Financial management homework

financial_management_unit_iii_assessment.docx

Financial Management Unit III Assessment

Question 1

· Define each part of a financial plan and discuss the importance of these components in managerial decision making.

Your response should be at least 250 words in length.

Question 2

· Construct a pro forma income statement for the first year and second year for the following assumptions:

Units of Sales in Year 1: 110,000

Price per Unit: $11

Variable cost per unit: 30%

Fixed Costs: $125,000

Income taxes: 15%

Interest Expense: $200,000

In year 2, Price per unit increases to $11.50, and unit of sales increases by 5%, all other assumptions remain the same.

Question 3

· Calculate the sustainable growth based on the following information:

· • Earnings after taxes = $35,000

· • Equity = $100,000

• d=22.4%

Question 4

· Calculate a table of interest rates based on the following information:

The pure interest rate is 1.6%

Inflation expectations for year 1 = 3%, year 2 =3.5%, years 3-5 =5%

The default risk is .1% for year one and increases by .2% over each year

Liquidity premium is 0 for year 1 and increases by .2% each year