Risk and probability Micro-Pub, Inc., is considering the purchase of one of two microhn cameras, R and S.
Both should provide benets over a 10-year period, and each requires an initial investment of $6,000.
Management has constructed the following table o
'jBFN 201 e Principlesof Finance '"Fi'nal' Exam MW
'Some imp0rtant'stugyipointsingladgzbutarenotlimited t0:
Concepts andcomputations: '
Operations:
Breakeven points
Depreciable value - -
Time value of money: l '
Single amount, annuity, and mixed cash fl
NW ,A . _ , , ._ , t
Portfolio betas Personal Finance Problem Rose Berry is attempting to evaluate two possible portfolios, which a
:6 "i'i as .m away: a «snareaa'aaemauaume areiualeialczéulem.smegma: .aevm slam sausaamnmueiaxe
compare the risks of the po
Interpreting beta A rm wishes to assess the impact of changes in the market return on an asset that has a beta
of 0.5. Note: Enter a negative percentage number if the asset return decreases. '
j, _. _._-_,_
a. If the market return increased by 10%, what i
Cost of common stock equity Assume that today is January 1, 2013. Ross Textiles Wishes to measure its cost of
' ' c entl sellin for 28.50. The rm ex ects to a a $5.50 dividend at '
the end of the year 0013 i. Ihe growth rate of the diVidls is 12.00%. Ke'r
Principles of Finance BFN (201)
Name: Date:
Final Exam (Part 2a take home problems) ver.f12
Class day and time:
1) McDonaldson Diet Center and Wafe Emporium, Inc., is considering replacing an existing piece of
equipment with a more sophisticated machine.
"T WACC300k Weights and hiarketweights Webster Company has compiled the 111mm;ggbggggme' V m 7
'f1016wingtale. .
a. Calculate the weighted average cost of capital using book value weights.
b. Calculate the weighted average cost of capital using market
structure'is-composed-of=the-sour6es-and=targeFmarkethewerg - ts=s - emana- ~ ' e = omngta 5 :T ' .-
' The cost of debt is estimated to be 8.5%; the cost of preferred stock is estimated to be 15.5%; the cost of retained
earnings is estimated to be 18%; an
Bond value and time-Constant required returns Pecos Manufacturing has just issued a 15 year, 8%
coupon interest rate, $1,000-par bond that pays interest annually. The required return is currently 6%, and the
company is certain it will remain at 6% until t
, , ,mn
Basic bond valuation Complex Systems has an outstanding issue of $1,000-par-value bonds with a coupon
interest rate of 7%. The issue pays interest annually and has 8 years remaining to its maturity date.
a. If bonds of similar risk are currently e
Bondvalue andtiméChanging returns Personal Finance Problem Lynn Parsons is considering
investing in either of two outstanding bonds. The bonds both have $1,000 par values and 1 5% coupon interest
rates and pay annual interest. Bond A has exactly 3 years
BFN 201 Principles of Financ - Exam 1: part 2 Take home ver.d \
Z/
A l) SixLakes, Inc., iswacorporation with 245,600 shareholders with 30% of their 20,000,000 shares
issued and outstanding. During 2011'the rm earned $ 2,575,000 before taxes and the paymen
BFN 201 Principles of Finance 14/! i1, 1 Exam 1: part 2 in-class ver.a
1) Fishy Wishy, Inc. sells high-end (very expensive) shing gear. It is a small corporation with onl: 42,200 shares
held (outstanding) by just 23 shareholders. During 2011 the rm earn
Cost of Long-term Capital
Long-term debt: .
Step 1. Calculate the pre-taX cost of debt (approximation):
Annual Interest + {Face Net Proceeds 1 -
Years to Maturity
3&3 _ 1F ace + Net Proceeds)
, _ 2 _-
Step 2. Calculate the aftertax CQSt of the debt:
9
BO=$80>< Z
1
+$1,000x -
,=1 <1+o.06)t [(1+0.06)9]
B[$8°)x[11 ]+$1ooox[1 ]
° 0.06 (1+0.06)9 (1+0.06)9
Bo=$1,136.03
The value of the bond with 6 years to maturity is:
6
Bo = $80 x I; (1 + (mat + $1,000 x [(1 + 0.06) 6]
B-($80)X[1-1 ]+$1000><[1 ]
'0 0.06
_t\
\: 7
BFN 201/Prlnciples' of Finance . \ / Id V Exam 3: part 2 - ver.a
I Date:
«iq
1) Seven Sisters, Inc., has just issued 16,500 "bonds" for a total principle (face) value, at maturity (in 20 years),
of $ 16,500,000 . The bonds have a coupon rate o
Basic bond valuation Complex Systems has an outstanding issue of $ 1,000-parvalue bonds with a coupon
interest rate of 7%. The issue pays interest annually and has 8 years remaining to its maturity date.
a. If bonds of similar risk are currently earning a
Beta coefcients and the capital asset pricing model Personal Finance Problem Katherine Wilson is 1
wondering how much risk she must undertake to generate an acceptable return on her porfolio. The risk-free I
return currently is 8%. The return on the avera
if the required return is 15%, the current value of bond A is $1,000.00. Note that when a. bond has a required
rate of return that is equal to the coupon rate, the bond will sell at par (at its par value).
(3) If the required return is 18%, the cu
Capital asset pricing model (CAPM) Mliortheasset shop/him the follOwing table, use the capital asset pricing
model to find the required return.
Risk-free 3, Market 521
rate, R F 1' return, rm Beta, b
2% ' l 1% . 1.9
The capital asset pricing model
Sample Lesson for the Jump$tart Coalitions Know Your Take-Home Pay Principle
Prepared by the National Endowment for Financial Education
Employee: Lucinda Smith.
SSN: 00011-0000
Pay Period: 11/9/97 to 11/16/97
Pay Date: 11/16/97
I p Net Pay: $231.71
B
Name
Income Matching Terms
r- -~ ~-~- 51Ilqulib'ilNE]!IlllllilillalIlhlllill[inll'liliiliia! Elilillili -v 7 - - ~ -
%A\RM A fixed amount of money paid to an employee for each pay
. enefits '
I - feterla_'5_tyle Berle g 2 A method for spreading individua
GIFT EXPENDITURE CHART
l
Gifts are among those extra expenses that when added together can throw a
budget way out of line. People tend to buy gifts on impulse and fail to comparison
shop.
1. Place a total dollar amount by each category of
betas "Personal Finance Problem Rose-Berry is attempting to evaluate two possible'portfolios, which
consist of the same ve assets held in different proportions. She is particularly interested in using beta to
compare the risks of the portfolios, so she ha
Risk and probability MicroPub,'liicigcosidergthe purchasieof one of two microlm cameras, R and S.
Both should provide benets over a 10-year period, and each requires an initial investment of $6,000.
Management has constructed the following table of estim
D
_ A :-
Directions: In the following example, employees are paid an hourly rate of $8.80 for the first 40 hours
within a given week. Any hours over 40 are paid at the time and a half rate, which is $13.20.
Calculate the gross pay in the table below. The
other income next year:
Mary's Monthly Expenses
'Housing:
Rent $ (700
Electrical bill ' 83M
Telephone $_5LQ_
Gasbill $ lm '
Food and Clothing:
Food at home , $ 3 Q_ .
Food away from home $ f 2(2
Clothing $_L3_Q
Laundry and cleaning $KL
Car:
Mary Considers