LIST OF FORMULAS FOR MIDTERM EXAM 2
1. Growth Models:
Constant Growth Model: , k = discount rate
Supernormal Growth Model: ,
2. Component Costs of Capital:
Common stock: 1) DVM: , where D1 = D0(1 + g) , and
2) SML equation:
Preferred stock: ; where g =
BUS 330a: Corporate Finance I, Spring 2012
American University in Bulgaria
Homework #4
Solution Guide
Problem 1 / Chapter 10
Because both machines are the same size you can just calculate each machines MIRR
and choose the machine with the higher MIRR. (Re
BUS 330a: Corporate Finance I
Spring 2012, American University in Bulgaria
Prof. Miroslav Mateev
HOMEWORK #1
Problem 1 / Chapter 2
Saunders Inc. recently reported an EBIT of $6 million. Its net income was $3 million. What was
the companys interest expense
BUS 330a: Corporate Finance I
Spring 2012, American University in Bulgaria
Prof. Miroslav Mateev
HOMEWORK #1
Problem 1 / Chapter 2
Saunders Inc. recently reported an EBIT of $6 million. Its net income was $3 million. What was
the companys interest expense
BUS 330a: Corporate Finance I
Spring 2012, American University in Bulgaria
Prof. Miroslav Mateev
HOMEWORK #3
Problem 1 / Chapter 7
The industry in which you company operates in, based on most recent analysts report is
expected to grow at a rate of 6%. The
BUS 330a: Corporate Finance I
Spring 2012, American University in Bulgaria
Prof. Miroslav Mateev
HOMEWORK #5
Problem 1 / Chapter 14
The Intel Corporation expects next years Net Income to be $15 million. The firms debt
ratio is currently 40%. Intel has $12
PRESENT VALUE AND THE
OPPORTUNITY COST OF CAPITAL
n
n
n
n
What is the NPV criterion?
How do we use the time line and the basic
equation to determine present value?
How do we determine present value of a
perpetuity and an annuity?
How do we determine prese
BUS 330a: CORPORATE FINANCE I
FALL 2012, AUBG
Quiz 1(a)
Solution Guide
Problem 1 (5 points)
The Moor Corporation has operating income (EBIT) of $750,000. The company
depreciation expense is $200,000. Moore is 100% equity financed, and it faces a 40% tax
r
BUS 330a: Corporate Finance I, Spring 2012
American University in Bulgaria
Homework #5
Solution Guide
Problem 1 / Chapter 14
Equity financing = $12,000,000(0.60) = $7,200,000.
Dividends = Net income - Equity financing
= $15,000,000 - $7,200,000 = $7,800,0
BUS 330a: Corporate Finance I, Spring 2012
American University in Bulgaria
Homework #1
Solution Guide
Problem 1 / Chapter 2
NI = $3,000,000; EBIT = $6,000,000; T = 40%; Interest = ?
Need to set up an income statement and work from the bottom up.
EBIT
Inte
BUS 330a: Corporate Finance I
Spring 2012, American University in Bulgaria
Prof. Miroslav Mateev
HOMEWORK #4
Problem 1 / Chapter 10
You work for a furniture manufacturing company which has to make a decision for
implementing a machine which is supposed to
Chapter 4. Solution for 4-35
3/11/2009
a. Find the FV of $1,000 invested to earn 10% annually 5 years from now. Answer this question by using
a math formula and also by using the Excel function wizard.
Inputs:
Formula:
Wizard (FV):
PV =
I/YR =
N =
FV = PV
BUS 330a: Corporate Finance I
Spring 2012, American University in Bulgaria
Prof. Miroslav Mateev
HOMEWORK #2
Problem 1 / Chapter 5
Real Time Computers Corp. has two bond issues outstanding. Both pay $110 annual
interest plus $1,000 at maturity. Bond A has
4/11/2010
Chapter 2. Solution for 2-14
a. Cumberland Industries' most recent sales were $455,000,000; operating costs (excluding depreciation) were equal to
85% of sales; net fixed assets were $67,000,000; depreciation amounted to 10% of net fixed assets;
BUS 330a: Corporate Finance I, Spring 2012
American University in Bulgaria
Homework #2
Solution Guide
Problem 1 / Chapter 5
a.
1. 5%:
Bond A:
Bond Z:
2. 8%:
Bond A:
Bond Z:
3. 12%: Bond A:
Bond Z:
Input N = 14, I/YR = 5, PMT = 110, FV = 1000, PV = ?, PV =
4/11/2010
Chapter 2. Solution for 2-15
a. Using the financial statements shown below, calculate net operating working capital, total net operating
capital, net operating profit after taxes, free cash flow, and return on invested capital for the most recen
Chapter 12. Solution for Ch 12-10 Build a Model
Zieber Corporation's 2010 financial statements are shown below. Forecast Zeiber's 2011 income statement and
balance sheets. Use the following assumptions: (1) Sales grow by 6%. (2) The ratios of expenses to
Most relevant concept questions and end of chapter problems from the textbook
Corporate Finance: A Focused Approach, 4th Edition, by Ehrhardt, M. and E. Brigham,
2011, South-Western Cengage .Learning
Midterm Exam 1 Chapters 1, 2, 3, 4, 5, 6, 7 and 12
Note
CHAPTER 6: PROBLEM SOLVING
Problem 1 (15 points)
Suppose you have invested in three stocks: A, B and C. You expect that returns on the
stocks depend on the following two states of the economy, with the probabilities to
happen given below.
State of
Economy
BUS 330a: Corporate Finance I, Spring 2012
American University in Bulgaria
Homework #2
Solution Guide
Problem 1 / Chapter 5
a.
1. 5%:
Bond A:
Bond Z:
2. 8%:
Bond A:
Bond Z:
3. 12%: Bond A:
Bond Z:
Input N = 14, I/YR = 5, PMT = 110, FV = 1000, PV = ?, PV =
4/2/2009
Chapter 6. Solution to Ch 06 P14 Build a Model
a. Use the data given to calculate annual returns for Bartman, Reynolds, and the Market Index, and then calculate
average returns over the five-year period. (Hint: Remember, returns are calculated by
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
B
C
D
E
F
G
H
4/11/2010
I
Chapter 7. Solution for Ch 7-20 Build a Model
Rework Problem 7-19. Taussig Technologies Corporation (TTC) has been growing at a rate of 20% per year in
recent years. This same growth rate is exp
4/11/2010
Chapter 5. Solution to Ch05 P24 Build a Model
A 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The
bond sells for $1,100. (Assume that the bond has just been issued.)
Basic Input
CAPITAL BUDGETING PROBLEMS
Investment Cash Flows
1. The Mulder Electrical Equipment Company is considering the purchase of one or two
different wire-soldering machines. Machine 1 has an initial cost of 100,000, costs 20,000 to
set up, and is expected to b
AMERICAN UNIVERSITY IN BULGARIA
BUS 330a: CORPORATE FINANCE I
SPRING 2012, AUBG
MIDTERM EXAM 2
Name: _ ID
_
Version 1 Solution Guide
1
INSTRUCTIONS:
1. You have 90 minutes to complete the exam.
2. The exam is worth a total of 100 points.
3. You may use a
Most relevant concept questions and end of chapter problems from the textbook Corporate
Finance: A Focused Approach, 4th Edition, by Ehrhardt, M. and E. Brigham, 2011, SouthWestern Cengage .Learning
Midterm Exam 3 Chapters 15, 16, and 13
1.
2.
3.
4.
5.
6.