Finance Assignment

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Assignment 1: Grading Summary
Part	Marks Available	Marks Obtained
I	33
II	35
III	32
Total	100

Part I: Financial Calculator Exercises (33 marks)

The table on the next page contains practice examples as well as the questions for Assignment 1: Part I. (For a detailed description of each column in this table, see “How do I Read the Table?” below.)

1. Work through each example in Column B on your financial calculator.

2. Check your answer with the one provided (Column C).

3. Look to the right side of the yellow column-divider and work through the corresponding assignment question (Column E).

· Note: Each numbered practice example corresponds to the same numbered assignment question (e.g., practice example 1: “Chain calculations – to the power of” with the calculation of (8 x 2)2 corresponds to the assignment Question 1 that asks you to calculate (1+0.25)8).

· If you can do the practice example, you should be able to do the corresponding assignment question.

4. Pay careful attention when reading questions that include multiple sets of brackets (e.g., assignment question 6). These can be confusing, so work through them carefully.

5. To record your solutions, put your answer in Column F, on the same row as the assignment question. See example for Question 1: (1+0.25)8).

6. Don’t be alarmed by the number of questions! You will likely be able to complete the work more quickly than you think.

7. There are 33 questions in Part I. Each question is worth 1% of the total marks for Assignment 1.

How Do I Read the Table?

Start from the far left-hand column and read across each row. We’ll refer to Example #10 in our descriptions below.

· Column A: number of the task (e.g., 10)

· Column B: title of the task (e.g., Calculating basic loan interest). Below this title is the description and data for the practice example. (In Example 10; N = 20 years, monthly payments (P/Y=12); Interest rate comp. monthly (C/Y=12); ...) As in Example 10, many of the practice examples and assignment questions take up several rows.

· Column C: check answer to the practice example. (In Example 10: 7.172951345.)

· Column D: numbering of the assignment questions (e.g., 18).

· Column E: description and data for the tasks in the assignment question. (In Question 10: Find annual interest rate; N = 30 years, quarterly payments; Interest rate compounded quarterly; …)

· Column F: write down your answer in this column. (See example provided for Question 1.)

Part I: Financial Calculator Exercises (33 marks)

A	B	C	D	E	F
	Examples	Check Answer	Q	Answer the questions in this column	Write down your answer in this column
PRELIMINARIES
SCIENTIFIC FUNCTIONS
1	Chain calculations - to the power of	256		1	(1+0.25)8	5.960464478
	(8 x 2)2


2	Calculating natural logs	2.99573227		2	ln(100)
	Ln(20)


3	To the power of	50.1187234		3	202.5
	10 1.7


4	e to the power of	20.0855369		4	e(-0.08)
	e 3


5	Reciprocals	0.02503779		5	(1/1.08) + (1/1.082)
	(1/63) + (1/72)


6	Combinations, to the power of	-2024.98438		6	-1000000+[200000(1-0.34)(1-(1/(1.08)10))/0.08]
	8-2 - 34 x 52


7	Combinations, to the power of	6.44741959		7	{[(1+(0.08/2))2](1/4)} - 1
	(123)1/4


8	Combinations, roots	0.0551362		8	square root[(0.6x(0.08-0.1)2)+(0.4x(0.12-0.1)2)]
	square root[(0.3x(0.15-0.07)2)+(0.7x(0.11-0.07)2)]


FINANCIAL FUNCTIONS
9	Memory calculations	4613.83829		9	Sum of following 4 parts
	Sum of the following 3 parts:				1000(1.05)/1.08
	500 x (1 + 0.1)2				1000(1.05^2)/1.08^2
	700 x (1 + 0.1)2 x (1 + 0.12)3				1000(1.05^3)/1.08^3
	900 x (1 + 0.1)2 x (1 + 0.12)3 x (1 + 0.13)5				(1000(1.05^3)(1.03)/(0.08-0.03))/(1.08^3)


10	Calculating basic loan interest	7.17295135		10	Find annual interest rate
	N = 20 years, monthly payments (P/Y=12)				N = 30 years, quarterly payments
	Interest rate compounded monthly (C/Y=12)				Interest rate compounded quarterly
	PV = 56000				PV = 1,200,000
	PMT = -440				PMT = -90,000
	FV = 0				FV = 0
	Compute annual interest rate				Compute annual interest rate


11	Calculating basic loan payments	-1255.85583		11	Find payment
	N = 20 years, quarterly payments (P/Y=4)				N = 30 years, monthly payments
	Interest rate = 6.5% compounded quarterly (C/Y=4)				Interest rate = 8%, compounded monthly
	PV = 56000				PV = 1,200,000
	FV = 0				FV = 0
	Compute PMT				Compute PMT

12	Calculating future value	7922.19308	12	Find Future Value
	N = 3 years, monthly payments (P/Y=12)			N = 30 years, monthly payments
	Interest rate = 6.5%, compounded quarterly (C/Y=4)			Interest rate = 8%, compounded semi-annually
	PV = 0			PV = 0
	PMT = -200			PMT = -900
	Compute FV			Compute FV


13	Calculating present value	3768.89483	13	Find Present Value
	N = 20 year, annual payments (P/Y=1)			N = 30 year, monthly payments
	Interest rate = 5%, compounded annually (C/Y=1)			Interest rate = 8%, compounded monthly
	PMT = 0			PMT = 0
	FV = -10000			FV = -1,000,000
	Compute PV			Compute PV


14	Ordinary annuity	-16245.6979	14	Find payment
	N = 1.5 years, monthly payments (P/Y=12)			N = 30 years, semiannual payments
	Interest rate = 3.6%, compounded monthly (C/Y=12)			Interest rate = 8%, compounded semiannually
	PV = 0			PV = 0
	FV = 300000			FV = -1,000,000
	Compute PMT			Compute PMT


15	Annuity due	7.07980118	15	Find interest rate in Annuity Due
	N = 2 years, monthly payments, at beginning of month (P/Y=12)		N = 5 years, monthly payments, BGN
	Interest rate compounded monthly (P/Y=12)			Interest rate compounded monthly
	PV = 2995			PV = 20,000
	PMT = -145			PMT = -350
	FV = 299.5			FV = -5000
	Compute I/Y			Compute annual interest rate

16	Calculating PV (Annuity due)		16	Find present value in Annuity Due
	N = 34 months, monthly payments (P/Y=12)	6279.95199		N = 5 years, monthly payments
	Interest rate = 18%, compounded monthly (C/Y=12)			Interest rate = 8%, compounded monthly
	PMT = -200			PMT = -1000x(8%/12)
	FV = -1500			FV = -1000
	Compute PV			Compute PV


17	Calculating PV (ordinary annuity)	146558.921	17	Find present value in Ordinary annuity
	N = 25 years, monthly payments, at end of month (P/Y=12)		N = 30 years, monthly payments
	Interest rate = 5.5%, compounded monthly (C/Y=12)			Interest rate = 8%, compounded monthly
	PMT = -900			PMT = -850
	FV = 0			FV = 0
	Compute PV			Compute PV


	Examples 18-27 use the same data			Questions 18-27 use the same data
18	Calculating mortgage payments and	-616.559743	18	Mortgage - Find payment
	generating an amortization schedule			N = 20 years, monthly payments, starts at end of January
	N = 20 years, monthly payments, starts at end of August (P/Y=12)		Interest rate = 7%, compounded monthly
	Interest rate = 5.45%, compounded monthly (C/Y=12)			PV = 350,000
	PV = 90000			FV = 0
	FV = 0			Compute payment PMT
	Compute PMT


	Amortization schedule - first five months (August - December)		P1 = 1
	P1 = 1, P2 = 5			P2 = 12
19	Balance at end of December	88951.4703	19	Balance at end of December in first year
20	Total Principal Repayment first 5 months	-1048.5297	20	Total Principal Repayment at end of first year
21	Total Interest payments in first 5 months	-2034.26901	21	Total Interest payments at end of first year

	Amortization schedule - second year
	P1 = 6			P1 = 61
	P2 = 17			P2 = 72
22	Balance at end of December in 2nd year	86335.9156	22	Balance at end of December in 6th year
23	Total Principal Repayment in 2nd year	-2615.55474	23	Total Principal Repayment in 6th year
24	Total Interest payments in 2nd year	-4783.16217	24	Total Interest payments in 6th year


	Amortization schedule - third year
25	Balance at end of December in 3rd year	83574.1979	25	Balance at end of December in 11th year
26	Total Principal Repayment in 3rd year	-2761.71766	26	Total Principal Repayment in 11th year
27	Total Interest payments in 3rd year	-4636.99926	27	Total Interest payments in 11th year


	Examples 28-31 use the same data			Questions 28 - 31 use the same data
28	Calculating payments, interest, and loan	-3844.56742	28	Find Mortgage payment
	balance after a specified payment			N = 30 years, monthly payment, Annuity Due
	N = 30 years, monthly payment (P/Y=12)			Interest rate = 5.25%, compounded monthly
	Interest rate = 8.5%, compounded monthly (C/Y=12)			PV = 200000
	PV = 500000			FV = 0
	FV = 0			Compute PMT
	Compute PMT


	Amortization schedule - first to 48th payment		Amortization schedule after 10 years - Same data as Q28
	P1 = 1			P1 = 1
	P2 = 48			P2 = 120
29	Balance after 48th payment	482755.407	29	Balance after 10 years of payments
30	Total Principal Repayment after 48 payments	-17244.5926	30	Total Principal Repayment after 10 years of payments
31	Total Interest payments after 48 payments	-167294.644	31	Total interest payments after 10 years of payments

32	Calculating IRR	17.50055766	32	Compute IRR using following data:
	CF0 = -5000			CF0=-10000
	CF1 = 2000			CF1=2500
	CF2 = 2000			CF2=2500
	CF3 = 3000			CF3=3500
				CF4=3500
				CF5=5000



33	Calculating NPV	223.9664667	33	Compute NPV
	CF0 = -5000			Same cash flows as Q32
	CF1 = 2000			Interest rate = 8%
	CF2 = 2000
	CF3 = 3000
	Interest rate = 15%

Part II: Financial Statements Review (35 marks)

1. Build the Income Statement and Balance Sheet for CanDo Inc. based on the information given below, as of December 31, 2009.

Accounts payable	$141,000
Accounts receivable	$103,000
Cash and cash equivalents	$154,000
CoGS	$224,700
Common Stock	$1,286,000
Depreciation	$37,000
Dividend payout ratio	40%
Interest paid	$43,000
Inventory	$129,000
Long-term debt	$1,254,000
Net Fixed Assets	$2,530,000
Sales	$330,000
Short-term debt	$132,000
Tax rate	35%
Number of shares	1,000,000
Price per share	$0.50

2. Obtain the following numbers from the income statement and balance sheet:

(i) Total Current Assets

(ii) Total Current Liabilities

(iii) Retained Earnings

(iv) Total Owners’ Equity

(v) Total Assets

(vi) Earnings before depreciation, interest and taxes (EBDIT)

(vii) Earnings before interest and taxes (EBIT)

(viii) Dividends

(ix) Addition to Retained Earnings

Part III: Financial Ratios Review (32 marks)

The following table presents the data for CanDo Inc. in as of December 31 2008:

Accounts payable	$104,000
Accounts receivable	$146,000
Cash and cash equivalents	$108,000
CoGS	$224,700
Common Stock	$1,286,000
Depreciation	$37,000
Dividend payout ratio	40%
Interest paid	$43,000
Inventory	$123,000
Long-term debt	$1,254,000
Net Fixed Assets	$2,467,000
Sales	$330,000
Short-term debt	$106,867
Tax rate	35%

Calculate the following financial ratios for CanDo Inc. in the fiscal year of 2009:

a. Current ratio

b. Quick ratio

c. Cash ratio

d. Net working capital ratio

e. Interval measure

f. Total debt ratio

g. Debt-equity ratio

h. Equity multiplier

i. Long-term debt ratio

j. Times interest earned

k. Cash coverage ratio

l. Inventory turnover (using average inventory from 2008 and 2009)

m. Days’ sales in inventory

n. Receivables turnover (using average accounts receivable from 2008 and 2009)

o. Days’ sales in receivables

p. Payables turnover (using average accounts payable from 2008 and 2009)

q. Days’ sales in payables

r. NWC turnover

s. Fixed assets turnover

t. Total asset turnover

u. Profit margin

v. Return on assets (ROA)

w. Return on equity (ROE)

x. Price-earnings (P/E) ratio

y. Market-to-book ratio