Fin300 Midterm

Ryerson University CFIN300 Mid line Exam radiate 2007 There ar 2. 0 hours in this exam. Version A bookman Name____________________________ (Please Print) Student Number_________________________________ Notes 1. This is a closed book exam. You may and obtain pens, pencils and a calculator at your desk. 2. A formula sheet is attached to the end of the exam. You may detach the formula sheet from the exam. Please engross out the scanner sheet as you go along in the exam. You testament not be given extra time at the end of the exam to fill it out. 3.Select the best possible answer for all(prenominal) multiple-choice question 4. Each of the 30 MC questions is worth 1 mark Marks Available fall 30_________ There are 14 pages in this exam. 2. Poor Dog, Inc. borrowed $135,000 from the bank today. They must re abide this m sensationy all over the next six old age by making periodical payments of $2,215. 10. What is the sake esteem on the loan? evoke your answer with annual com pounding. A) 5. 98% B) 6. 63% C) 4. 1% D) 5. 65% E) 5. 80% 3. How a great deal would you pay for a security that pays you $500 every 4 months for the next 10 age if you gather up a return of 8% per division increase monthly? A) $11,228. 48 B) $15,000. 00 C) $10,260. 0 D) $13,724. 90 E) $10,200. 23 4. You can pee-pee 5% per family deepen annually for the next 4 geezerhood, followed by 8% per socio-economic class increase quarterly for 5 geezerhood. What is the average annual compounded ramble of return over the 9 year period? Express your answer with monthly compounding. A) B) 6. 2% C) 6. 97% D) 6. 43% E) 6. 59% 5. You gestate just purchased a house for $540,000 with a $200,000 down payment. You are expiry to get a mortgage at the TF bank for the balance. TF is charging a rate of 5. 8% per year compounded semi-annually on 5 year term mortgages.You want to make weekly payments amortized over 20 days. What is your weekly payment? A) $87 7. 60 B) $549. 01 C) $545. 47 D) E) $871. 92 6. Master Meter is planning on constructing a new $20 million facility. The company plans to pay 20% of the cost in hard cash and finance the balance.How untold forget severally monthly loan payment be if they can borrow the necessary funds for 30 years at 9% per year compounded semi-annually? A) $128,740 B) $158,567 C) $160,925 D) $141,982 E) $126,853 7. Gerry Industries has some 8% (per year compounded semi-annually) coupon bonds on the foodstuff that are switching at $989, pay elicit semi-annually, and mature in fifteen years. The company would like to issue $1 million in new fifteen-year bonds. What coupon rate should be applied to the new bonds if Gerry Industries wants to sell them at par? Express your answer with semi-annual compounding. A) 8. 00% B) 8. 3% C) 7. 87% D) 8. 13% E) 8. 26% 8. You develop decided to save $30 a week for the next three years as an emergency fund. You can earn 3. 5 % per year compounded weekly. How much would you fill to deposit in unitary lump sum today to have the same sum up in your savings at the end of three years? A) $4,441. 26 B) $4,382. 74 C) $4,288. 87 D) $4,305. 19 E) $4,414. 14 9. A credit poster company charges you an lodge in rate of 1. 25% per month.The annual pctage rate is ____ and the effective annual rate is _______. A) 15. 00% 16. 08% B) 16. 08% 15. 00% C) 15. 00% 15. 00% D) 15. 00% 14. 55% E) 14. 55% 15. 00% 10. The Friendly bank wants to earn an effective annual rate of 9% on its cable car loans. If interest is compounded monthly, what APR must they charge? A) 8. 65% B) 9. 17% C) 8. 58% D) 9. 38% E) 8. 44% Use the chase to answer question 11 Rondolo, Inc. 2006 Income rehearsal lettuce Sales $12,800 slight Cost of Goods Sold 10,400 Less Depreciation 680 Earnings Before Interest and Taxes 1,720 Less Interest remunerative 280 Taxable Income $1,440 Less Taxes 500 network I ncome $940 Dividends $423 Additions to retained earnings $517 Rondolo, Inc. 2006 chemical equilibrium Sheet Cash $520 Accounts payable $1,810 Accounts rec 1,080 tenacious-term debt 3,600 Inventory 3,120 Common contain 5,000 meat $4,720 bear earnings 1,790 bring in fixed assets 7,480 inwardness assets $12,200 inwardness liabilities & equity $12,200 11. Rondolo, Inc. is truely direct at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio lead confront constant.How much additional debt is required if no new equity is brocaded and sales are projected to increase by 4 percentage? A) -$122. 08 B) $598. 75 C) $416. 00 D) -$562. 50 E) $318. 01 12. Your brother-in-law borrowed $2,000 from you four years ago and then disappeared. yesterday he returned and expressed a desire to pay back the loan, including the interest accrued.Assuming that you had agr eed to charge him 10% per year compounded annually, and assuming that he wishes to make five equal annual payments beginning in one year, how much would your brother-in-law have to pay you annually in order to pay off the debt? (Assume that the loan continues to accrue interest at 10% per year. ) A) $738. 63 B) $798. 24 C) $772. 45 D) $697. 43 E) $751. 46 13. What information to you need to cause the 3 year forward rate starting 2 years from now? A) 2 and 5 year zero coupon routine rates B) 3-year zero coupon spot rate C) 2 and 3 year zero coupon spot rates D) 5 year zero coupon spot rate E) 3 and 5 year zero coupon spot rates 14. You have been making payments for the final 25 years and have finally nonrecreational off your mortgage.Your trus iirthy mortgage was for $345,000 and the interest rate was 5% per year compounded semi-annually for the constitutional 25 year period. How much interest have you paid over the last 5 years of the mortgage? A) B) $120,392. 23 C) $13,931. 87 D) $80,743. 13 E) $106,460. 37 15. Which of the following is (are) sources of cash? I. an increase in storeys receivable II. a decrease in common stock tercet. an increase in long-term debt IV. a decrease in accounts payable A) I, II, and IV solitary(prenominal) B) II and IV only C) I only D) trine only E) I and III only 16. Financial planning allows firms to I. avoid future losses. II. gravel contingency plans. III. ascertain expected financing needs. IV. explore and evaluate motley options. A) I, II, III, and IV B) I and IV only C) III and IV only D) II and III only E) II, III, and IV only Use the following to answer question 17 accredited $100 Assets A) $52. 00 B) $22. 50 C) $0. 00 D) $4. 50 E) $29. 50 18. A new security will pay an initial cash flow of $100 in 1 year. Thereafter it will pay cash flows every month for the rest of time. The cash flows will grow at 3% per year compounded monthly forever. If you require a return of 6% per year compounded monthly, how much would you be willing to pay for this security? A) $18,932. 30 B) $40,000. 00 C) $37,864. 59 D) $33,333. 33 E) $20,000. 00 19. Which one of the following actions is the best example of an agency problem? A) Basing instruction bonuses on the attainment of specific financial goals B) Requiring stockholders approval of all management compensation decisions C) Paying management bonuses based on the current market respect of the firms stock D) Paying management bonuses based on the number of blood locations opened during the year E) Accepting a project that enhances both management salaries and the market value of the firms stock 20. The bonds of Franks Welding, Inc. pay an 8% annual coupon, have a 7. 98% (per year compounded annually) yield to maturity and have a shell value of $1,000. The current rate of inflation is 2. 5% per yea r compounded annually.What is the real rate of return on these bonds? A) 5. 42 percent B) 5. 48 percent C) 5. 35 percent D) 5. 37 percent E) 5. 32 percent 21. What is the future value of the following cash flows at the end of year 3 if the interest rate is 6% per year compounded annually? The cash flows occur at the end of each year. Year 1 Year 2 Year 3 $5,180 $9,600 $2,250 A) $19,341. 02 B) $15,916. 8 C) $19,608. 07 D) $18,246. 25 E) $18,109. 08 22. The I. C. James Co. invested $10,000 six years ago at 5% per year simple interest. The I. M. suffer Co. invested $10,000 six years ago at 5% per year compounded annually. Which one of the following statements is true concerning these two investments? I. The I. C.James Co. has an account value of $13,400. 96 today. II. The I. C. James Co. will have an account value of $13,400. 96 six years from now. III. The I. M Smart Co. will earn $525 interest in the second year. IV. Both the I. C. James Co. and the I. M. Smart Co. will earn $500 interest in the first year. A) II, III and IV only B) II and IV only C) I and III only D) III and IV only E) I, III and IV only 23. The bonds of Microhard, Inc. carry a 10% annual coupon, have a $1,000 face value, and mature in four years. Bonds of equivalent risk yield 15% (per year compounded annually). Microhard is having cash flow problems and has asked its bondholders to accept the following commode The firm would like to make the next three coupon payments at half the scheduled amount, and make the final coupon payment be $251.If this plan is implemented, the market price of the bond will (rise/fall) to ___________. (Continue to assume a 15% required return. ) A) $892. 51 B) $865. 45 C) $829. 42 D) $808. 89 E) $851. 25 24. Your older sister deposited $5,000 today at 8% per year compounded annually for five years. You would like to have just as much money at the end of the ne xt five years as your sister. However, you can only earn 6% per year compounded annually. How much more money must you deposit today than your sister if you are to have the same amount at the end of five years? A) $367. 32 B) $399. 05 C) $489. 84 D) $201. 0 E) $423. 81 25. wage income differs from operating cash flow due to the handling of A) Interest expense and depreciation. B) Depreciation and dividends. C) Dividends and non-interest expense. D) Dividends and interest expense. E) Dividends, interest expense, and depreciation. 26. Shirley adds $1,000 to her savings on the last day of each month. Shawn adds $1,000 to his savings on the first day of each month.They both earn an 8% per year compounded quarterly rate of return. What is the difference in their savings account balances at the end of 35 years? A) $13,923. 34 B) $15,794. 64 C) $16,776. 34 D) $14,996. 47 E) $12,846. 88 Use the following to answer questions 27-30 KLM, Inc. 2006 Income Statement Net sales $3,685 Cost of goods sold $3,180 Depreciation $104 Earnings in advance interest and taxes $401 Interest paid $25 Taxable income $376 Taxes $128 Net income $248 Dividends paid $60 Addition to retained earnings $188 KLM Corporation Balance Sheets as of December 31, 2005 and 2006 2005 2006 2005 2006 Cash $520 $601 Accounts payable $621 $704 Accounts rec. $235 $219 Notes payable $333 $272 Inventory $964 $799 flow liabilities $954 $976 authorized assets $1,719 $1,619 Long-term debt $350 $60 Net fixed assets $890 $930 Common stock $800 $820 Retained earnings $505 $693 Total assets $2,609 $2,549 Total liabilities and Owners equity $2,609 $2,549 27. What is the net swell disbursement for 2006? A) $208 B) $144 C) -$144 D) $64 E) -$64 28. What is the cash flow from assets for 2006? A) $1,307 B) $2,259 C) $355 D) $2,503 E) $111 29. What is the operating cash flow for 2006? A) $480 B) $169 C) $425 D) $272 E) $377 30. What is the change in net working capital for 2006? A) $122 B) $643 C) $765 D) -$643 E) -$122 31. A number of years ago you bought some land for $100,000. forthwith it is worth $225,000. If the land has been rising is price by 5% per year compounded annually, how long have you owned the land? A) 14. 1 years B) 16. years C) Cant be determined with the given information D) 13. 8 years E) 12. 4 years FV = PV (1+tr) pic FV = PV (1+r)t pic pic pic pic pic pic pic pic pic pic pic pic pic pic pic pic Total Dollar Return (TDR) = Dividend Income + cowlingital derive (Loss) pic pic pic pic Variance of returns pic pic pic pic pic pic pic Arbitrage Pricing Theory PV of CCA tax shield pic pic Current balance = Current Assets Total Asset = Sales Current Liabilities turnover rate Total Assets Quick Ratio = Current Assets Inventory ROA = Net Income Current Liabilities Total Assets Inventory disturbance = COGS ROE = Net Income Inventory Total truth Cash Ratio = Cash P/E Ratio = Price/common share Current Liabilities EPS receivables = Sales Dividend Payout = DPS Turnover Accounts Receivable Ratio EPS D/E Ratio = Total Debt Dividend Payout = Cash Dividends Total Equity Ratio Net Income Total Debt Ratio = Total Debt mart to sustain Price / Common share Total Assets Ratio = Book value of equity Equity multiplier = Total Assets Profit = Net Income Total Equity Margin Sales Net Working = Net Working Capital Interval Measure = Current Assets Capital-Total Asset Total Assets Average Daily Operating Costs Long Term Debt = Long Term Debt Cash Coverage = EBIT + Depreciation Ratio Total Equity + LT Debt Ratio Interest eld Sales in = 365 Days Days Sales in = 365 Days Receivables Receivables Turnover Inventory Inventory Turnover Internal Growth = ROA x R Sust ainable = ROE x R assess 1 ROA x R Growth Rate 1 ROE x R Sustainable = p(S/A)(1+D/E) x R Growth Rate 1 p(S/A)(1+D/E) x R NWC = Sales Fixed Asset = Sales Turnover NWC Turnover Net Fixed Assets Times Interest = EBIT CF from Assets = Operating CF Cap Ex Additions to NWC Operating CF = EBIT + Deprec Tax =Sales Costs Taxes = (Sales Costs) x (1 Tc) + Deprec x Tc Cap Ex = End Gross FA pray Gross FA Cap Ex = End Net FA Beg Net FA + Deprec Add to NWC = End NWC Beg NWC CF to Debtholders = Interest Net unsanded Debt CF to Shareholders = Divs Net New Equity CF from Assets = CF to Debtholders + CF to Shareholders Earned Interest Charges Answer Key 2. E 3. E 4. E 5. B 6. E 7. D 8. A 9. A 10. A 11. A 12. C 13. A 14. C 15. D 16. E 17. E 18. C 19. D 20. C 21. D 22. D 23. C 24. C 25. A 26. D 27. B 28. C 29. E 30. E 31. B