FINA1221 and FINA2221
Semester 2, 2014
Solutions for tutorial 8 (week 9)
Brealey Myers Marcus 7th Edition
Chapter 9 Question 5
Textbook answer:
Gross revenues from new chip = 12 million $25 = $300 million
Cost of new chip = 12 million $8 = $96 million
Los
72 Berli/DeMarzo ' Commute Hymns
quipment that would need to be purchased.
= after-trot cash ow =
sale pcic- I' (sale price book value) = $15 million 0.406515 million - D) = $9 million. Thus,
Questions and Problems
1. Your large, highly-protable gol
Smmsm rm Sagan Goaob fat
new 5%.
Questions and Problems
1. Consider the following probability distributions:
Asset A
Return -30% 0% 20% 40%
Probability 0.20 ' 0:40 0.20 0.20
Asset B 5? (3/
Return 30% #353 6321?; Aging Aim/u
Probability 0.20 2245' M
brie:
M. -
costs (excluding tax and depreciation) will amount to 50% of revenue. From then on you expect
that the free cash flow the course generates will grow by 3% forever. The tax rate is 40% and you
[U
8:
E
p:
r-r
n:
n
0
D
E
Q.
(I!
5:!
D
0"?
E-
n:
"U
I:
n
F
Decision Tree Brealey, Myers, Partington and Robinson
11.
You are considering offering a new computer-based consulting service. There is a 60 per cent chance the demand will be high in the first
year. If it is high, there is an 80 per cent chance that it
Introduction to Finance 221
Worksheet - Uncertainty - Solutions
LIST OF TERMS
Abandonment value
Break-even analysis
Decision tree
Monte Carlo simulation
Comparative advantage
Economic rent
Probability
Project analysis
Scenario
Sensitivity analysis
Competi
Two-Bit Mining Company (PBEH adapted)
The Two-Bit Mining Company has constructed a town at Big Bore, near the site of a rich mineral discovery
in a remote part of Australia. The town will be abandoned when mining operations cease after an estimated
ten ye
EAC short but tricky - BMPR
Question
A project requires use of spare computer capacity. If the project is not terminated, the
company will need to buy an additional graphics-server at the end of year2. If it is terminated,
the graphics-server will not be
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question.
1) The internal rate of return (IRR) is a capital budgeting project's expected return.
Which of the following statements about the IRR method is true?
A
Pea; E err-
Questions and Problems
1. Consider the following probability distributions:
Asset A
Return 30% 0% 30% 40%)
Probability 0.20 ' 0:40 0.20 0.20
Asset B ' (if
earl)? r , 3 2r.) .3 .
Return 49% i 63% is F 46%
Probability 0.20 see M set)
9.2.6 ant)
CH07: Investment Decision Rules
NPV Investment Rule:
if all of the projects (-) cash flows
precede its (+) cash flows
Multiple IRR = Rely on NPV Rule
Take the highest NPV = Receiving
NPV in cash today
Stand-alone project accept
project with (+) NPV
NPV Pr
Intro to Finance: Tutorial 1
Tutor: Tom Simpson
Q1: What is the important difference between a
corporation and all other organisational forms?
A corporation is a legal entity separate from its
owners.
This allows for public trading of equity in the
corp
FINA1221 and FINA2221
Semester 2, 2014
Solutions for tutorial 10 (week 11)
Brealey Myers Marcus 7th Edition
Chapter 10 Question 2
Textbook answer:
The extra 2 million burgers increase total costs by $1.0 million.
Therefore, variable cost = $0.50 per burge
FINA1221 and FINA2221
Semester 2, 2014
Solutions for tutorial 7 (week 8)
Brealey Myers Marcus 7th Edition
These extra questions are next best chapter questions after the questions selected for the
tutorials. Finish tutorials first.
Chapter
Extra Questions
FINA1221 and FINA2221
Semester 2, 2014
Solutions for tutorial 9 (week 10)
Brealey Myers Marcus 7th Edition
Chapter 5 Question 68
Textbook answer:
a.
PV = $100/(1.08)3 = $79.38
b.
Real value = $100/(1.03)3 = $91.51
c.
Real interest rate =
d.
PV = $91.51/(1
FINA1221 and FINA2221
Semester 2, 2014
Solutions for tutorial 2 (week 3)
Brealey Myers Marcus 7th Edition
Chapter 3 Question 3
Accounting revenues and expenses can differ from cash flows because some items included in the
computation of revenues and expen
FINA1221 and FINA2221
Semester 2, 2014
Solutions for tutorial 4 (week 5)
Brealey Myers Marcus 7th Edition
Chapter 6 Question 1
Textbook answer:
a.
Coupon rate = 6%, which remains unchanged. The coupon payments are fixed at $60 per year.
b.
When the market
FINA1221 and FINA2221
Semester 2, 2014
Solutions for tutorial 1 (week 2)
Brealey Myers Marcus 7th Edition
Chapter 1 Question 13
Textbook answer:
Both capital budgeting decisions and capital structure decisions are long-term financial decisions.
However, c
FINA1221 and FINA2221
Semester 2, 2014
Solutions for tutorial 5 (week 6)
Brealey Myers Marcus 7th Edition
Chapter 7 Question 3
Textbook answer:
The preferred stock pays a level perpetuity of dividends. The expected dividend next year is
the same as this y
FINA1221 and FINA2221
Semester 2, 2014
Solutions for tutorial 12 (week 13)
Brealey Myers Marcus 7th Edition
Chapter 12 Question 1
Textbook answer:
a.
False. Investors require higher expected rates of return on investments with high market
risk, not high t
FINA1221
10
Capital Markets and the Pricing of Risk
10.2
Common Measures of Risk and Return
When a manager makes an investment decision or an investor purchases a security, they
have some view as to risk involved and likely return investment will earn
Pro
FINA1221
11
Optimal Portfolio Choice and the Capital Asset Pricing Model
11.1
The Expected Return of a Portfolio
Portfolio weights are the fraction of the total investment in the portfolio held in each individual
investment in the portfolio:
Portfolio wei
FINA1221 Introduction to Finance 2016
Tutorial 2 (week three) solutions
Berk and DeMarzo, Corporate Finance, 3rd global edition
Accounting Revision
Chapter 2 Questions 2, 4, 9, 17, 23, 24, 45
Franking Credits
How much of a $350 cash dividend would you
nee
FINA1221 and FINA2221 - Introduction to Finance
Keith Godfrey - Lecture One - July 2016
1. Welcome to FINA1221 / 2221
My background
Unit outline
- Semester schedule
- Assessment
Tutorial preparation and participation (see tips on final page)
Online test