Costs and prices regularly fall every year in the microcomputer industry. Briefly indicate
your recommendation and rationale for an inventory method for a firm about to enter this
industry.
Selecting an inventory method that provides tax minimization and

FNAN 301 Extra problems risk and return
1. Over the past 4 years, Duke Property stock had returns of 16.0%, 13.0%, 7.0%, and -26.0% and Princess
Property stock had returns of 21.0%, 5.0%, 0.0%, and -18.0%.
a. What was the arithmetic mean return of Duke Pr

Suppose that the demand curve for corn is downward-sloping but that the supply curve is
perfectly price inelastic at a quantity of Q* once the corn is harvested. Furthermore,
assume that the equilibrium price is $5 per bushel.
A. If the U.S. government de

FNAN 301
Solutions to test bank problems stocks
Some answers may be slightly different than provided solutions due to rounding
1. Driver Corporation has issued bonds, common stock, and preferred stock. Rank the
following in terms of their priority on Driv

FNAN 301
Test bank problems risk and return
1. A stock had returns of 9.0%, 3.0%, -7.0%, and 7.0% over the past four years.
a. What was the arithmetic mean annual return?
b. What was the compound annual return?
2. A stock had returns of 5%, 8%, -3%, 10%,

Quiz#2TakehomeDueOctober4,2011
1. If the price of a gallon of gasoline was 28 cents in 1965 and 32 cents in 1969, then
the:
A. nominal price increased, but we cant tell the real price unless we know what
happened to the prices of other goods
B. nominal pr

FNAN 301
Solutions to test bank problems capital budgeting criteria
Some answers may be slightly different than provided solutions due to rounding
1. What is the NPV of project A if it has the following expected cash flows and the cost of
capital for proj

FNAN 301, Fall 2011, quiz 4, solutions
Find the tax rate from an incomplete project income statement with borrowing
1. East West Cola is evaluating the eco-can project, which would require the purchase of a piece
of equipment for $600,000 today. During ye

FNAN 301, Spring 2012, quiz 4, solutions
Find allocated cost with from allocated cost without and relevant cost for project
1. Tripp Industries currently owns 8 stores and is considering project X, which is a potential
project that would involve opening a

of money part 1 - 1
FNAN 301
Financial Management
Time value of money
Part 1
of money part 1 - 2
Topics Covered
Overview of time value of money
Single cash flows
Simple
interest
Compound interest
Future value
Present value
Implied rate
Length of tim

FNAN 301, Fall 2009, quiz 4, solutions
Quantitative: find NPV from OCF, NWC, and capital spending
1. Chaotic Corporation is considering a project that would last for 3 years and have a cost of
capital of 10.0 percent. The relevant level of net working cap

FNAN 301, summer A 2012, quiz 4, version A, solutions
1. Cosmic Butler Inc. is an event planning business in Fairfax. The objective of its managers is
to maximize shareholder value. The firm is evaluating the Sweet 16 project which involves
building and o

FNAN 301, Spring 2012, quiz 3, solutions
Conceptual: relative volume of activity on primary/secondary markets and common/preferred
1. Which one of the assertions about statement 1 and statement 2 is most likely to be true?
Statement 1: Yesterday, the amou

FNAN 301, Fall 2011, quiz 3, solutions
Conceptual: preferred and common stock dividend issues
1. Which one of the assertions about statement 1 and statement 2 is true?
Statement 1: When a company performs very well, the dividends paid to its common shareh

FNAN 301, Spring 2011, quiz 3, solutions
Conceptual: running company and relative risk of securities
1. Forever Sno-Globe Corporation has issued bonds, common stock, and preferred stock. Which
of the assertions about statement 1 and statement 2 is most li

FNAN 301, Spring 2010, quiz 3, solutions
Conceptual: effect of YTM changes on value: direction and magnitude for different maturities
1. Georgetown Inc. and Fairfax Inc. have each issued a bond that just paid a coupon and pays its
next semi-annual coupon

FNAN 301, Fall 2009, quiz 3, solutions Quantitative: find price with non-constant dividend growth model 1. The annual dividend paid by Zorn Corp. common stock is expected to be $0 in 1 year, $0 in 2 years, $5.00 in 3 years, $7.00 in 4 years, and then grow

FNAN 301, Spring 2012, quiz 2, solutions
Find extra CF from PV of growing perpetuity and extra CF
1. Griff has an investment worth $178,000. The investment makes a special, extra payment of X to
Griff in 4 months from today, and it also makes regular mont

FNAN 301
Solutions to test bank problems time value of money part 2
1. Quality Real Estate owns a skyscraper that is expected to produce cash flows of $10 million in 1 year,
$15 million in 2 years, and $220 million in 3 years, when it is expected to be so

FNAN 301
Solutions to test bank problems time value of money part 2
Some answers may be slightly different than provided solutions due to rounding
1. Quality Real Estate owns a skyscraper that is expected to produce cash flows of $10 million in 1 year,
$1

of money part 2 - 1
FNAN 301
Financial Management
Time value of money
Part 2
of money part 2 - 2
Topics Covered
Multiple cash flows
Present
value
General patterns, perpetuities, ordinary annuities, annuities
due, and delayed perpetuities and annuities

FNAN 301
Solutions to extra problems on corporate financial management
1. Milan Office Supplies, Inc. (MOS) is a fairly large firm that does not have a chief financial
officer. A large investor that owns many shares of MOS stock visits the firm to discuss

FNAN 301
Extra problems on corporate financial management
1. Milan Office Supplies, Inc. (MOS) is a fairly large firm that does not have a chief financial
officer. A large investor that owns many shares of MOS stock visits the firm to discuss the
company

FNAN 301
Solutions to test bank problems time value of money part 2
Some answers may be slightly different than provided solutions due to rounding
1. Quality Real Estate owns a skyscraper that is expected to produce cash flows of $10 million in 1 year,
$1

FNAN 301
Solutions to test bank problems time value of money part 1
Some answers may be slightly different than provided solutions due to rounding
1. How much will you have in
a. 16 years if you invest $500 today at an annual rate of 5.6%?
b. 18 years if

FNAN 301
Solutions to test bank problems stocks
Some answers may be slightly different than provided solutions due to rounding
1. Driver Corporation has issued bonds, common stock, and preferred stock. Rank the
following in terms of their priority on Driv

FNAN 301
Solutions to test bank problems relevant cash flows and NPV analysis
Some answers may be slightly different than provided solutions due to rounding
1. Blizzard Inc. is evaluating a 1-year project that would involve an initial investment of $1,000

FNAN 301
Solutions to test bank problems risk and return
Some answers may be slightly different than provided solutions due to rounding
1. A stock had returns of 9.0%, 3.0%, -7.0%, and 7.0% over the past four years.
a. What was the arithmetic mean annual

FNAN 301 Formulas and Notes (p. 1 of 6)
Value in t periods with simple interest:
C0 [1 + (simple interest rate per period t)] = C0 + (C0 simple interest rate per period t)
FVt = C0 (1+r)t
Financial calculator: In either BEGIN or END mode, FV is the future

FNAN 301, Spring 2015, test 1, solutions
1. Three years ago, Andre deposited $15,800 in an account that has earned and will earn 6.30
percent per year in compound interest. If Rainbow deposits $19,200 in an account in 2 years
from today that earns simple