| FIN 3402 CORPORATE FINANCE |
| DISTANCE LEARNING SA 2013 |
| You have three hours from the time you open this file. Exam must be posted by Monday June 17th |
| DO NOT COPY FROM OR PARAPHASE YOUR TEXTBOOK. ANSWER “IN YOUR OWN WORDS” AND GIVE AN EXAMPLE(S) WHENEVER APPROPIATE |
| Timed test: 3 hours | | | | Name |
| | I, (type name here), certify that my answers here are my own work, and that I completed this in accordance with the FNU Honor Code. |
| | | | | | | | | | GRADE |
| 1 | List and describe (with examples) the three basic types of financial decisions. | | | | | | | | POINTS |
| | | | | | | | | | 5 |
| | | | | | | XYZ Company Statement of |
| 2 | XYX Company Balance Sheet as of December 31, 2012 | | | | | Income for Fiscal Year 2012 |
| | Assets | | Liabilities & Equity | | | Income Statement |
| | Cash | $5,000 | Accts Payable | $28,000 | | Sales | $285,000 |
| | Accounts Receivable | $12,000 | | | | Cost of sales | $90,000 |
| | Inventory | $24,000 | | | | Gross Profit | $195,000 |
| | Total Current Assets | $41,000 | Ttl Current Liab. | $28,000 | | Salaries & Benefits | $80,000 |
| | | | | | | Operating Expenses | $60,000 |
| | Plant & Property | $120,000 | Long term debt | $80,000 | | EBIDT | $55,000 |
| | | | Equity | $81,000 | | Depreciation | $8,000 |
| | Total Assets | $161,000 | Ttl Liab. & equity | $161,000 | | Interest | $6,400 |
| | | | | | | Taxes | $12,180 |
| | Shares outstanding | 50,000 | | | | NIAT | $26,580 |
| | Beta | 1.18 |
| | | | |
| | Calculate: | Working Capital | | | | | | | 5 |
| | | Debt to equity Ratio | | | | | | | 5 |
| | | | | | | |
| 3 | Referring to the Balance Sheet and Income Statement in Question 2. |
| | Assume you are a bank and and the company is asking for a loan to purchase inventory. |
| | List two financial ratios you would use to make your decision. Calculate the ratios and explain why you selected them. | | | | | | | | 5 |
| | | | | | | | | | 5 |
| 4 | Use Excel Financial Functions to calculate the missing amounts (yellow cells) |
| | Present Value | Years | Interest Rate | Payment | Future Value | Payments |
| | | 10 | 6.0% | $500 | $20,000 | per year |
| | $5,000 | | 8.0% | $0 | $1,000 | na |
| | $47,000 | 20 | | $1,000 | $100,000 | per quarter |
| | $46,800 | 12 | 6.0% | | $80,000 | semi annually |
| | $24,000 | 10 | 9.0% | $100 | | Semi annually |
| 5 | You are considering purchasing the bond described below: |
| | Face Value | $1,000 |
| | YTM | 12 |
| | Coupon Rate | 10% |
| | Coupon Payments | | Semi-annually |
| | You are looking for an annual reutrn of 14%. |
| | Using the Excel financial functions, calculate the amount you would pay for the bond. |
| | | | | | | | | | 5 |
| 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% |
| | Risk Free return is 6% and your market risk premium is 10% |
| | Today's price | $32.00 |
| | Dividends | $2.50 | Paid quarterly |
| | Beta | 1.18 |
| | First calculate your required return. Then use the Excel financial functions to calculate how much you would pay for the Stock. |
| | Required Return | | | | | | | | 5 |
| | PV | | | | | | | | 5 |
| 7 | Your company is trying to decide between the following investments. It's required return is 18% |
| | | Year | Investment/Income | | Year | Investment/Income |
| | | 0 | ($125,000.00) | | 0 | ($300,000) |
| | | 1 | $58,000.00 | | 1 | $150,000 |
| | | 2 | $75,000.00 | | 2 | $160,000 |
| | | 3 | $67,000.00 | | 3 | $120,000 |
| | | 4 | $50,000.00 | | 4 | $95,000 |
| | | NPV | | | | | | | 5 |
| | | IRR | | | | | | | 5 |
| | Which invetment should the company take? |
| 8 | A Company has the following debt/equity structure: |
| | | Debt | $245,000 |
| | | Equity | $326,000 |
| | Cost of Debt | 8% |
| | Cost of Equity | 18% |
| | Tax Rate | 33% |
| | Calculate the firms WACC (Weighted Average Cost of Capital) |
| | | Capital Structure | Weight | Cost (%) before Tax | Cost (%) after Tax | Weighted Cost | | | | | | |
| | Debt |
| | Equity |
| | Total Debt+ Equity |
| | WACC | | | | | | | | 10 |
| 9 | Discuss the advantages and disadvantages of corporate debt. |
| | | | | | | | | | 5 | | | |
| 10 | here is some information about ABC company |
| | | | | 2012 | 2011 | Average |
| | | Inventory | | $42,000 | $44,000 | $43,000 |
| | | Accounts Receivable | | $35,000 | $34,000 | $34,500 |
| | | Accounts Payable | | $26,000 | $30,000 | $28,000 |
| | | Net Sales | | $500,000 |
| | | Cost of Goods Sold | | $350,000 |
| | Calculate the company's operating and cash cyles (show your work) |
| | Inventory turnover | | | Times per year | | | | | 1 |
| | A/R turnover | | | Times per year | | | | | 1 |
| | A/P turnover | | | Times per year | | | | | 1 |
| | Inventory period | | | Days | | | | | 1 |
| | A/R period | | | Days | | | | | 1 |
| | A/P period | | | Days | | | | | 1 |
| | | | | | | | | | |
| | OPERATING CYCLE | | | Days | | | | | 10 |
| | CASH CYCLE | | | Days | | | | | 10 |
neel
question_5.xlsx
