Name
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Signature
Quiz #1, Fin 4360, Spring 2016, Section 1a
Dr. Rongbing Huang
Each question has only one best answer and is worth 8.5 points.
1. Which of the following is not an example of a financial intermediary?
a) Goldman Sachs
b) Allstate In
Wall Street Journal
EARNINGS
JANUARY 21, 2009
Penney Sees Cash Gains by KATHY SHWIFF
J.C. Penney Co., looking to calm investors, said it expects to have more than $2 billion of cash on its balance sheet Jan. 31,
the end of its fiscal year, and added that
Perpetuities
Like annuities, perpetuities have the
same cash flows all occurring at equal
intervals, but they continue forever with no
maturity date (they are perpetual).
With annuities, the payments (C) exceed
the interest income (interest expense, in
th
Question
For the same consulting job (assuming
you could earn 12%), would you rather
have?
1.
2.
$29,000 paid in payments of $6,500 at the
end of year one, $7,500 paid at the end of
year two, and $15,000 paid at the end of
year three.
$22,459.23 paid toda
FIN 4260 - Short-Term Financial Management
Chapter 3 Homework Spring 2012
PV = FV / [1 + (k)(n/365)]
PVPerp =
CF
k
or
=
PV = FV / [1 + (k/365)(n)]
Cash Flow Per Period
Interest Rate Per Period
1) YOU WANT TO RENEGOTIATE LONGER CREDIT TERMS WITH ONE OF YOU
Relationship Between FV and
PV
The two formulas are opposites:
If the FV formula is:
FV = PV(1 + r)t
then, the PV formula is:
PV = FV/(1 + r)t
1
Time Value of Money
Growth Rate:
Discount Rate:
2
Present Value
Suppose you need $10,000 in 10 years
and can e
Shifting Gears
We turn our attention now to loans.
When money is borrowed, the borrower repays:
Principal - the original loan amount borrowed.
Interest - the amount the lender charges for borrowing the
money.
1
Loans
There are three primary types of loans
Ordinary Annuity
You won the lottery and will receive
$20,000 at the end of each of the next five
years. C are your winning worth today
What 1
iPVA =assume a 9% discount rate?
f you r 1 - (1 + r)t
1
Financial Calculators
Well now use the PMT
key.
Note w
Multiple Cash Flows - FV
Lets solve the first oneyou deposit
$1,000 per year into your savings account
for four years, starting now, to save for a
house. How much money will you have at
the end of four years?
1
Multiple Cash Flows - FV
0
2
3
$1,000
1
$1,0
Problem #1 a.
Problem #1 b.
In-Class Exercises
What Is Liquidity?
Elements of liquidity include several
dimensions:
Time
The amount of time to convert an asset to cash.
The quicker, the more liquid the firm.
Amount
The firms capacity to meet its ST oblig
Chapter 3
Valuation
Contents
Two Approaches to Financial DecisionMaking
NPV Calculations
Basic Valuation Model
Choosing the Discount Rate
Capital Allocation Decision Making in
Practice
Appendix 3A: Advanced Present Value
Analysis
Page 24
Chapter 3 - Page
Short-Term
Financial Management
Chapter 3 - Valuation
Prepared by Patty Robertson
May not be used without permission
2
Part I - Introduction to
Liquidity
Chap
ters
Cove
red
Chapter 1
Chapter 2
The Role of Working Capital
Solvency, Liquidity & Financial
Fl
Future Value
Question:
If you invest $100 at 10% for one year, how
much money will you have?
$100
0
$?
1
1
Future Value
Investing in a Single Period:
If you invest $100 at10% for one year, how
much money would you have?
$ 10 interest
($100)(10%, or .10)
+
GAAP
Revenue and expenses are recognized when earned or
incurred, not when cash is collected and spent.
This is called accrual accounting.
The Income Statement does not reflect cash inflows and
outflows.
In addition, the firm has some flexibility in other
How An Annuity Amortizes
While working, you saved for retirement.
You just retired and expect to live another
30 years. You saved $500,000 and expect
to earn 5% annually. How much money
can you withdraw annually, starting at the
end of the year, so that y
Problem #1 c.
In-Class Exercises
Working Capital Survey
Select portions of the annual Working Capital Survey
conducted by CFO Magazine are provided in the link
below:
http:/www.cfo.com/media/pdf/1006WCcharts.pdf
2
Current Liquidity Index
Liquidity includ
Problem #1 d.
Problem #1 e.
Problem #1 f.
In-Class Exercises
Financial Flexibility
Financial Flexibility is related to a firms overall
financial structure and if financial policies allow it
enough flexibility to take advantage of unforeseen
opportunities
Problem #2
In-Class Exercises
Risk Management Associates
RMA publishes the Annual Statement
Studies, the industry standard for
comparison of financial statement data.
The studies report composite data on 680+
industries organized by the North American
In
Solving for N
Mark earns $61,067 at
his firm. His salary was
$42,500 when he was
hired. He figures that
his annual raises have
averaged 3.35%. How
many years has he
You cannot solve for t algebraically. You
can use the natural logarithm function
(defined
Types of Ratios (see Appendix/Handout)
Liquidity (short-term solvency)
Measures the firms ability to pay bills in the
short-term.
Important to short-term creditors (e.g. banks,
suppliers).
Leverage (long-term solvency)
Measures the firms ability to pay lo
Name
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Signature
Quiz #2 (Chapters 5-6), Fin 4360, Spring 2016, Version B
Dr. Rongbing Huang
Each question has only one best choice. Each question is worth 8.5 points, so you can earn up to a total of 102 points.
1.
Both investors and gamblers tak
Name
Solutions
Signature
Quiz #2 (Chapters 5-6), Fin 4360, Spring 2016, Version A
Dr. Rongbing Huang
Each question has only one best choice. Each question is worth 8.5 points, so you can earn up to a total of 102 points.
1.
Rank the following from highest
Name
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Signature
Exam #2
FIN 4360, Section 1, Version B
Investments
Dr. Rongbing Huang
Spring 2016
Chapters 5-8
Instructions: The total time for this test is about 80 minutes. Please use your time efficiently and first
finish questions that you kn
Name
Solutions
Signature
Exam #1
FIN 4360, Section 1b
Investments
Dr. Rongbing Huang
Spring 2016
Chapters 1-4
Instructions: The total time for this test is 75 minutes. Please use your time efficiently and first finish
questions that you know how to do. Th
Name
Solutions
Signature
Quiz #3 (Chapters 7-8), Fin 4360, Spring 2016, Version A
Dr. Rongbing Huang
Each question has only one best choice. Each question is worth 8.5 points, so you can earn up to a total of 102
points.
1.
Investors require a risk premiu
Name
Solutions
Signature
Exam #2
FIN 4360, Section 1, Version A
Investments
Dr. Rongbing Huang
Spring 2016
Chapters 5-8
Instructions: The total time for this test is about 80 minutes. Please use your time efficiently and first
finish questions that you kn
Name
Solutions
Signature
Quiz #3 (Chapters 7-8), Fin 4360, Spring 2016, Version B
Dr. Rongbing Huang
Each question has only one best choice. Each question is worth 8.5 points, so you can earn up to a total of 102
points.
1.
Security A has an expected rate
Name
Solutions
Signature
Exam #1
FIN 4360, Section 1a
Investments
Dr. Rongbing Huang
Spring 2016
Chapters 1-4
Instructions: The total time for this test is 75 minutes. Please use your time efficiently and first finish
questions that you know how to do. Th