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1 FIN 370 Cash Flow Problem Sets (4-5,4-7,4-8,4-11,4-13) For more course tutorials visit Multiyear Future Value How much would be in your savings account in 11 years after depositing $150 today if the bank pays 8 percent per year? (LG4-3) 4-7 Compounding with Different Interest Rates A deposit of $350 earns the following interest rates: a. 8 percent in the first year. b. 6 percent in the second year. c. 5.5 percent in the third year. What would be the third year future value? 4-8 Compounding with Different Interest Rates A deposit of $750 earns interest rates of 9 percent in the first year and 12 percent in the second year. What would be the second year future value? (LG4-3)

2 4-11 Present Value What is the present value of a $1,500 payment made in nine years when the discount rate is 8 percent? (LG4-4) 4-13 Present Value with Different Discount Rates Compute the present value of $1,000 paid in three years using the following discount rates: 6 percent in the first year, 7 percent in the second year, and 8 percent in the third year. (LG4-4) ============================================ FIN 370 Final Exam Guide (New) For more course tutorials visit Which financial statement reports the amounts of cash that the firm generated and distributed during a particular time period? statement of retained earnings Income statement Statement of cash flows Balance sheet

3 Which of these provide a forum in which demanders of funds raise funds by issuing new financial instruments, such as stocks and bonds? Money markets Investment banks Primary markets Secondary markets The top part of Mars, Inc. s 2013 balance sheet is listed as follows (in millions of dollars). What are Mars, Inc. s current ratio, quick ratio, and cash ratio for 2013? 4.2, 1.0, , , , 6.0, 1.0

4 0.1111, , 0.2 Which of these ratios show the combined effects of liquidity, asset management, and debt management on the overall operation results of the firm? Financial Profitability Coverage Liquidity As new capital budgeting projects arise, we must estimate. the cost of the stock being sold for the specific project when such projects will require cash flows the cost of the loan for the specific project

5 the float costs for financing the project What s the current yield of a 6 percent coupon corporate bond quoted at a price of ? 6.1 percent 10.2 percent 6.0 percent 5.9 percent We call the process of earning interest on both the original deposit and on the earlier interest payments: computing. multiplying. compounding. discounting.

6 Which financial statement reports a firm s assets, liabilities, and equity at a particular point in time? Balance sheet Income statement Statement of retained earnings Statement of cash flows You are trying to pick the least-expensive machine for your company. You have two choices: machine A, which will cost $50,000 to purchase and which will have OCF of -$3,500 annually throughout the machine s expected life of three years; and machine B, which will cost $75,000 to purchase and which will have OCF of -$4,900 annually throughout that machine s four-year life. Both machines will be worthless at the end of their life. If you intend to replace whichever type of machine you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 14 percent, which one should you choose? Machine A

7 Machine B Neither machine A nor B Both machines A and B When firms use multiple sources of capital, they need to calculate the appropriate discount rate for valuing their firm s cash flows as. a simple average of the capital components costs a weighted average of the capital components costs a sum of the capital components costs they apply to each asset as they are purchased with their respective forms of debt or equity Which of these is used as a measure of the total amount of available cash flow from a project? Operating cash flow

8 Investment in operating capital Free cash flow Sunk cash flow Which of these does NOT perform vital functions to securities markets of all sorts by channeling funds from those with surplus funds to those with shortages of funds? Secondary markets Mutual funds Insurance companies Commercial banks Will s Wheels, Inc. reported a debt-to-equity ratio of 0.65 times at the end of If the firm s total debt at year-end was $5 million, how much equity does Will s Wheels have? $7.69 million

9 $5 million $0.65 million $3.25 million Which of these is the term for portfolios with the highest return possible for each risk level? Total portfolios Modern portfolios Optimal portfolios Efficient portfolios What are the tools available for the manager in financial planning? Delaying disbursement of cash, reducing collection period, cash management, and Increasing inventory turnover

10 Reducing collection period and delaying disbursement of cash Increasing inventory turnover and reducing collection period Delaying disbursement of cash and cash management Suppose that Model Nails, Inc. s capital structure features 60 percent equity, 40 percent debt, and that its before-tax cost of debt is 6 percent, while its cost of equity is 10 percent. If the appropriate weighted average tax rate is 28 percent, what will be Model Nails WACC? 7.73 percent 8.40 percent 8.00 percent percent We commonly measure the risk-return relationship using which of the following? Coefficient of variation

11 Standard deviation Expected returns Correlation coefficient Financial plans include which of the following? Schedule of Sales, Expenses, and Capital Expenditure All of the above Short Term and Long Term Plan Pro forma Income Statement, Balance Sheet Which of the following terms means that during periods when interest rates change substantially, bondholders experience distinct gains and losses in their bond investments? Interest rate risk

12 Credit quality risk Reinvestment rate risk Liquidity rate risk What are reasons for the firm to go abroad? Access to raw materials Diversification Lower production cost All of the above Which of these statements is true regarding divisional WACC? Using a simple firmwide WACC to evaluate new projects would give an unfair advantage to projects that present more risk than the firm s average beta.

13 Using a divisional WACC versus a WACC for the firm s current operations will result in quite a few incorrect decisions. Using a firmwide WACC to evaluate new projects would have no impact on projects that present less risk than the firm s average beta. Using a simple firmwide WACC to evaluate new projects would give an unfair advantage to projects that present less risk than the firm s average beta. The Rule of 72 is a simple mathematical approximation for. the number of years required to double an investment the payments required to double an investment the present value required to double an investment the number of years required to double an investment the future value required to double an investment We can estimate a stock s value by.

14 using the book value of the total stockholder equity section using the book value of the total assets divided by the number of shares outstanding discounting the future dividends and future stock price appreciation compounding the past dividends and past stock price appreciation Which of these is the process of estimating expected future cash flows of a project using only the relevant parts of the balance sheet and income statements? Substitutionary analysis Incremental cash flows Cash flow analysis Pro forma analysis

15 Five years ago, Jane invested $5,000 and locked in an 8 percent annual interest rate for 25 years (ending 20 years from now). James can make a 20-year investment today and lock in a 10 percent interest rate. How much money should he invest now in order to have the same amount of money in 20 years as Jane? $7, $5, $3, $3, The overall goal of the financial manager is to. maximize net income maximize earnings per share maximize shareholder wealth minimize total costs

16 Which of the following can create ethical dilemmas between corporate managers and stockholders? Auditors Board of directors Agency relationship Venture Capitalist A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent. $79.14 $65.40 $65.57 $66.67

17 Which financial statement shows the total revenues that a firm earns and the total expenses the firm incurs to generate those revenues over a specific period of time generally one year? Statement of cash flows Statement of retained earnings Balance sheet Income statement Which of the following is a true statement? If interest rates fall, all bonds will enjoy rising values. If interest rates fall, corporate bonds will have decreasing values. If interest rates fall, no bonds will enjoy rising values. If interest rates fall, U.S. Treasury bonds will have decreasing values.

18 ============================================ FIN 370 Week 1 Calculating Ratios Worksheet (2 Set) For more course tutorials visit This Tutorial contains 2 Set of Answers FIN 370 Week 1 Calculating Ratios Worksheet 1. What is agency theory? How can setting the appropriate goals for the firm minimize the agency problem? 2. Differentiate between profit maximization and wealth maximization. 3. Why must organizations focus on both shareholder wealth and the stakeholders? 4. Differentiate between the three financial statements with which managers should be familiar. How are they linked? ============================================

19 FIN 370 Week 1 Calculating RatiosLake of Egypt Marina (3-29, 3-30) For more course tutorials visit FIN 370 Week 1 Calculating Ratios Review the financial statements for Lake of Egypt Marina, Inc. Complete the following problem sets from Chapter 3 in Microsoft Excel : 3-29 Spreading the Financial Statements 3-30 Calculating Ratios Format your assignment consistent with APA guidelines. Click the Assignment Files tab to submit your assignment ============================================ FIN 370 Week 1 Question and Problem Sets (Ch 1: Q 3,11 Ch 2: Q4,9, CH 3: Q4,7, Ch 4: Q 1,6) For more course tutorials visit

20 Purpose of Assignment Complete the following Questions and Problems (Concepts and Critical Thinking Questions for Ch. 1 Only) from each chapter as indicated. Show all work and analysis. Prepare in Microsoft Excel or Word. Ch. 1: Questions 3 & 11 (Concepts Review and Critical Thinking Questions section) Ch. 2: Questions 4 & 9 (Questions and Problems section): Microsoft Excel template provided for Problem 4. Ch. 3: Questions 4 & 7 (Question and Problems section) Ch. 4: Questions 1 & 6 (Questions and Problems section): Microsoft Excel template provided for Problem 6. Format your assignment consistent with APA guidelines if submitting in Microsoft Word. Click the Assignment Files tab to submit your assignment. Ch. 1: Questions 3 & 11 (Concepts Review and Critical Thinking Questions section)

21 3. Corporations [LO3] What is the primary disadvantage of the corporate form of organization? Name at least two advantages of corporate organization. 11. Goal of the Firm [LO2] Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits. Ch. 2: Questions 4 & 9 (Questions and Problems section): Microsoft Excel template provided for Problem 4. Building an Income Statement [LO1] Billy s Exterminators, Inc., has sales of $817,000, costs of $343,000, depreciation expense of $51,000, interest expense of $38,000, and a tax rate of 35 percent. What is the net income for this firm? 3. Dividends and Retained Earnings [LO1] Suppose the firm in Problem 2 paid out $95,000 in cash dividends. What is the addition to retained earnings? 4. Per-Share Earnings and Dividends [LO1] Suppose the firm in Problem 3 had 90,000 shares of common stock outstanding. What is the earnings per share, or EPS, figure? What is the dividends per share figure? 9. Calculating Additions to NWC [LO4] The 2014 balance sheet of Steelo, Inc., showed current assets of $4,630 and

22 current liabilities of $2,190. The 2015 balance sheet showed current assets of $5,180 and current liabilities of $2,830. What was the company s 2015 change in net working capital, or NWC? Ch. 3: Questions 4 & 7 (Question and Problems section) 4. Calculating Inventory Turnover [LO2] The Green Corporation has ending inventory of $417,381, and cost of goods sold for the year just ended was $4,682,715. What is the inventory turnover? The days sales in inventory? How long on average did a unit of inventory sit on the shelf before it was sold? 7. DuPont Identity [LO4] If Roten Rooters, Inc., has an equity multiplier of 1.15, total asset turnover of 2.10, and a profit margin of 6.1 percent, what is its ROE? Ch. 4: Questions 1 & 6 (Questions and Problems section): Microsoft Excel template provided for Problem Pro Forma Statements [LO1] Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes):

23 6. Calculating Internal Growth [LO3] The most recent financial statements for Schenkel Co. are shown here: Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30 percent dividend payout ratio. What is the internal growth rate? ============================================ FIN 370 Week 2 Cash Flow Problem Sets (5-1,5-3,5-5,5-7,5-12,5-15,5-39) For more course tutorials visit FIN 370 Week 2 Cash Flow Problem Sets Complete the following problem sets from Chapter 5 in Microsoft Excel :

24 (Calculate monthly payment only) 5-1FutureValue Compute the future value in year 9 of a $2,000 deposit in year 1 and another $1,500 deposit at the end of year 3 using a 10 percent interest rate. 5-3 Future Value of an Annuity What is the future value of a $900 annuity payment over five years if interest rates are 8 percent? 5-5 Present Value Compute the present value of a $2,000 deposit in year 1 and another $1,500 deposit at the end of year 3 if interest rates are 10 percent. 5-7 Present Value of an Annuity What s the present value of a $900 annuity payment over five years if interest rates are 8 percent?

25 5-12 Present Value of an Annuity Due If the present value of an ordinary, 6-year annuity is $8,500 and interest rates are 9.5 percent, what s the present value of the same annuity due? 5-15Effective Annual Rate A loan is offered with monthly payments and a 10 percent APR. What s the loan s effective annual rate (EAR)? 5-39 Loan Payments You wish to buy a $25,000 car. The dealer offers you a 4-year loan with a 9 percent APR. What are the monthly payments? How would the payment differ if you paid interest only? What would the consequences of such a decision be? ============================================ FIN 370 Week 2 Financial Markets and Institutions Report (2 Papers) For more course tutorials visit This Tutorial contains 2 Papers FIN 370 Week 2 Financial Markets and Institutions Report

26 Create a 1,050-word report, and include the following: Describe the role of the financial institutions and financial markets in our economy Differentiate between primary and secondary markets. Differentiate between money and capital markets. Format your assignment consistent with APA guidelines. ============================================ FIN 370 Week 2 Question and Problem Sets (Ch 5: Q3,Q4 Ch 6: Q2, Q20, Ch 7 : Q3,Q11 Ch 8: Q1,Q6) For more course tutorials visit Prepare in Microsoft Excel or Word. Ch. 5: Questions 3 & 4 (Question and Problems section): Microsoft Excel templates provided for Problems 3 and 4 Ch. 6: Questions 2 & 20 (Questions and Problems section)

27 Ch. 7: Questions 3 &11 (Questions and Problems section) Ch. 8: Questions 1 & 6 (Questions and Problems section): Microsoft Excel template provided for Problem 6 Format your assignment consistent with APA guidelines if submitting in Microsoft Word. Click the Assignment Files tab to submit your assignment. Ch. 5: Questions 3 & 4 (Question and Problems section): 3. Calculating Present Values [LO2] For each of the following, compute the present value: 4. Calculating Interest Rates [LO3] Solve for the unknown interest rate in each of the following:

28 Ch. 6: Questions 2 & 20 (Questions and Problems section) 2. Present Value and Multiple Cash Flows [LO1] Investment X offers to pay you $4,700 per year for eight years, whereas Investment Y offers to pay you $6,700 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is 15 percent? 20. Calculating Loan Payments [LO2, 4] You want to buy a new sports coupe for $79,500, and the finance office at the dealership has quoted you an APR of 5.8 percent for a 60-month loan to buy the car. What will your monthly payments be? What is the effective annual rate on this loan? Ch. 7: Questions 3 &11 (Questions and Problems section) 3. Valuing Bonds [LO2] Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose

29 a German company issues a bond with a par value of 1,000, 23 years to maturity, and a coupon rate of 5.8 percent paid annually. If the yield to maturity is 4.7 percent, what is the current price of the bond? Excel Sheet 11. Valuing Bonds [LO2] Union Local School District has a bond outstanding with a coupon rate of 3.7 percent paid semiannually and 16 years to maturity. The yield to maturity on this bond is 3.9 percent, and the bond has a par value of $5,000. What is the price of the bond? Ch. 8: Questions 1 & 6 (Questions and Problems section): Microsoft Excel template provided for Problem 6 1. Stock Values [LO1] The Jackson Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent

30 on The Jackson Timberlake Wardrobe Co. stock, what is the current price? What will the price be in three years? In 15 years? 6. Stock Valuation [LO1] Suppose you know that a company s stock currently sells for $63 per share and the required return on the stock is 10.5 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it s the company s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?s. ============================================ FIN 370 Week 3 Individual AssingmentRisk and Return Analysis Report (2 Papers) For more course tutorials visit This tutorial contains 2 Papers FIN 370 Week 3 Risk and Return Analysis

31 Create a 1,050-word report, and include the following: Explain the relationship between risk and return Identify an example of risk and return. Explain which is more risky bonds or common stocks. Explain how understanding risk and return will help you in future business ventures. Format your assignment consistent with APA guidelines. Click the Assignment Files tab to submit your assignment. ============================================ FIN 370 Week 3 Question and Problem Sets (Ch 9: Q7 & Q8, Ch 10: Q3& Q13, Ch 11: Q 1 & Q7) For more course tutorials visit Prepare in Microsoft Excel or Word. Ch. 9: Questions 7 & 8 (Questions and Problems section) Ch. 10: Questions 3 & 13 (Questions and Problems section)

32 Ch. 11: Questions 1 & 7 (Questions and Problems section) Format your assignment consistent with APA guidelines if submitting in Microsoft Word. Click the Assignment Files tab to submit your assignment. Ch. 9: Questions 7 & 8 (Questions and Problems section) 7. Calculating IRR [LO5] A firm evaluates all of its projects by applying the IRR rule. If the required return is 14 percent, should the firm accept the following project? 8. Calculating NPV [LO1] For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return is 24 percent? Ch. 10: Questions 3 & 13 (Questions and Problems section) 3. Calculating Projected Net Income [LO1] A proposed new investment has projected sales of $635,000. Variable costs are 44 percent of sales, and fixed costs are $193,000; depreciation is $54,000. Prepare a pro forma income statement assuming a tax rate of 35 percent. What is the projected net income?

33 13. Project Evaluation [LO1] Dog Up! Franks is looking at a new sausage system with an installed cost of $540,000. This cost will be depreciated straight-line to zero over the project s five-year life, at the end of which the sausage system can be scrapped for $80,000. The sausage system will save the firm $170,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $29,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of this project? Ch. 11: Questions 1 & 7 (Questions and Problems section) 1. Calculating Costs and Break-Even [LO3] Night Shades, Inc. (NSI), manufactures biotech sunglasses. The variable materials cost is $9.64 per unit, and the variable labor cost is $8.63 per unit. a. What is the variable cost per unit? b. Suppose NSI incurs fixed costs of $915,000 during a year in which total production is 215,000 units. What are the total costs for the year? c. If the selling price is $39.99 per unit, does NSI break even on a cash basis? If depreciation is $465,000 per year, what is the accounting break-even point?

34 7. Calculating Break-Even [LO3] In each of the following cases, calculate the accounting break-even and the cash breakeven points. Ignore any tax effects in calculating the cash breakeven. ============================================ FIN 370 Week 3 Risk and Return Problem Sets (7-21,7-27,8-19,8-21,9-33) For more course tutorials visit FIN 370 Week 3 Risk and Return Problem Sets Complete the following problem sets from Chapter 7 in Microsoft Excel : Complete the following problem sets from Chapter 8 in Microsoft Excel :

35 Complete the following problem sets from Chapter 9 in Microsoft Excel : 9-33 Click the Assignment Files tab to submit your assignment. Complete the following problem sets from Chapter 7 in Microsoft Excel : 7-21 Compute Bond Price Compute the price of a 3.8 percent coupon bond with 15 years left to maturity and a market interest rate of 6.8 percent. (Assume interest payments are semiannual.) Is this a discount or premium bond? 7-27 Yield to Maturity A 5.65 percent coupon bond with 18 years left to maturity is offered for sale at $1, What yield to maturity is the bond offering? (Assume interest payments are semiannual.) Complete the following problem sets from Chapter 8 in Microsoft Excel :

36 8-19 Value a Constant Growth Stock Financial analysts forecast Safeco Corp. s (SAF) growth rate for the future to be 8 percent. Safeco s recent dividend was $0.88. What is the value of Safeco stock when the required return is 12 percent? 8-21 Expected Return Ecolap Inc. (ECL) recently paid a $0.46 dividend. The dividend is expected to grow at a 14.5 percent rate. At a current stock price of $44.12, what is the return shareholders are expecting? Complete the following problem sets from Chapter 9 in Microsoft Excel : 9-33 Risk, Return, and Their Relationship Consider the following annual returns of Estee Lauder and Lowe s Companies (Table Attached) ============================================ FIN 370 Week 3 Team Assignment Precision Machines Part 1 (annotated bibliography and excel calculation) For more course tutorials visit This Tutorial contains both annonated bibliography and excel file

37 FIN 370 Week 3 Team Assignment Precision Machines Part 1 Precision Machines is preparing a financial plan for the next six months to determine the financial needs of the company. The historical analysis of the company s sales shows that the company s total sales are 30% cash sales and 70% credit sales. Further analysis of credit sales shows that the company receives 50% of the credit sales one month after the sale and the remaining 50% in the second month after the sale. This means the cash collections from sales are 30% in the first month of the sale, 35% in the second month, and 35% in the third month. The materials purchased by the company amounts to 50% of the sales for the month. The company pays for the purchases one month after the initial purchase. The company likes to maintain a cash balance of $5,000. The cost of borrowing is 10%. The company plans to pay off the loan whenever there is a surplus and borrow when there is a deficit. The attached spreadsheet shows revenues (sales), expenses, capital expenditures, and other expenses for Precision Machines next six months. Using the information given on the spreadsheet, prepare a cash budget for January through June and determine the cash surplus, deficit, and the financing needs of the company.

38 Note: There are two parts to this learning team assignment; Part 2 will be completed in Week 5. Review the Learning Team Assignment due in Week 5. Create an outline for the essay. Develop a 700-word annotated bibliography using at least 3 resources. Format your paper consistent with APA guidelines. Click the Assignment Files tab to submit your assignment. ============================================ FIN 370 Week 4 Cash Flow AnalysisFrank Smith Plumbing (calculation and 2 Papers) For more course tutorials visit This tutorial includes both calculation and 2 Papers FIN 370 Week 4 Cash Flow Analysis

39 Analyze the case study, Frank Smith Plumbing. Analyze the Frank Smith Plumbing s Financial Statement spreadsheet. Compare the cost of the truck to the cash flow records Compile your calculations in a Microsoft Excel document Develop a 1,050-word analysis and include the following: Explain why limited leverage is good for business.show the profitability of the project so that Stephanie can convince her father to purchase the truck by borrowing money. Explain how Stephanie should convince her mother that it is inappropriate to call the bank manager and his wife for assistance in getting the loan approval? Analyze whether the investment in the truck is profitable. Explain whether it is more beneficial for Frank to close his business.

40 Explain what you would do in this same situation. Format your assignment consistent with APA guidelines. Click the Assignment Files tab to submit your assignments. ============================================ FIN 370 Week 5 Team Assignment Precision Machines Part 2 (Cash Budget and Strategic Analysis) For more course tutorials visit FIN 370 Week 5 Precision Machines Part 2 Note: There are two parts to this learning team assignment; Part 1 was completed in Week 3. Review the Precision Machines document and spreadsheet. Prepare a cash budget for Precision Machines in Microsoft Excel.

41 Create a 1,225-word strategic analysis and include the following: Recommend a cash management strategy for the company that will minimize the financing cost and increase the cash flows for the company. Explain two economic and market forces that will impact the financial plan of this company. Format your documents consistent with APA guidelines. Click the Assignment Files tab to submit your assignment. Review the "Precision Machines" document and spreadsheet. Prepare a cash budget for Precision Machines in Microsoft Excel. Precision Machines ============================================

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