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FIN615 Final exam




Question;1) The following procedure is recommended when creating financial statements in Excel, in order to minimize error and make the statements easier to read when provided to others:a) Use custom number formatsb) Make excel do as little work as possible by avoiding the use of formulasc) Use as many fonts and colors as possible in order to separate line items and subheadingsd) Hide data you do not want others to see before distributing a worksheet2) You are thinking of buying a miniature golf course to operate. It is expected to generate cash flows of $40,000 per year in years one through four and $50,000 per year in years five through eight. If the appropriate discount rate is 10%, what is the present value of these cash flows?a) $285,288b) $167,943c) $235,048d) $828,2303) The intrinsic value of an asset is:a) The price which a marginal investor is willing to pay for an assetb) The required rate of return demanded by an investorc) The price of an asset less its accumulated depreciationd) The present value of expected future cash flows provided by the asset4) Using the Net Present Value method of capital budgeting will always lead you to the economically correct decision because_____, however it can be misleading when comparing projects of ____.a) NPV represents the change in shareholder wealth that accompanies the acceptance of an investment, differing sizeb) NPV considers the time value of money, differing payback periodsc) NPV considers the time value of money, differing sized) NPV can be greater than, equal to, or less than zero, differing payback periods5) In calculating the risk associated with two potential projects (A & B), which of the following statistical calculations indicates that the projects are equally risky?i) The standard deviation of A is 100, and the coefficient of variation of A is 80.912ii) The standard deviation of B is 1,000, and the coefficient of variation of B is 809.12iii) The variance of A?s possible outcomes is 258.10, and the standard deviation of A is 100iv) The variance of B?s possible outcomes is 2,581, and the standard deviation of B is 1,000b) iii and ivc) ii and iiid) i and iie) i and ivf) None of the above6) The value for "a" in the regression equation Y = a + b(X) + e is shown in Excel asa) the slope b) the forecasted variablec) the interceptd) the independent predictor variablee) none of the above7) The best example of a useful function macro created by a financial analyst might be to:a) Insert a standard header on a worksheet for a weekly expense summary reportb) Calculate the IRR of various investment opportunities as they arise throughout the fiscal yearc) Format a monthly financial report prior to internal distributiond) Summarize a column of sales data by producte) B and C8) As a bank loan officer, you want to reference detailed columnar loan portfolio data with a list of past-due loans. Which of the following is the most effective tool for doings so?a) Pivot tableb) H Lookupc) Search functiond) Scatter plote) V Lookup_________________________________________________________Use the information below for the next problem, No 9.9. Calculate the free cash flow__________________________________________________________Use the following information for the next problem, No. 1010. What is the expected return for Security X?_________________________________________________________________________?Use the following information for the next three problems, Nos. 11-13PV ofYear Cash Flow Cash Flows1 $14,000 $12,726 2 $14,000 $11,564 3 $10,000 $7,510 4 $10,000 $6,830 5 $8,000 $4,968 11. What is the NPV of above project if the initial investment was $35,000?12. Calculate the IRR assuming a cost of capital of 10%. 13. Calculate the MIRR of the project assuming a cost of capital of 10%. ___________________________________________________________________________14. Suppose that you are approached with an offer to purchase an investment that will provide cash flows of $1,200 per year for 15 years. The cost of purchasing this investment is $9,800. You have an alternative investment opportunity, of equal risk, that will yield 8% per year. What is the NPV that makes you indifferent between the two options?___________________________________________________________________15. The Claustrophobic Solution, Inc., a residential window and door manufacturer, has the following historical record of earnings per share (EPS) from 2011 to 2007:2011 2010 2009 2008 2007EPS $1.10 $1.05 $1.00 $0.95 $0.90The company?s payout ratio has been 60% over the last five years and the last quoted price of the firm?s share of stock was $10. Flotation costs for new equity will be 7%. The company has 30,000,000 of common shares of stock outstanding and a debt-equity ratio of 0.5. If dividends are expected to grow at the same arithmetic average growth rate of the last five years, what is the dividend payment in 2012?_____________________________________________________________________________?16. The following are the company sales from 2000-2009Year Xylophone1 $2252 $5683 $9894 $1,6785 $3,1896 $6,1387 $10,6048 $16,5949 $21,795a. Fit an exponential trend curve to the data andb. Calculate the projected sales in 2010, 2011, 2012.________________________________________________________________________________________17. THE FINAL PROBLEM IS A CALCULATION PROBLEM with multiple partsFrozen Turkeys Scenario Cost of Land $ 200,000 Cost of Buildings & Equipment $ 350,000 MACRS Class 20 Life of Project (Years) 5 Terminal Value of Land $ 300,000 Terminal Value of Buildings & Equipment $ 175,000 First year sales (pounds) 250,000 Price per Pound $3.50 Unit Sales Growth Rate 7.0% Variable Costs as % of Sales 62% Fixed Costs 75,000 Tax Rate 35% WACC 10.0% a. Prepare a statement of annual cash flows for years 0 through 5. Cash flows in year 0 are your expenses for building and land. Sales growth is based on the annual growth rate in units. Assume no changes in fixed or variable costs. Depreciate the project cost for 5 years, with the cash flow in year 5 to include the terminal cash flow of ending the investment.b. Calculate the NPV, profitability index, IRR, MIRR, payback and discounted payback of the cash flows in part 1. c. Using scenario manager find best case, worst case, base case of NPV based on sales in pounds, price per pound, and variable cost percent. Make sure to include scenario summary.


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