Flashcards in FIN 515 NEW DEVRY Complete Class,FIN 515 NEW DEVRY Assignment,FIN 515 NEW DEVRY Course Deck (15):

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FIN 515 Week 7 Problem Set

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FIN 515 Week 7 Problem Set

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Chapter 26 (page 903):

Answer the following questions:

What is the difference between a firm’s cash cycle and its operating cycle?

How will a firm’s cash cycle be affected if a firm increases its inventory, all else being equal?

How will a firm’s cash cycle be affected if a firm begins to take the discounts offered by its suppliers, all else being equal?

The Greek Connection had sales of $32 million in 2012, and a cost of goods sold of $20 million. A simplified balance sheet for the firm appears below:

Calculate The Greek Connection’s net working capital in 2012.

Calculate the cash conversion cycle of The Greek Connection in 2012.

The industry average accounts receivable days is 30 days. What would the cash conversion cycle for The Greek Connection have been in 2012 if it had matched the industry average for accounts receivable days?

Assume the credit terms offered to your firm by your suppliers are 3/5, Net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30.

Chapter 27 (page 925):

Which of the following companies are likely to have high short-term financing needs? Why?

A clothing retailer

A professional sports team

An electric utility

A company that operates toll roads

A restaurant chain

Sailboats Etc. is a retail company specializing in sailboats and other sailing-related equipment. The following table contains financial forecasts as well as current (month 0) working capital levels. During which months are the firm’s seasonal working capital needs the greatest? When does it have surplus cash?

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FIN 515 Week 6 Quiz

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FIN 515 Week 6 Quiz

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Question : You work for Athens Inc. and you must estimate the Year 1 operating cash flow for a project with the following data. What is the Year 1 operating cash flow?

Question : Which of the following is not a cash flow and thus should not be reflected in the analysis of a capital budgeting project?

Question : Which of the following is not a key element in strategic planning as it is described in the text?

Question : Which of the following assumptions is embodied in the AFN formula forecasting method?

Question : How is the capital intensity ratio generally defined?

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FIN 515 Week 6 Problem Set

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FIN 515 Week 6 Problem Set

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1. What inherent characteristic of corporations creates the need for a system of checks on manager behavior?

2. What are some examples of agency problems?

3. What are the advantages and disadvantages of the corporate organizational structure?

4. What is the role of the board of directors in corporate governance?

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FIN 515 Week 5 Problem Set

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FIN 515 Week 5 Problem Set

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Chapter 10 (pages 345–348)

4. You bought a stock one year ago for $50 per share and sold it today for $55 per share. It paid a $1 per share dividend today.

a. What was your realized return?

b. How much of the return came from dividend yield and how much came from capital gain?

20. Consider two local banks. Bank A has 100 loans outstanding, each for $1 million, that it expects will be repaid today. Each loan has a 5% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $100 million outstanding, which it also expects will be repaid today. It also has a 5% probability of not being repaid. Explain the difference between the type of risk each bank faces. Which bank faces less risk? Why?

22. Consider the following two, completely separate, economies. The expected return and volatility of all stocks in both economies is the same. In the first economy, all stocks move together—in good times all prices rise together and in bad times they all fall together. In the second economy, stock returns are independent—one stock increasing in price has no effect on the prices of other stocks. Assuming you are risk-averse and you could choose one of the two economies in which to invest, which one would you choose? Explain.

30. What does the beta of a stock measure?

35. Suppose the market risk premium is 5% and the risk-free interest rate is 4%. Using the data in Table 10.6 (also shown above), calculate the expected return of investing in

a. Starbucks’ stock.

b. Hershey’s stock.

c. Autodesk’s stock.

Chapter 11 (pages 390–396):

2. You own three stocks: 600 shares of Apple Computer, 10,000 shares of Cisco Systems, and 5,000 shares of Colgate-Palmolive. The current share prices and expected returns of Apple, Cisco, and Colgate-Palmolive are, respectively, $500, $20, $100 and 12%, 10%, 8%.

a. What are the portfolio weights of the three stocks in your portfolio?

b. What is the expected return of your portfolio?

c. Suppose the price of Apple stock goes up by $25, Cisco rises by $5, and Colgate-Palmolive falls by $13. What are the new portfolio weights?

d. Assuming the stocks’ expected returns remain the same, what is the expected return of the portfolio at the new prices?

50. Suppose Autodesk stock has a beta of 2.16, whereas Costco stock has a beta of 0.69. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, what is the expected return of a portfolio that consists of 60% Autodesk stock and 40% Costco stock, according to the CAPM?

Chapter 12 (page 431):

26. Unida Systems has 40 million shares outstanding trading for $10 per share. In addition, Unida has $100 million in outstanding debt. Suppose Unida’s equity cost of capital is 15%, its debt cost of capital is 8%, and the corporate tax rate is 40%.

a. What is Unida’s unlevered cost of capital?

b. What is Unida’s after-tax debt cost of capital?

c. What is Unida’s weighted average cost of capital?

27. You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of 9%. However, the new business will be 25% debt financed, and you anticipate its debt cost of capital will be 6%. If its corporate tax rate is 40%, what is your estimate of its WACC?

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FIN 515 Week 4 Problem Set

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FIN 515 Week 4 Problem Set

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Bonds-1. Interest on a certain issue of bonds is paid annually with a coupon rate of 8%. The bonds have a par value of $1,000. The yield to maturity is 9%. What is the current market piece of these bonds? The bonds will mature in 5 years.

Bonds-2. A certain bond has 12 years left to maturity. Interest is paid annually at a coupon rate of 10%. The bonds are currently selling for $850. What is their YTM?

Bonds-3. A certain bond pays a semiannual coupon rate at a 10% annual rate. The bond has a par value of $1,000. There are eight years to maturity. The yield to maturity is 9%. What is the current price of the bond?

Bonds-4. A particular corporate bond has a par value of $1,000. Coupon payments are $40 and are paid twice a year. Seven years are left on the life of the bond.The YTM is 9%. What is the price of the bond?

Bond-5. A given bond has 5 years to maturity. It has a face value of $1,000. It has a YTM of 5% and the coupons are paid semiannually at a 10% annual rate. What does the bond currently sell for?

Bond-6. A given bond has five years left to maturity. Interest is paid annually and the annual coupon rate is 9%. The par value of the bond is $1,000. The bond currently sells for $1,000. What is the yield to maturity?

9-1.Assume Evco, Inc., has a current price of $50 and will pay a $2 dividend in 1 year, and its equity cost of capital is 15%. What price must you expect it to sell for right after paying the dividend in 1 year in order to justify its current price?

9-5.NoGrowth Corporation currently pays a dividend of $2 per year, and it will continue to pay this dividend forever. What is the price per share if its equity cost of capital is 15% per year?

9-6.Summit Systems will pay a dividend of $1.50 this year. If you expect Summit’s dividend to grow by 6% per year, what is its price per share if its equity cost of capital is 11%?

9-7. Dorpac Corporation has a dividend yield of 1.5%. Dorpac’s equity cost of capital is 8%, and its dividends are expected to grow at a constant rate. a. What is the expected growth rate of Dorpac’s dividends? b. What is the expected growth rate of Dorpac’s share price?

9-12.Procter & Gamble will pay an annual dividend of $0.65 1 year from now. Analysts expect this dividend to grow at 12% per year thereafter until the fifth year. After then, growth will level off at 2% per year. According to the dividend-discount model, what is the value of a share of Procter & Gamble stock if the firm’s equity cost of capital is 8%?

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FIN 515 Week 4 Midterm – 3 Sets

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FIN 515 Week 4 Midterm – 3 Sets

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FIN 515 Week 3 Problem Set

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FIN 515 Week 2 Quiz

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FIN 515 Week 2 Quiz

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Question 1

(TCO B) You are a trust fund baby. Your trust fund is currently worth $1,234,000. The problem is the terms of the trust don’t allow you to receive any of the money until you are 27. You are now 21. The fund is earning 7.7% per year. How much will the fund be worth when you are 27 and too old to enjoy it?

Ignore taxes. Show your work. If you use Excel, show the formula with the parameters, and the answer. If you use a formula, provide the standard formula, the formula with terms substituted, and the answer. If you use a calculator, show the inputs and the answer.

Question 2

(TCO B) You have a student loan of $75,000. The interest rate is 8.6% per year. You have been out of school for 6 months and are ready to start making payments. You want to use the maximum allowed of 10 years to pay off the loan by making equal monthly payments. How much are the monthly payments?

Ignore taxes. Show your work. If you use Excel, show the formula with the parameters, and the answer. If you use a formula, provide the standard formula, the formula with terms substituted, and the answer. If you use a calculator, show the inputs and the answer.

Question 3

(TCO B) You want to have $1,000,000 in 30 years. You already have $50,000. You think you can get a 7% annual return on your money. How much per year will you have to save to get to $1,000,000?

Ignore taxes. Show your work. If you use Excel, show the formula with the parameters, and the answer. If you use a formula, provide the standard formula, the formula with terms substituted, and the answer. If you use a calculator, show the inputs and the answer.

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FIN 515 Week 2 Problem Set

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FIN 515 Week 2 Problem Set

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FIN 515 Week 1 Quiz

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FIN 515 Week 1 Quiz

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Question 1 - (TCO G) Which do you think provides a more valid measure of how a company is doing, comparison of current results with historical results or comparison of current results with the current results of another company?

Question 2- (TCO G) Barnes Corp’s total assets at the end of last year were $415,000,000 and its net income after taxes was $17,750,000. What was its return on total assets?

Question 3- (TCO G) Between December 31, 2016 and December 31, 2017, ROE at Bobcat Industries decreased even though sales increased. Using the DuPont Identity, explain what else could have happened to cause this.

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FIN 515 Week 1 Problem Set

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FIN 515 Second Course Project

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FIN 515 Second Course Project

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FIN 515 First Course Project

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FIN 515 First Course Project

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FIN 515 Final Exam 5 Sets

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FIN 515 Final Exam 5 Sets

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(TCO A) In the United States, the most common type of business by number of businesses is the _____. (Points : 5)

(TCO A) Sole proprietorships have all of the following advantages except (Points : 5)

(TCO B) Which of the following would cause the future value of an annuity to decrease? (Points : 5)

(TCO B) Which of the following is an annuity due? (Points : 5)

(TCO G) What are the names of the four components of the DuPont Identity and how are they calculated? What does each measure? (Points : 20)

(TCO D) A stock pays an annual dividend of $2.50 and that dividend is not expected to change. Similar stocks pay a return of 10%. What is P0? (Points : 20)

(TCO D) A stock has just declared an annual dividend of $2.25 to be paid one year from today. The dividend is expected to grow at a 7% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20)

(TCO D) A particular bond has 8 years to maturity. It has a face value of $1,000. It has a YTM of 7% and the coupons are paid semiannually at a 10% annual rate. What does the bond currently sell for? (Points : 10)

(TCO D) A bond currently sells for $1,000 and has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Points : 10)

(TCO D) Using examples, explain the difference between systematic risk and nonsystematic risk. Explain why the distinction is important for both investors and issuers of stock.(Points : 30)

(TCO E) A company has 10 million shares outstanding trading for $7 per share. It also has $300 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30)

(TCO A) Relate how the job of the financial manager can be explained using the balance sheet. (Points : 25)

(TCO H) Other things being equal, would a firm prefer a longer or shorter Cash Conversion Cycle? What are some examples of ways a firm could attain this? (Points : 30)

(TCO F) A company has the opportunity to do any of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work

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