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FIN 5409 -- CORPORATE FINANCE Final Exam -June 2014

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Question;FIN 5409 -- CORPORATE FINANCEFinal Exam -June 2014FIN 5409 -- CORPORATE FINANCE Final Exam -June 2014 Name Date: 1 List and;explain (with examples) the three functions of a Financial Manager. Write;your answer here 2 ABC;COMPANY As of 30-12-2012 ABC;Company Month ending Assets Liabilities & Equity Income;Statement 30-12-2012 Cash $1,000 Accounts;Payable Loans $1,000 Sales $50,000 Accounts;Receivable $2,000 Accounts Payable Inventory $2,000 Cost;of sales $25,000 Inventory $3,000 Gross Profit $25,000 Total;Current Assets $6,000 Total Current Liabilities $3,000 Salaries;Benefits $8,000 Operating;Expenses $10,000 Plant;Property $10,000 Long term debt $8,000 EBIDT $7,000 Equity $5,000 Depreciation $1,000 Total;Assets $16,000 Total Liabilities & equity $16,000 Interest $1,500 Taxes $2,000 Shares;outstanding 2,500 NIAT $2,500 Beta 1.25 Return;on Equity Calculate: Return on Assets Debt;to equity Ratio 3 Assume;you are a bank and ABC Company in Question 2 is asking you for a working;capital line of credit to purchase inventory. List;two financial ratios you would use to make your decision. Calculate the ratios;Using the financial data from question 2. Explain why you selected each ratio. Write;your answer here 4 Calculate;the missing amounts: 2 Present;Value Interest Rate Periods Payments Future Value $1,000.00;8% 10 Years $500 per;quarter $1,870.00;12% 5 Years Month $10,000.00 $2,675.00;24% Months $75;Month $0.00 $3,450.00;8 Years $250 Annually $4,000.00 4% 30 Years $758 Monthly $0.00 5 You are;considering purchasing the bond described below: Face;Value $1,000 YTM 8 Coupon;Rate 10% Coupon;Payments Semi-annually You are;looking for an annual return of 14%. How;much would you pay for the Bond (Use Excel Financial Functions) $1,000;at Maturity value Coupon;payments value Total;Bond PV 6 You are;considering purchasing the stock described below: You expect to hold the stock;for 5 years and then sell it for a capital gain of 100%. You are also looking for a return of 16% on;an average beta stock. Today's;price $20.00 Dividends $2.00 Paid quarterly Beta 1.12. Using;the Excel financial formulas, calculate the amount you would pay for the Stock. 7 Your;company is trying to decide between the following equal risk investments. It's;required return is 18% Year Investment/Income Year Investment/Income 0 ($10,000) 0 ($20,000) 1 $2,000 1 $5,000;2 $5,000 2 $6,000;3 ($5,000) 3 $6,000;4 $20,000 4 $22,000;NPV NPV IRR IRR Which;one should it chose-- Why? 8 A;Company has a tax rate of 30% and the following;debt/equity structure: Amount Interest rate Debt $30,000 8% Preferred;Stock $10,000 10% Equity $30,000 18% Calculate;the firms WACC (Weighted Average Cost of Capital) (show your work) 9 Describe;the relationship between: (give an;example) a. Capital structure b. Leverage c. Risk;Write;your answer here: ="msonormal">

 

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