135
Fall 2015 MM1
CRN 86105
Quiz #2
9/1/2015
Question 1 (3 points): You are faced with the question of trying to choose a portfolio of stocks and
bonds and other securities from the seemingly unlimited number of available choices. In answering
TestId: 1001
For each problem, choose the answer choice that best answers the question.
Name
_
1 _
8 _
2 _
9 _
3 _
10 _
4 _
11 _
5 _
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6 _
13 _
7 _
14 _
TestId: 1001
TestId: 1001
Question 1)
The market portfolio has an expected return of 8% and a retur
TestId: 101
For each problem, choose the answer choice that best answers the question.
Name
_
1 _
3 _
2 _
4 _
5 _
TestId: 101
TestId: 101
Question 1)
An investment earns a rate of return of 11% per year compounded quarterly. What is the
effective annual r
Name:
MBA 8135
Spring 2016
CRN 82282
Quiz #1
9/8/2016
Question 1 (2 points): You have just invested $250,000 in an account that will pay you $2000 a month,
each month, for the rest of eternity, with the first payment coming one month from today.
a) What i
Name:
MBA 8135
Spring 2016
CRN 14589
Final
4/27/2016
Question 1 (5 points): You intend to use a Monte Carlo simulation to perform a capital budgeting
analysis of a potential project manufacturing toys. You believe that you will sell approximately 100,000
Long Answer Questions
1. The solution to the long-answer question is provided in a separate Excel file.
Multiple Choice Questions
1) The firm has four options.
The first option is to completely fix the equipment. This option costs $10 million and results
Name:
MBA 8135
Fall 2016
CRN 82282
Quiz #2
9/22/2016
Question 1 (6 points): Consider the following three risky securities. Stock A has an expected return of
8% and a return standard deviation of 20%. Stock B has an expected return of 13% and a return
stan
Name:
MBA 8135
Spring 2016
CRN 14589
Quiz #2
2/17/2016
Question 1 (3 points): The risk associated with any investment can be thought of as having 2
components.
a) What do we call the 2 different components of risk associated with any given security?
b) Ho
Long Answer:
Question 1 (4 points): You are the CFO of an energy firm. A natural gas pipeline that your firm
operates needs maintenance, and you must decide whether to simply restore the pipeline to a
minimal functional state or to make a larger investmen
TestId: 101
For each problem, choose the answer choice that best answers the question.
Name
_
1 _
3 _
2 _
4 _
5 _
TestId: 101
TestId: 101
Question 1)
An investment will generate cash flows of $30,000 in one year, $75,000 in two years, $58,000 in four year
Long Answer Questions
1)
a. The cash flow structure is a perpetuity. The present value of a perpetuity is given by
=
where is the rate of return per period, is the cash flow per period, and is the present
value of the account. The problem tells us that w
Name:
MBA 8135
Fall 2015 MM1
CRN 86105
Quiz #5
9/29/2015
Question 1 (4 points): You believe that you have the ability to make sandwiches that are better than
other restaurants in your local area. Because of your rare sandwich making abilities, you are con
Long Answer Questions
1)
a. The percentage return in any year is
=
+
or equivalently
=
+
1
The return in year 1 is
1 =
$91 + $3
1 = 0.146341 = 14.6341%
$82
The return in year 2 is
2 =
$84 + $5
1 = 0.021978 = 2.1978%
$91
The return in year 3 is
3
Name:
MBA 8135
Spring 2016
CRN 14589
Quiz #4
4/20/2016
Question 1 (3 points): You are considering opening an ice cream store to sell your home-made ice
cream. You will operate the store for a most 3 years. The initial cost of opening the store is $50,000.
Name:
MBA 8135
Fall 2015 MM1
CRN 86105
Midterm
9/8/2015
Question 1 (3 points): Your parents are wealthy and generous. They want to set up an account that will
provide for not just you, but all future generations of your family. But, they insist that you w
Long Answer Questions
1) The loan payments represent an annuity because the loan payments will be of equal amount. Since
I will pay the loan off over five years using monthly payments, there will be 60 total payments. The
annual interest rate is 6% compou
TestId: 401
For each problem, choose the answer choice that best answers the question.
Name
_
1 _
2 _
3 _
TestId: 401
TestId: 401
Question 1)
A firm's assets have a beta of 1.2. The firm is financed with $15 million in equity and $5 million in debt.
What
MS Finance, MBA 8135
page - 1 -
Final Exam Practice Questions E
MBA 8135: Final Exam Practice Questions E
PART I: MULTIPLE CHOICE (each problem is worth 4 points)
1)
Which of the following statements is incorrect:
a.
Usually each share of a corporations s
MBA 8135
page - 1 -
Final Exam Practice Questions D
MBA 8135: Final Exam Practice Questions D
1.
Value is created and recognized over time if
A) cash raised is invested in the investment activities of the firm.
B) funds are raised in the capital markets.
GSU, Department of Finance, AFM
Spring 2015
- Online class week 7
- page 1 -
Corporate Finance
MBA 8135
Step-by step approach for online class week 9 (March 12, 2015)
1. Textbook reading
Carefully read p. 135-138 (middle) in our textbook. It explains the
1.
We will use the bottom up approach to calculate the operating cash flow. Assuming we operate the
project for all four years, the cash flows are:
Year
Sales
Operating costs
Depreciation
EBT
Tax
Net income
+Depreciation
Operating CF
Change in NWC
Capital
The cash outflow at the beginning of the project will increase because of the spending on NWC. At the
end of the project, the company will recover the NWC, so it will be a cash inflow. The sale of the
equipment will result in a cash inflow, but we also mu
If the equipment will be replaced at the end of its useful life, the correct capital budgeting technique is
EAC. Using the NPVs we calculated in the previous problem, the EAC for each system is:
EACA = $387,571.92 / (PVIFA11%,4) EACA = $124,924.64
EACB =
First, we will calculate the annual depreciation of the new equipment. It will be:
Annual depreciation = $375,000/5 Annual depreciation = $75,000
Now, we calculate the aftertax salvage value. The aftertax salvage value is the market price minus (or
plus)
The EAC approach is appropriate when comparing mutually exclusive projects with different lives that
will be replaced when they wear out. This type of analysis is necessary so that the projects have a
common life span over which they can be compared. For