4. E , = + (0.08)(20, 000) 5. D. Course 2 Solutions 51 May a
|
|
- Duane Booth
- 6 years ago
- Views:
Transcription
1 . D According to the semi-strong version of the efficient market theory, prices accurately reflect all publicly available information about a security. Thus, by this theory, actively managed portfolios should not be able to consistently outperform the rest of the market. All available information has already been incorporated into the current market price. 2. A The private market does not usually provide public goods since it is impossible to exclude non-paying customers. This often makes it impossible for a private firm to collect sufficient revenue to cover the cost.. E An increase in business inventories indicates that demand is not as high as businesses anticipated, resulting in inventory accumulation. The decrease in demand is a reflection of the downturn in economic activity. 4. E X = = 85. a , = + (0.08)(20, 000) S20 j S = j j = 4.8% 5. D X B= X a = 0.4 n i n C = v Xan 2n X J = v i 0.4 n a = v = 0.6 n i X J = 0.6 i Course 2 Solutions 5 May 200
2 6. E The licensing fee works the same as an increase in fixed costs; it shifts the market supply upward, increasing price and decreasing quantity demanded. At the firm level, however, it increases average costs without changing marginal costs; therefore, the representative firm increases output. This apparent paradox is resolved by the fact that in the long run some firms will go out of business. 7. D Seth = = = Janice = 5000 ( 0.06)( 0) = Lori = P(0) 5000 = where P= = a The sum is C Additional paid-in capital will be $,200,000 (($ per share $ par value) 00,000 shares = $200,000 increase). 9. D For a normal good, a price decline results in a positive income effect and a quantity increase larger than would be the case for a compensated price decline. 0. C Project X: Annual cash flows of (immediate annuity at 0% with PV = 4000). Payback 4000 in 6 th year. NPV discount rate = (0.07) = 0.06 Annuity at 6% of cash flows of 4000, ,, = Project Y: Payback in 5 th year IRR is interest rate such that: 4000 = 6600v 5 IRR = 0.5% NPV = /(.06) 5 = % Course 2 Solutions 52 May 200
3 . B decl bal 0 X d = ( ) ( d ) = ( 0.25) 7 X 8 /0 ( ) Depr = X X 0.25 = X 7/0 sum of yrs digits 0 i = first 7 yrs depr = 55 7 X 49 Depr = Y X X = Y X = Y 2. E Bruce's interest, year : 00 0 = X ( d) ( d) Robbie's interest, year 7: ( d ) 6 = X = d ( d ) 0 d ( d) 6 = d = 0.9% 2 X = 00 = ( ) 0. D If you assume: Annual repayments of interest and principal repayments are level. Year (t + ) principal repaid = v n t Year t interest repaid = i an + = v n t+ t Total = v n t+ + v n t = v n t (v ) = v n t ( ( v)) = + v n t (d) 4. B Real wages can grow only when there is labor productivity growth or labor s share of product increases. The latter has remained relatively constant for long periods so the former is the primary source of real wage growth. Course 2 Solutions 5 May 200
4 5. D Currently Tom is making a profit of 5 a day. If he outsources delivery, Tom could double output and earn a profit of 50 excluding the delivery cost. Hence Tom could pay the delivery service up to 45 without decreasing his profit. 6. B An increase in market interest rates will result in banks lending out excess reserves which lowers free reserves and increases the money supply. 7. B 0 v = 2; 0v = 2 ( + i) 2 + ( i) ( i) ( i) = 0 2 ± 204 ( + i) = = i = 7.72% X = = / = 9.84 ( + i).0772 ( ) 8. A At the competitive price, a natural monopoly cannot cover its costs because price is below average cost at this point. 9. A Economic income = Cash flow plus change in NPV NPV = 628.4/ /(.2) 2 = 960. NPV 2 = 628.4/.2 = 52.7 Economic income = ( ) = B The relationship between money, velocity, prices, and real output is such that if real output is rowing at 2.75% per year, and velocity is increasing at.00% per year, and the inflation target is 0 to.00%, then in order to maintain the identity M + v = P + Y, where each variable is a growth rate, then it must be that money growth is between.75% and 2.75%. Course 2 Solutions 54 May 200
5 2. E The increase in the price of an input, in this case labor, drives up the marginal cost of producing chips; therefore, it leads to a decrease in the supply of chips and an increase in the price of chips. Similarly, since chips are used to make computers, the supply of computers falls, the equilibrium price of computers increases, and the quantity exchanged decreases. 22. E Let i = after-tax WACC 000 a 5 i 20,000 = a 5 i = i = 0.25%. After-tax WACC = 0.25 = r E (0.4) + r D ( T x )(0.6) = 0.4 r E + ½ r E ( 0.25)(0.6) = 0.4r E r E r E = 6.4%. 2. D An increase in government spending shifts the IS curve to the right and increases both income and interest rates. 24. C Year Year 2 Year Year 4 Dollar deductions,0 44,450 4,80 7,40 Tax shields,666 5,558 5,84 2,594 After tax rate = 0.2(0.65) = Present value =,666/ ,558/ ,84/ ,594/ = 0, C II is not true A firm will not shut down unless Marginal Costs are less than Average VARIABLE costs. 26. C Z = 00 s 6 66% Accumulated Value = X = 00( ( Is) ) = % 0.06 = (2.2) = s % Y = 00( ( Is) ) = % (02.877) = Y/X = 2.0. Course 2 Solutions 55 May 200
6 27. B ( P0 760) P0(0.06).0P0 760 Chris s return = = 0.5P0 0.5P0 ( P0 760) P0(0.06) 2.0P0 792 Jose s return = = 0.5P0 0.5P0 Chris s return = 2 [Jose s return].0p [.0P0 792] = 0.5 P0 0.5 P0.0P 0 = 824 P 0 = 800.0P (800) 760 i = = = 64/400 = 6%. 0.5P 0.5(800) 28. C Set up table: 0 Q P TR MR MC Monopolist will produce the largest quantity such that MR MC. At a quantity of, the demand curve produces a price of 7. Solution is the same if you assume Q is continuous. 29. B With net exports set to zero, the government expenditure multiplier is equal to y C ( T ) = 0.7( 0.) = 0.7(0.7) = 0.49 = = B (p 20) + ( p) ( 5) =.25 p = 0.75 Put value if exercised now = X ( X ) Put value if not exercised now =.25 Equate the above two, we get X = 75. Course 2 Solutions 56 May 200
7 . A Time-weighted return = 0% means: 2 X = => 2X = X 0 (2 + X ) X = 60 Dollar-weighted return: I = X X 0 = Y = = = 25% 0 + (60) E As a result of the factor-price effect, the marginal cost curves of the firms do not shift down but up.. E Assets = Liabilities + Shareholder Equity = = Net income = EBIT Interest Taxes = = 290. (Note depreciation has already been subtracted to get EBIT) Payout Ratio = 0.l0 = dividends = dividends net income 290 Dividends = 29. Retained Earnings = Net Income dividends = Retained Earnings 26 Internal Growth Rate = = = 0.875%. Assets D Competitive equilibrium occurs at Q = 0, P = 2 Consumer surplus = ½ ( 4 2) 0 = 0 Producer surplus = ½ (2 0) 0 = 0 Total surplus = 20 At constrained P = producers will only supply Q = 5 so producer surplus = ½ ( 0) 5 = 2.5 The full price to consumer (including waiting time, etc.) will be bid up to P = to eliminate excess demand. So consumer surplus = ½ (4 ) 5 = 2.5 Total surplus = 5 Deadweight loss = 20 5 = 5. Course 2 Solutions 57 May 200
8 5. A I. Only if correlations are zero. II. Beta doesn t measure correlation, it is an estimated first derivative. III. Flatter 6. C The change in the real exchange rate is equal to the change in the nominal rate times the ratio of the inflation rates. [.5/.25.0/.02] = 2%. 7. A B = = Pa = P.08 P = X = Pa X = PR = v 4 = B Year Starting Book equity ROE 20% 20% 5% 5% 5% Earnings Dividends Plowback Free C-F Starting in year Dividend growth rate g = Plowback ROE = (0.5)(0.5) = t = 2 of future dividends = t = 2 of free cash-flow = 08/( ) = 440 t = 0 of free cash-flow = 440(.5) Course 2 Solutions 58 May 200
9 9. C Since the project is to expand the firm s existing operations, the risk of the new project is the same as that of the firm s existing operations. According to MM capital structure theory, to compute the asset beta, which measures the risk of the firm s existing assets in place, we add the equity beta and the debt beta, each weighted by its proportion in the firm s capital structure. β project = 0.60 β E β D = 0.60(.5) (0.75) =.2. Then, the CAPM may be applied to find the cost of capital: R = ( ) = = E st, calculate Present value(exercise Price) (or PV[EX]): Current Share Price Since ln = -0.08, at the risk-free rate, Present Value of the Exercise Price and the Current Share Price = 00, the PV(EX) = 08.. In addition: t = 0.25, and σ = 0.4. Note that [σ * Square Root (t)] = 0.2 Based on these inputs, it is easy to calculate d and d 2 : d = -0., and d 2 = -0.5 (Exactly) Black-Scholes: N(d)*(Current Price) N(d2)*(PV[EX]) = N( 0.)*00 N( 0.5)*08. = 00(0.82) 08.(0.085) = B Price of bond = 000 ( + i) ( i) 0 ( ) S ( i) = S /2 20 /2 = = i = 9.75% / A The correct answer follows from the definition of the price elasticity of demand. The percentage change in price from the initial equilibrium is /9, and the percentage change in quantity demanded is /; hence the price elasticity of demand is.00. One can also solve the problem directly using the differential calculus: elasticity = (dq/dp)(p/q). Course 2 Solutions 59 May 200
10 4. C I. Cost of capital remains at 4% false. II. β C = D/V β D + E/V β E = / (0.) + 2/ (.65) =.2. β C =.20 >.05 Project is less risky false. III. r c = r f + β C (r m r f ) 0.4 = X X = 0.05 = 5% true. 44. D EBIT,560 Int 6,000 = 00, ,560 Tax,946 = 5, ,64 = Amount available to shareholders 45. B ROE =, ,92. 5 t 2 dt k e = 2 t 5 k 0 e = k e = k = k = B Slope of indifference curve is dy/dx = Y/X Budget line is of form 5X + Y = I Y = (/)I (5/)X Slope of budget line = 5/ = Y/X Y = (5/)X (5/)X*X = 2 X 2 = 7.2 X = A Monetarists believe that in the long run, real output is not affected by monetary growth, but is affected by technology and the growth of inputs. Course 2 Solutions 60 May 200
11 48. A Current capitalization rate is: P 0 = DIV /(r g) = 0.50/(r 0.075) r = 0.50/28.50 = r = When the long-run growth rate changes, current price should adjust to reflect this change, and to keep the expected rate of return constant. P 0 = 0.50/( ) = B ann eff 2 i = (.05) = Tawny: δ = ln (.025) = Y At t = 5, = δ t = 5 = Y = Y Z = ( ) = A = a = a 50 j n j j = 7.00%, soa =.79 n 6% n = 0.2 Course 2 Solutions 6 May 200
12 Course 2 May 200 Answer Key D 26 C 2 A 27 B E 28 C 4 E 29 B 5 D 0 B 6 E A 7 D 2 E 8 C E 9 D 4 D 0 C 5 A B 6 C 2 E 7 A D 8 B 4 B 9 C 5 D 40 E 6 B 4 B 7 B 42 A 8 A 4 C 9 A 44 D 20 B 45 B 2 E 46 B 22 E 47 A 2 D 48 A 24 C 49 B 25 C 50 A Course 2 Solutions 62 May 200
1. Which of the following statements is an implication of the semi-strong form of the. Prices slowly adjust over time to incorporate past information.
COURSE 2 MAY 2001 1. Which of the following statements is an implication of the semi-strong form of the Efficient Market Hypothesis? (A) (B) (C) (D) (E) Market price reflects all information. Prices slowly
More informationCourse 2 Solutions November 2001 Exams
Course 2 Solutions November 2001 Exams 1. E 2 3 t t dt = 100 300 t 3 /300 3 0 100e = 109.41743 t /300 3 ( 109.41743 ) ( 109.41743 ) ( 109.41743 )( 1.8776106) 109.41743 3 6 + X e + X = X + X X = X 96.025894
More informationCourse 2 May 2003 Answer Key
Course 2 May 2003 Answer Key 1. B 26. C 2. A 27. C 3. D 28. B 4. D 29. E 5. C 30. D 6. A 31. A 7. B 32. E 8. E 33. A 9. D 34. D 10. C 35. C or E* 11. A 36. B 12. C 37. D 13. B 38. A 14. E 39. D 15. A 40.
More informationRisk, Return and Capital Budgeting
Risk, Return and Capital Budgeting For 9.220, Term 1, 2002/03 02_Lecture15.ppt Student Version Outline 1. Introduction 2. Project Beta and Firm Beta 3. Cost of Capital No tax case 4. What influences Beta?
More informationTable of Contents. Chapter 1 Introduction to Financial Management Chapter 2 Financial Statements, Cash Flows and Taxes...
Table of Contents Chapter 1 Introduction to Financial Management... 1 22 Importance of Financial Management 2 Finance in the Organizational Structure of the Firm 3 Nature and Functions of Financial Management:
More informationSAMPLE FINAL QUESTIONS. William L. Silber
SAMPLE FINAL QUESTIONS William L. Silber HOW TO PREPARE FOR THE FINAL: 1. Study in a group 2. Review the concept questions in the Before and After book 3. When you review the questions listed below, make
More informationCHAPTER 9: THE CAPITAL ASSET PRICING MODEL
CHAPTER 9: THE CAPITAL ASSET PRICING MODEL 1. E(r P ) = r f + β P [E(r M ) r f ] 18 = 6 + β P(14 6) β P = 12/8 = 1.5 2. If the security s correlation coefficient with the market portfolio doubles (with
More informationChapter 15. Required Returns and the Cost of Capital. Required Returns and the Cost of Capital. Key Sources of Value Creation
15-1 Chapter 15 Required Returns and the Cost of Capital Fundamentals of Financial Management, 12/e Created by: Gregory A. Kuhlemeyer, Ph.D. 15-2 After studying Chapter 15, you should be able to: Explain
More informationNovember 2001 Course 2 Interest Theory, Economics and Finance. Society of Actuaries/Casualty Actuarial Society
November 2001 Course 2 Interest Theory, Economics and Finance Society of Actuaries/Casualty Actuarial Society 1. Ernie makes deposits of 100 at time 0, and X at time 3. The fund grows at a force of 2 t
More informationCHAPTER 15 CAPITAL STRUCTURE: BASIC CONCEPTS
CHAPTER 15 B- 1 CHAPTER 15 CAPITAL STRUCTURE: BASIC CONCEPTS Answers to Concepts Review and Critical Thinking Questions 1. Assumptions of the Modigliani-Miller theory in a world without taxes: 1) Individuals
More informationSuggested Answer_Syl12_Dec2017_Paper 14 FINAL EXAMINATION
FINAL EXAMINATION GROUP III (SYLLABUS 2012) SUGGESTED ANSWERS TO QUESTIONS DECEMBER 2017 Paper- 14: ADVANCED FINANCIAL MANAGEMENT Time Allowed: 3 Hours Full Marks: 100 The figures on the right margin indicate
More informationFINALTERM EXAMINATION Spring 2009 MGT201- Financial Management (Session - 2) Question No: 1 ( Marks: 1 ) - Please choose one What is the long-run objective of financial management? Maximize earnings per
More informationECONS 301 Homework #1. Answer Key
ECONS 301 Homework #1 Answer Key Exercise #1 (Supply and demand). Suppose that the demand and supply for milk in the European Union (EU) is given by pp = 120 0.7QQ dd and pp = 3 + 0.2QQ ss where the quantity
More information4. D Spread to treasuries. Spread to treasuries is a measure of a corporate bond s default risk.
www.liontutors.com FIN 301 Final Exam Practice Exam Solutions 1. C Fixed rate par value bond. A bond is sold at par when the coupon rate is equal to the market rate. 2. C As beta decreases, CAPM will decrease
More information15.414: COURSE REVIEW. Main Ideas of the Course. Approach: Discounted Cashflows (i.e. PV, NPV): CF 1 CF 2 P V = (1 + r 1 ) (1 + r 2 ) 2
15.414: COURSE REVIEW JIRO E. KONDO Valuation: Main Ideas of the Course. Approach: Discounted Cashflows (i.e. PV, NPV): and CF 1 CF 2 P V = + +... (1 + r 1 ) (1 + r 2 ) 2 CF 1 CF 2 NP V = CF 0 + + +...
More information2 Maximizing pro ts when marginal costs are increasing
BEE14 { Basic Mathematics for Economists BEE15 { Introduction to Mathematical Economics Week 1, Lecture 1, Notes: Optimization II 3/12/21 Dieter Balkenborg Department of Economics University of Exeter
More informationEconomics 335 Problem Set 6 Spring 1998
Economics 335 Problem Set 6 Spring 1998 February 17, 1999 1. Consider a monopolist with the following cost and demand functions: q ö D(p) ö 120 p C(q) ö 900 ø 0.5q 2 a. What is the marginal cost function?
More informationFINANCE REVIEW. Page 1 of 5
Correlation: A perfect positive correlation means as X increases, Y increases at the same rate Y Corr =.0 X A perfect negative correlation means as X increases, Y decreases at the same rate Y Corr = -.0
More information1 Maximizing profits when marginal costs are increasing
BEE12 Basic Mathematical Economics Week 1, Lecture Tuesday 9.12.3 Profit maximization / Elasticity Dieter Balkenborg Department of Economics University of Exeter 1 Maximizing profits when marginal costs
More informationM I M E E N G I N E E R I N G E C O N O M Y SAMPLE CLASS TESTS. Department of Mining and Materials Engineering McGill University
M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y SAMPLE CLASS TESTS Department of Mining and Materials Engineering McGill University F O R E W O R D The following are recent Engineering Economy class
More information1. True or false? Briefly explain.
1. True or false? Briefly explain. (a) Your firm has the opportunity to invest $20 million in a project with positive net present value. Even though this investment adds to the value of the firm, under
More informationDisclaimer: This resource package is for studying purposes only EDUCATION
Disclaimer: This resource package is for studying purposes only EDUCATION Chapter 6: Valuing stocks Bond Cash Flows, Prices, and Yields - Maturity date: Final payment date - Term: Time remaining until
More informationMidterm Review. P resent value = P V =
JEM034 Corporate Finance Winter Semester 2017/2018 Instructor: Olga Bychkova Midterm Review F uture value of $100 = $100 (1 + r) t Suppose that you will receive a cash flow of C t dollars at the end of
More informationHomework Solutions - Lecture 2
Homework Solutions - Lecture 2 1. The value of the S&P 500 index is 1312.41 and the treasury rate is 1.83%. In a typical year, stock repurchases increase the average payout ratio on S&P 500 stocks to over
More informationQuestion # 1 of 15 ( Start time: 01:53:35 PM ) Total Marks: 1
MGT 201 - Financial Management (Quiz # 5) 380+ Quizzes solved by Muhammad Afaaq Afaaq_tariq@yahoo.com Date Monday 31st January and Tuesday 1st February 2011 Question # 1 of 15 ( Start time: 01:53:35 PM
More informationFoundations of Economics 5 th Edition, AP Edition 2011
A Correlation of 5 th Edition, AP Edition 2011 Advanced Placement Microeconomics and Macroeconomics Topics AP is a trademark registered and/or owned by the College Board, which was not involved in the
More informationFoundations of Economics 5 th Edition, AP*Edition 2011
A Correlation of 5 th Edition, AP*Edition 2011 To the Advanced Placement Topics Microeconomics and Macroeconomics *Advanced Placement, Advanced Placement Program, AP, and Pre-AP are registered trademarks
More informationMGT201 Financial Management Solved MCQs A Lot of Solved MCQS in on file
MGT201 Financial Management Solved MCQs A Lot of Solved MCQS in on file Which group of ratios measures a firm's ability to meet short-term obligations? Liquidity ratios Debt ratios Coverage ratios Profitability
More information2018 Level I Formulas
2018 Level I Formulas www.ift.world support@ift.world www.ift.world 1 Formula of Formulas Have to know Should know Type 1: Formula exists, but what really matters is the intuition Type 2: Know the formula,
More informationCHAPTER 19 DIVIDENDS AND OTHER PAYOUTS
CHAPTER 19 DIVIDENDS AND OTHER PAYOUTS Answers to Concepts Review and Critical Thinking Questions 1. Dividend policy deals with the timing of dividend payments, not the amounts ultimately paid. Dividend
More informationCHAPTER 5 Bonds and Their Valuation
5-1 5-2 CHAPTER 5 Bonds and Their Valuation Key features of bonds Bond valuation Measuring yield Assessing risk Key Features of a Bond 1 Par value: Face amount; paid at maturity Assume $1,000 2 Coupon
More informationMGT Financial Management Mega Quiz file solved by Muhammad Afaaq
MGT 201 - Financial Management Mega Quiz file solved by Muhammad Afaaq Afaaq_tariq@yahoo.com Afaaqtariq233@gmail.com Asslam O Alikum MGT 201 Mega Quiz file solved by Muhammad Afaaq Remember Me in Your
More informationFIN622 Formulas
The quick ratio is defined as follows: Quick Ratio = (Current Assets Inventory)/ Current Liabilities Receivables Turnover = Annual Credit Sales / Accounts Receivable The collection period also can be written
More informationMGT201 Financial Management Solved MCQs
MGT201 Financial Management Solved MCQs Why companies invest in projects with negative NPV? Because there is hidden value in each project Because there may be chance of rapid growth Because they have invested
More informationCHAPTER 9: THE CAPITAL ASSET PRICING MODEL
CHAPTER 9: THE CAPITAL ASSET PRICING MODEL 1. E(r P ) = r f + β P [E(r M ) r f ] 18 = 6 + β P(14 6) β P = 12/8 = 1.5 2. If the security s correlation coefficient with the market portfolio doubles (with
More informationProblem Set #2. Intermediate Macroeconomics 101 Due 20/8/12
Problem Set #2 Intermediate Macroeconomics 101 Due 20/8/12 Question 1. (Ch3. Q9) The paradox of saving revisited You should be able to complete this question without doing any algebra, although you may
More informationSolved MCQs MGT201. (Group is not responsible for any solved content)
Solved MCQs 2010 MGT201 (Group is not responsible for any solved content) Subscribe to VU SMS Alert Service To Join Simply send following detail to bilal.zaheem@gmail.com Full Name Master Program (MBA,
More informationFinancing decisions (2) Class 16 Financial Management,
Financing decisions (2) Class 16 Financial Management, 15.414 Today Capital structure M&M theorem Leverage, risk, and WACC Reading Brealey and Myers, Chapter 17 Key goal Financing decisions Ensure that
More information600 Solved MCQs of MGT201 BY
600 Solved MCQs of MGT201 BY http://vustudents.ning.com Why companies invest in projects with negative NPV? Because there is hidden value in each project Because there may be chance of rapid growth Because
More informationECO 209Y MACROECONOMIC THEORY AND POLICY LECTURE 12: THE DERIVATION OF THE AGGREGATE DEMAND CURVE
ECO 209 MACROECONOMIC THEOR AND POLIC LECTURE 12: THE DERIVATION OF THE AGGREGATE DEMAND CURVE Gustavo Indart Slide 1 FIXED-PRICE MODEL Everything we have done in the IS-LM model has been in terms of demand,
More information80 Solved MCQs of MGT201 Financial Management By
80 Solved MCQs of MGT201 Financial Management By http://vustudents.ning.com Question No: 1 ( Marks: 1 ) - Please choose one What is the long-run objective of financial management? Maximize earnings per
More informationFinancial Leverage: the extent to which a company is committed to fixed charges related to interest payments. Measured by:
Wk 11 FINS1613 Notes 13.1 Discuss the effect of Financial Leverage Financial Leverage: the extent to which a company is committed to fixed charges related to interest payments. Measured by: The debt to
More informationChapter 14 The Cost of Capital
Topics Covered Chapter 14 The Cost of Capital Konan Chan Financial Management, Fall 2018 Cost of capital Weighted average cost of capital (WACC) Capital structure Required rates of return Divisional costs
More informationMBA 203 Executive Summary
MBA 203 Executive Summary Professor Fedyk and Sraer Class 1. Present and Future Value Class 2. Putting Present Value to Work Class 3. Decision Rules Class 4. Capital Budgeting Class 6. Stock Valuation
More informationMGT201- Financial Management Solved by vuzs Team Zubair Hussain.
MGT201- Financial Management Solved by vuzs Team Zubair Hussain 1- Company ABC wants to issue more common stock face value Rs.10. Next year the Dividend is expected to be Rs.2 per share assuming a Dividend
More informationMicroeconomics, IB and IBP. Regular EXAM, December 2011 Open book, 4 hours
Microeconomics, IB and IBP Regular EXAM, December 2011 Open book, 4 hours There are two pages in this exam. In total, there are six questions in the exam. The questions are organized into four sections.
More information2. Basic Concepts In Project Appraisal [DoF Ch. 4; FP Ch. 3, 4, 5]
R.E.Marks 2003 Lecture 3-1 2. Basic Concepts In Project Appraisal [DoF Ch. 4; FP Ch. 3, 4, 5] 1. Which Investment Criterion? 2. Investment Decision Criteria 3. Net Present Value Annual User Charge / Value
More informationEconomics Honors Exam 2009 Solutions: Microeconomics, Questions 1-2
Economics Honors Exam 2009 Solutions: Microeconomics, Questions 1-2 Question 1 (Microeconomics, 30 points). A ticket to a newly staged opera is on sale through sealed-bid auction. There are three bidders,
More informationPart A: Corporate Finance
Finance: Common Body of Knowledge Review Part A: Corporate Finance Time Value of Money Financial managers always want to determine how much a periodic receipt of future cash flow is worth in today s dollars.
More informationEC 202. Lecture notes 14 Oligopoly I. George Symeonidis
EC 202 Lecture notes 14 Oligopoly I George Symeonidis Oligopoly When only a small number of firms compete in the same market, each firm has some market power. Moreover, their interactions cannot be ignored.
More informationECON 102 Boyle Final Exam New Material Practice Exam Solutions
www.liontutors.com ECON 102 Boyle Final Exam New Material Practice Exam Solutions 1. B Please note that these first four problems are likely much easier than problems you will see on the exam. These problems
More informationMGT201 Short Notes By
MGT201 Short Notes By http://www.vustudents.net 1- Company ABC wants to issue more common stock face value Rs.10. Next year the Dividend is expected to be Rs.2 per share assuming a Dividend growth rate
More informationCourse FM 4 May 2005
1. Which of the following expressions does NOT represent a definition for a? n (A) (B) (C) (D) (E) v n 1 v i n 1i 1 i n vv v 2 n n 1 v v 1 v s n n 1 i 1 Course FM 4 May 2005 2. Lori borrows 10,000 for
More information1 (a) Net present value evaluation Year $000 $000 $000 $000 $000 Sales revenue 1,575 1,654 1,736 1,823 Selling costs (32) (33) (35) (37)
Answers Fundamentals Level Skills Module, Paper F9 Financial Management December 2010 Answers 1 (a) Net present value evaluation Year 1 2 3 4 5 $000 $000 $000 $000 $000 Sales revenue 1,575 1,654 1,736
More informationECON 4415: International Economics. Autumn Karen Helene Ulltveit-Moe. Lecture 8: TRADE AND OLIGOPOLY
ECON 4415: International Economics Autumn 2006 Karen Helene Ulltveit-Moe Lecture 8: TRADE AND OLIGOPOLY 1 Imperfect competition, and reciprocal dumping "The segmented market perception": each firm perceives
More information14.02 Solutions Quiz III Spring 03
Multiple Choice Questions (28/100): Please circle the correct answer for each of the 7 multiple-choice questions. In each question, only one of the answers is correct. Each question counts 4 points. 1.
More informationInstitute of Actuaries of India
Institute of Actuaries of India Subject CT1 Financial Mathematics November 2012 Examinations INDICATIVE SOLUTIONS Page 1 of 1 Note 1. Markers are instructed to follow the guidelines as closely as possible
More informationCHAPTER 2 REVENUE OF THE FIRM
CHAPTER 2 REVENUE OF THE FIRM Chapter Outline I. Advertising, Consumer Demand, and Business Research II. Demand and Revenue Concepts A. Changes in Demand and Quantity Demanded B. Total Revenue and Average
More informationc U 2 U 1 Econ 310 Practice Questions: Chaps. 4, 7-8 Figure 4.1 Other goods
Econ 310 Practice Questions: Chaps. 4, 7-8 Figure 4.1 Other goods A H a c U 2 b U 1 0 x Z H Z 1. Figure 4.1 shows the effect of a decrease in the price of good x. The substitution effect is indicated by
More informationAFM 271 Practice Problem Set #2 Spring 2005 Suggested Solutions
AFM 271 Practice Problem Set #2 Spring 2005 Suggested Solutions 1. Text Problems: 6.2 (a) Consider the following table: time cash flow cumulative cash flow 0 -$1,000,000 -$1,000,000 1 $150,000 -$850,000
More informationBasic Finance Exam #2
Basic Finance Exam #2 Chapter 10: Capital Budget list of planned investment project Sensitivity Analysis analysis of the effects on project profitability of changes in sales, costs and so on Fixed Cost
More informationINTEREST RATES Overview Real vs. Nominal Rate Equilibrium Rates Interest Rate Risk Reinvestment Risk Structure of the Yield Curve Monetary Policy
INTEREST RATES Overview Real vs. Nominal Rate Equilibrium Rates Interest Rate Risk Reinvestment Risk Structure of the Yield Curve Monetary Policy Some of the following material comes from a variety of
More informationCA - FINAL INTERNATIONAL FINANCIAL MANAGEMENT. FCA, CFA L3 Candidate
CA - FINAL INTERNATIONAL FINANCIAL MANAGEMENT FCA, CFA L3 Candidate 12.1 International Financial Management Study Session 12 LOS 1 : International Capital Budgeting Capital Budgeting is the process
More informationMULTIPLE-CHOICE QUESTIONS Circle the correct answers on this test paper and record them on the computer answer sheet.
#18: /10 #19: /9 Total: /19 VERSION 1 M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y Class Test #2 Wednesday, 12 November, 2008 90 minutes PRINT your family name / initial and record your student ID
More informationEcon 422 Eric Zivot Summer 2004 Final Exam Solutions
Econ 422 Eric Zivot Summer 2004 Final Exam Solutions This is a closed book exam. However, you are allowed one page of notes (double-sided). Answer all questions. For the numerical problems, if you make
More informationFUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE Time Allowed: 2 Hours30 minutes Reading Time:10 Minutes GBAT9123 Sample exam SUPERVISED OPEN BOOK EXAMINATION INSTRUCTIONS 1. This is a supervised open book examination.
More information] = [1 + (1 0.3)(10/70)] =
7.1. Sicily Pharmaceuticals has $10 million in debt and $70 million in equity. Its tax rate is 30%, cost of debt 8%, and beta 1.5. The riskless rate is 5% and the expected return on the market 12%. Sicily
More informationPAPER 2 : STRATEGIC FINANCIAL MANAGEMENT
Question 1 PAPER 2 : STRATEGIC FINANCIAL MANAGEMENT Question No. 1 is compulsory. Attempt any five questions from the rest. Working notes should form part of the answer. (a) Mr. Tamarind intends to invest
More informationForeign Trade and the Exchange Rate
Foreign Trade and the Exchange Rate Chapter 12 slide 0 Outline Foreign trade and aggregate demand The exchange rate The determinants of net exports A A model of the real exchange rates The IS curve and
More informationChapter 14 Capital Structure Decisions ANSWERS TO END-OF-CHAPTER QUESTIONS
Chapter 14 Capital Structure Decisions ANSWERS TO END-OF-CHAPTER QUESTIONS 14-1 a. Capital structure is the manner in which a firm s assets are financed; that is, the righthand side of the balance sheet.
More informationAdvanced Corporate Finance. 3. Capital structure
Advanced Corporate Finance 3. Capital structure Objectives of the session So far, NPV concept and possibility to move from accounting data to cash flows => But necessity to go further regarding the discount
More informationFINAL EXAMINATION ANSWER KEY
William M. Boal Version A FINAL EXAMINATION ANSWER KEY I. Multiple choice (1)b. (2)a. (3)c. (4)d. (5)c. (6)c. (7)a. (8)c. (9)c. (10)d. (11)b. (12)c. (13)b. (14)b. (15)b. (16)a. (17)b. (18)b. (19)b. (20)d.
More informationProblem Set 3: Suggested Solutions
Microeconomics: Pricing 3E Fall 5. True or false: Problem Set 3: Suggested Solutions (a) Since a durable goods monopolist prices at the monopoly price in her last period of operation, the prices must be
More informationAFM 371 Practice Problem Set #2 Winter Suggested Solutions
AFM 371 Practice Problem Set #2 Winter 2008 Suggested Solutions 1. Text Problems: 16.2 (a) The debt-equity ratio is the market value of debt divided by the market value of equity. In this case we have
More informationFCF t. V = t=1. Topics in Chapter. Chapter 16. How can capital structure affect value? Basic Definitions. (1 + WACC) t
Topics in Chapter Chapter 16 Capital Structure Decisions Overview and preview of capital structure effects Business versus financial risk The impact of debt on returns Capital structure theory, evidence,
More informationCome & Join Us at VUSTUDENTS.net
Come & Join Us at VUSTUDENTS.net For Assignment Solution, GDB, Online Quizzes, Helping Study material, Past Solved Papers, Solved MCQs, Current Papers, E-Books & more. Go to http://www.vustudents.net and
More informationConsumers cannot afford all the goods and services they desire. Consumers are limited by their income and the prices of goods.
Budget Constraint: Review Consumers cannot afford all the goods and services they desire. Consumers are limited by their income and the prices of goods. Model Assumption: Consumers spend all their income
More informationECS2601 Oct / Nov 2014 Examination Memorandum. (1a) Raymond has a budget of R200. The price of food is R20 and the price of clothes is R50.
ECS2601 Oct / Nov 201 Examination Memorandum (1a) Raymond has a budget of R200. The price of food is R20 and the price of clothes is R50. (i) Draw a budget line, with food on the horizontal axis. (2) Clothes
More informationQuiz Bomb. Page 1 of 12
Page 1 of 12 Quiz Bomb Indicate whether the following statements are True or False. Support your answer with reason: 1. Public finance is the study of money management of individual. False. Public finance
More informationQuestion # 4 of 15 ( Start time: 07:07:31 PM )
MGT 201 - Financial Management (Quiz # 5) 400+ Quizzes solved by Muhammad Afaaq Afaaq_tariq@yahoo.com Date Monday 31st January and Tuesday 1st February 2011 Question # 1 of 15 ( Start time: 07:04:34 PM
More informationCHAPTER 15 INVESTMENT, TIME, AND CAPITAL MARKETS
CHAPTER 15 INVESTMENT, TIME, AND CAPITAL MARKETS REVIEW QUESTIONS 1. A firm uses cloth and labor to produce shirts in a factory that it bought for $10 million. Which of its factor inputs are measured as
More informationHomework Solutions - Lecture 2 Part 2
Homework Solutions - Lecture 2 Part 2 1. In 1995, Time Warner Inc. had a Beta of 1.61. Part of the reason for this high Beta was the debt left over from the leveraged buyout of Time by Warner in 1989,
More informationThe Hurdle Rate The minimum rate of return that must be met for a company to undertake a particular project
Risk, Return and Capital Budgeting The Hurdle Rate The minimum rate of return that must be met for a company to undertake a particular project The Weighted Average Cost of Capital (WACC) -The hurdle rate
More informationTopics in Corporate Finance. Chapter 2: Valuing Real Assets. Albert Banal-Estanol
Topics in Corporate Finance Chapter 2: Valuing Real Assets Investment decisions Valuing risk-free and risky real assets: Factories, machines, but also intangibles: patents, What to value? cash flows! Methods
More informationRutgers University Department of Economics. Midterm 1
Rutgers University Department of Economics Econ 336: International Balance of Payments Spring 2006 Professor Roberto Chang Midterm 1 Instructions: All questions are multiple choice. Select the correct
More informationChapter 11 Cash Flow Estimation and Risk Analysis ANSWERS TO END-OF-CHAPTER QUESTIONS
Chapter 11 Cash Flow Estimation and Risk Analysis ANSWERS TO END-OF-CHAPTER QUESTIONS 11-1 a. Project cash flow, which is the relevant cash flow for project analysis, represents the actual flow of cash,
More informationFINA Homework 2
FINA3313-005 Homework 2 Chapter 04 Measuring Corporate Performance True / False Questions 1. The higher the times interest earned ratio, the higher the interest expense. 2. The asset turnover ratio and
More informationECONOMICS. Time Allowed: 3 hours Maximum Marks: 100
Sample Paper (CBSE) Series ECO/SP/1B Code No. SP/1-B ECONOMICS Time Allowed: 3 hours Maximum Marks: 100 General Instructions: (i) All Questions in both the sections are compulsory. However there is internal
More informationFNCE 370v8: Assignment 3
FNCE 370v8: Assignment 3 Assignment 3 is worth 5% of your final mark. Complete and submit Assignment 3 after you complete Lesson 9. There are 12 questions in this assignment. The break-down of marks for
More informationECON/MGMT 115. Industrial Organization
ECON/MGMT 115 Industrial Organization 1. Cournot Model, reprised 2. Bertrand Model of Oligopoly 3. Cournot & Bertrand First Hour Reviewing the Cournot Duopoloy Equilibria Cournot vs. competitive markets
More informationECON 3010 Intermediate Macroeconomics Final Exam
ECON 3010 Intermediate Macroeconomics Final Exam Multiple Choice Questions. (60 points; 3 pts each) #1. An economy s equals its. a. consumption; income b. consumption; expenditure on goods and services
More informationGS/ECON 5010 section B Answers to Assignment 3 November 2012
GS/ECON 5010 section B Answers to Assignment 3 November 01 Q1. What is the profit function, and the long run supply function, f a perfectly competitive firm with a production function f(x 1, x ) = ln x
More informationECON 103C -- Final Exam Peter Bell, 2014
Name: Date: 1. Which of the following factors causes a movement along the demand curve? A) change in the price of related goods B) change in the price of the good C) change in the population D) both b
More information8a. Profit Maximization by a competitive firm: a. Cost and Revenue: Total, Average and Marginal
8a. Profit Maximization by a competitive firm: a. Cost and Revenue: Total, Average and Marginal The cost of producing any level of output is determined by the quantity of inputs used, and the price per
More informationCopyright 2009 Pearson Education Canada
Operating Cash Flows: Sales $682,500 $771,750 $868,219 $972,405 $957,211 less expenses $477,750 $540,225 $607,753 $680,684 $670,048 Difference $204,750 $231,525 $260,466 $291,722 $287,163 After-tax (1
More informationCircular Flow of Economic Activity
Business Income Circular Flow of Economic Activity Product Market Consumer Spending Firms Goods and Services Goods and Services Households Taxes Taxes Businesses Individuals Productive Resources Physical
More information3. C 12 years. The rule 72 tell us the number of years needed to double an investment is 72 divided by the interest rate.
www.liontutors.com FIN 301 Exam 2 Practice Exam Solutions 1. B Hedge funds are largely illiquid. Hedge funds often take large positions in investments. This makes it difficult for hedge funds to move in
More informationChapter 7 Pricing with Market Power SOLUTIONS TO EXERCISES
Firms, Prices & Markets Timothy Van Zandt August 2012 Chapter 7 Pricing with Market Power SOLUTIONS TO EXERCISES Exercise 7.1. Suppose you produce minivans at a constant marginal cost of $15K and your
More informationPortfolio Project. Ashley Moss. MGMT 575 Financial Analysis II. 3 November Southwestern College Professional Studies
Running head: TOOLS 1 Portfolio Project Ashley Moss MGMT 575 Financial Analysis II 3 November 2012 Southwestern College Professional Studies TOOLS 2 Table of Contents 1. Valuation and Characteristics of
More informationUVic Econ 103C with Peter Bell Review for Final Exam Final Lecture
UVic Econ 103C with Peter Bell Review for Final Exam Final Lecture Thanks for your engagement this semester. You are quite the group of students! Let s finish off strong here today Suppose Q D (P) = 100-P
More information