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1. The Financial Management Decision Process: Chp...




1. The Financial Management Decision Process: Chp 1 What are the three types of financial management decisions? For each type of decision, give an example of a business transaction that would be relevant. 2. Sole Proprietorships and Partnerships: Chp. 1 What are the four primary disadvantages of the sole proprietorship and partnership forms of business organization? What benefits are there to these types of business organization as opposed to the corporate form? 3. Corporations : Chp 1 What is the primary disadvantage of the corporate form of organization? Name at least two advantages of corporate organization. 4. Building a Balance Sheet: Chp 2 Predator Pucks, Inc. has current assets of $8,000, net fixed assets of $45,000, current liabilities of $6,800, and long-term debt of $13,800. What is the value of the shareholders' equity account for this firm? How much is net working capital? 5. Building an income statement ? Chp 2: Mama Roach Exterminators, Inc. has sales of $634,000, costs of $305,000, depreciation expense of $46,000, interest expense of $29,000, and a tax rate of 35 percent. What is the net income of this firm? 6. Calculating Liquidity Ratios ? Chp 3: SDJ, Inc. has net working capital of $1,570, current liabilities of $4,380, and inventory of $1,875. What is the current ratio? What is the quick ratio? 7. Calculating Leverage Ratios ? Chp 3: Star Lakes, Inc. has a total debt ratio of .29. What is the debt-equity ratio? What is its equity multiplier? 8. Calculating Present Values ? Chp 5: Imprudential, Inc., has an unfunded pension liability of $700 million that must be paid in 20 years. To assess the value of the firm?s stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 8.5 percent, what is the present value of this liability? 9. Calculating Future Values ? Chp 5: Your coin collection contains fifty 1952 silver dollars. If your grandparents purchased them for their face value when they were new, how much will your collection be worth when you retire in 2054, assuming they appreciate at a 4.5 percent annual rate? 10. Present Value and Multiple Cash Flows ? Chp 6: Investment X offers to pay you $19,000 per year for 8 years, whereas investment Y offers to pay you 16,000 per year for 5 years. Which of these cash flow streams has the higher percent value if the discount rate is 5 percent? If the discount rate is 22 percent? 11. Present Value and Multiple Cash Flows ? Chp 6: Seaborn Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value at 18 percent? At 24 percent? Year Cash Flow 1 21000 2 450 3 6952 4 2100 5 4600 12. Treasury Bonds ? Chp 7: Is it true that a U.S. Treasury security is risk-free? 13. Stock Valuation - Chp 8: Why does the value of a share of stock depend on dividends? 14. Stock Valuation - Chp 8: A substantial percentage of the companies listed on the NYSE and NASDAQ don't pay dividends, but investors are nonetheless willing to buy shares in them. How is this possible given your answer to the previous question? 15. Calculating IRR ? Chp 9: A firm evaluates all of its projects by applying the IRR rule. If the required return is 18 percent, should the firm accept the following project? Year Cash Flow 0 -$30,000 1 13,000 2 19,000 3 12,000 16. Calculating NPV ? Chp 9: For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return was 30 percent? Year Cash Flow 0 -$30,000 1 13,000 2 19,000 3 12,000 17. Bonus question: You are looking into an investment that will pay you $12,000 per year for the next ten years. If you require a 15 percent return, what is the most you would pay for this investment? 18. Bonus question: A company's bond has a 10 percent coupon rate and a $1000 face value. Interest is paid semiannually, and the bond has 20 years to maturity. If investors require a 12 percent yield, what is the bond's value? What is the effective annual yield on the bond?


Paper#1886 | Written in 18-Jul-2015

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