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FIN 5409 CORPORATE FINANCE Final Exam 2014

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Question;FIN 5409 -- CORPORATE FINANCE Final Exam -June 2014 1 List and explain (with examples) the three functions of a Financial Manager. Write your answer here 2 ABC COMPANY As of 12/30/2012 ABC Company Month ending Assets Liabilities & Equity Income Statement 12/30/2012 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

 

Paper#49165 | Written in 18-Jul-2015

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