EAR Calculation
Calculate the effective rate for a loan with an APR of 13% compounded monthly.
Nominal Rate
Compounding Periods
EAR
13%
12
13.80%
What is the effective rate_%?
EAR SAMPLE PROBLEM SOLUTION (ALSO WITH EXCEL)
Thanks for your posts, Sarah, Rya
ANOTHER SAMPLE PROBLEM
Here are supplier based questions that everyone can review. I always like to
highlight certain types of problems because you may "see" them again! These are
a couple of quick inventory questions.
1. Assume Enterprise Inc. sells spec
Referring to the optimization of cash cycles, we have to consider the role of float management.
So, here is another good sample problem:
ONE MORE SAMPLE PROBLEM:
Assume that you have a company with $35,400 on deposit with no outstanding checks or uncleare
Here is a *SAMPLE PROBLEM* alert!
If a company has sales of $3.5 million and expenses consist of cost of good sold of $1 million,
administrative expenses of $200,000, marketing expenses of $150,000, depreciation of $400,000,
interest of $250,000, and divi
The operating cycle is the time period between the acquisition of inventory and the collection of
cash from receivables. It includes the length of time it takes to acquire inventory, sell it and
collect cash associated with its sale. And, it is a sum of t
Hi Tech, Inc. expects to have sales of $600 in the first quarter of the year. The
accounts receivable balance was $400. Assuming that they have a collection period
of 45 days, what is the approximate beginning balance (of accounts receivable) for
the seco
Introduction
You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The
company is considering a capital investment in a new machine and you are in charge of making a
recommendation on the purchase based on (1) a given rate
Nichole Bowker
Introduction
You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The
company is considering a capital investment in a new machine and you are in charge of making a
recommendation on the purchase based on (
*SAMPLE PROBLEM/QUESTION ALERT*
Keeping in line with our discussion related to cash cycles, here is a sample problem to work
through.
Indicate whether or not each one of these scenarios increase cash (a source of cash) or decrease
cash (a use of cash):
1.
The operating cash flow formula is:
EBIT (earnings before interest and taxes)
+ Depreciation
- Tax
-operating cash flow
To calculate a companys operating cash flow,
you would take your net income, add back in
your depreciation, and then deduct any taxes
p
-15000
11000
9000
5800
$6,795.64 Function for NPV
-45000
11520
13630
16470
18990
($2,989.48)
A "mom and pop store" is going to make a $15,000 investment that will produce the following cash inflows:
Year 1.$11,000
Year 2.$ 9,000
Year 3.$ 5,800
a). What is
Example - IRR Calculations
-145000
71000
68000
52000
16% Function for IRR
II. SAMPLE PROBLEM # 2
Consider the following project:
Year 0 Investment. -$145,000
Year 1 Cash Flow. 71,000
Year 2 Cash Flow. 68,000
Year 3 Cash Flow. 52,000
What is the IRR and if
* SAMPLE PROBLEM SOLUTION SUMMARY USING EXCEL*
I have attached a file that uses Excel. The reason why the result is "in red" is because we have to think of the price of the bond as the investment or an outlay of cash (meaning what is paid for).
Face Value
Face Value
Annual coupon rate
Payment frequency
Market Yield
$1,000.00
0.08
2
0.09
80 Coupon in dollars
$513.41
PV of the annuity portion
$422.41
PV of the $1,000
$935.82
Bond Price
1) First, find the price of the following Bond X.
The interest rate on th
1.How much money will result from investing $1000 annually for 10 years?
2. How much do you need to invest annually to accumulate $10,000 in 5 years?
3. If $10,000 is invested now, how much money can be withdrawn over a 5 year period?
4. If you won a swee
*SAMPLE PROBLEM ALERT*
1) Assume a corporation sells stock with a price of $40, and the last dividend paid to
shareholders was $1.55. Assuming a growth rate of 3%, what is the rate of return on this stock?
2) If a large corporation paid a dividend of $2.4
*SAMPLE PROBLEM ALERT*
1. Assume Marion, Inc. has stock with a beta of 1.4, and also the current risk free rate is 3% and
the expected market return is 8%. What is the expected return of this company's stock?
2. Approximately 6 month later, Marion's compe
Debt
Preferred Stock
Common Stock
Market Value (in millions)
100
50
350
Total Market Value
Weights
"Costs" Multiply Weights x Costs
20%
6%
1.200%
10%
8%
0.800%
70%
11%
7.700%
500
Weighted Average Cost of Capital
9.700%
*NOTE: Rd of 6% indicates you are to