Chapter 9
1. a. k = cfw_D1 +(P1-P0)/P0
ke = cfw_$.50+($18-$15)/$15=23.3%
b. ke = cfw_$.25+($17-$15)/$15=15%
c. ka = cfw_$.10+($13-$15)/$15=-12.7%
6. expected return=k = (5%)(.05)+(8%)(.25)+(10%)(.40)+
FIN 326
Dr. Shum
Review the following types of problems for Final Exam:
Ch. 3 ratios
Ch. 4 external funding requirement (EFR)
Ch. 6 time value of money
PV, PVA, FV, FVA, n, k, PMT
non-annual compoundi
Ch. 9 Risk and Return
1.
In financial theories, we assume that investors and financial managers are risk averse.
What does the term "risk aversion" mean?
2.
What is expected return (value)?
3.
What do
Ch. 10 Capital Budgeting Techniques
1.
Payback Period, NPV, IRR, PI
-What are they?
-What are the advantages and drawbacks of each of them?
-What are the decision criteria for each of them?
-Which one
Ch. 1 Foundations
1.
What are real assets? What are financial assets?
2.
What is a financial market?
3.
Financial management means the management and control of money and money-related
operations with
Ch. 16
Economic Ordering Quantity
1. Diskettes Etc. Inc. (DEI) must order floppy diskettes from its supplier in lots of onedozen boxes. Given the following information, complete the table below and
de
FIN 326 Pop Quiz #7 10/27/20171.A share of common stock is not a derivative, but an option to buy the
stock is a derivative because the value ofthe option is derived from the value of the stock.True.
FIN 326 Pop Quiz #3 1.If you can constantly earn 8% interest each year on your investment, how long
does it take to triple your initial investment? a.Draw a time line and clearly mark the known and
un
Bond Valuation: Intermediate Problems
Review 7
1. An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 10% annual
w. Bond L matures in 15 years, while bond S matures
Future Value of an Annui Due
Annuity Due-Payments are made at the beginning of each period instead of the
end (an ordinary annuity).
Whats the future value of a 7%, 5-year Wthat pays $300 each year?
Variable Growth
A food company has developed a new fat free ice cream, and as the popularity of the product increases,
the rm will grow rapidly perhaps as much as 20% per year. Over time, as the marke
Valuing Preferred Stock
Alcoa. Inc. has preferred stock outstanding that pays a dividend of $3.75 per share each year. The stock
paid a dividend yesterday. If investors require a 5.5% return on this i
Variable Growth Stock (Advanced!
Carbohydrates Anonymous (CA) operates a chain of weightloss centers. Its services have been in great
demand in recent years and its prots have soared. CA recently paid
Time Value of Money (TVM)
$100 ._ _ WWW VWhich -_T_\_ $100 One Year
Today Jifwwww One? / From Today
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TCLKT: +146? Momcy ow, Ingres-l 1+ and cam gig-0+ by a+ Val?
Notation
PV 2 pier' Velma
FV =
Capital Asset Pricing Model (CAPM) Review
A stocks risk consists of two components:
1. Market Risk
2. Company-Specic Risk.
Company-specic risk can be eliminated by xiimaisms-gm
- mama» {ASK is caused
Bond Review Problems
Make sure P/Y =1 before starting a bond problem.
Bond Valuation: Annual
Morin Company's bonds mature in 8 years, have a par value of $1,000, and make an annual coupon
interest pay
. 7 \.
Basic Bond Valuation Problems Rm a 39M 6,; pi,-\bjfm ) 39/, 5. /
ABC Corporations bonds have 10 years remaining to maturity. Interest is paid annually, they have a $1,000
par value, the cougon
Present Value of a Lump Sum
You are planning to take a vacation in three years that you estimate will cost $5,000. If you can invest
your money in a mutual fund that has a 12% rate of return, how much
1.Corporates face double taxation, which is a drawback when comparing to proprietorships and
partnerships. (T) 2.Intrinsic value is a short-run concept. (F. Its a long-run concept) 3.According to
Murp