...누르시면 18이라는 답이 나오게 되고, AOS Method로 Setting을 하신다면 12라는 답이 나오게 됩니다. 그러므로 일반적인 계산 방식에 따라 Chn Method로 Setting하시는 것이 좋습니다. 8. 여기까지 실행하신 후 Button을 누르십시오. 9. 화면에 0.000 이라는 표시가 나타납니다. 를 누르시면 화면에 P/Y = 12.000 이 나타납니다. 이것이 의미하는 바는 1년에 Payment가 12번 이뤄진다는 뜻입니다.그러나 일반적으로 1년에 한 번씩 Payment가 이뤄진다는 가정하에 문제가 출제되므로 를 누르시면 P/Y = 1.000으로 Setting이 됩니다. 이것으로 Finance용으로 사용할 수 있는 계산기 Setting이 끝나게 됩니다. 그럼 이제까지의 과정을 그림으로 표시해 보도록 하겠습니다. → → → → → → → → → → → → → → → → → → Ⅱ. Time Value of Money 계산법 Ⅱ-1 Time Value of Money의 Work Sheet Time Value of Money를 계산할 때는 계산기의 셋째줄에 있는 Key와 Key 만을 사용하면 됩니다....
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...TIME VALUE OF MONEY FUTURE VALUE: What’s a $ today worth in the future. FORMULA: (1+I)N PRESENT VALUE: is a future amount of money that has been discounted to reflect its current value, as if it existed today. FORMULA: 1/(1+I)N LOAN PAYMENT Lump sum: a singel payment "Ordinary annuity - valuing a stream of payments at the end of each period Annuity Due – valuing a stream of payments at the beginning of each period " INTEREST RATE "Compound Interest Stated rate – Effective rate Present and future values Discounting and accreting values" Rate (with coumpund interest) 9.23% Consider a stated annual rate of 10%. Compounded yearly, this rate will turn $1000 into $1100. However, if compounding occurs monthly, $1000 would grow to $1104.70 by the end of the year, rendering an effective annual interest rate of 10.47%. Basically the effective annual rate is the annual rate of interest that accounts for the effect of compounding. BREAK-EVEN ANALYSIS HOW MANY UNITS A COMPANY MUST SALES OR HOW MUCH REVENUE MUST BE OBTEINED BEFORE THE COMPANY BEGING TO MAKE PROFIT FIXED COST $12,000 FORMULAS: BE$={FC/[1-(VC/P)]} BE$= BREAK...
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...to retain once you retire), you expect that you would need Rs. 240,000 per year in real terms as pension. Assume that the average long-term inflation rate is expected to be 4.8% per year. Calculate how much you would thus need to save every year in real terms (to contribute to the pension fund) in order to meet your needs? 2. Raj Corporation has the opportunity to invest $ 1 million now (t=0) and expects after tax return of $600000 in t=1 and $700000 in t=2. The project will last for 2 years only. The appropriate cost of capital is 12% with all equity financing. The borrowing rate is 8% and Raj Corporation will borrow $300000 for the project. The debt must be repaid in two equal instalments. Assume that debt tax-shields have a net value of $0.30 per dollar of interest paid. Calculate the project’s APV. 3. The following table shows the price of a sample of US treasury strips in March 2009. Each strips make a single payment of $1000 at maturity. Maturity | Price (%) | March 2010 | 99.423 | March 2011 | 97.546 | March 2012 | 94.510 | March 2013 | 90.524 | a) Calculate the annually compounded spot interest rate for each year. b) What will be the price of the bond in year March 2011, which have maturity in March 2013 which make...
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...Financial Management Pillar Strategic Level Paper 19 November 2008 – Wednesday Morning Session Instructions to candidates You are allowed three hours to answer this question paper. You are allowed 20 minutes reading time before the examination begins during which you should read the question paper and, if you wish, highlight and/or make notes on the question paper. However, you will not be allowed, under any circumstances, to open the answer book and start writing or use your calculator during the reading time. You are strongly advised to carefully read ALL the question requirements before attempting the question concerned (that is all parts and/or subquestions). The question requirements are highlighted in a dotted box. ALL answers must be written in the answer book. Answers or notes written on the question paper will not be submitted for marking. Answer the ONE compulsory question in Section A on pages 2 to 5. The question requirements are on page 5, which is detachable for ease of reference. Answer TWO of the four questions in Section B on pages 8 to 15. Maths Tables and Formulae are provided on pages 17 to 21. These pages are detachable for ease of reference. The list of verbs as published in the syllabus is given for reference on the inside back cover of this question paper. Write your candidate number, the paper number and examination subject title in the spaces provided on the front of the answer book. Also write your contact ID and name in the space provided in the...
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...Finance 3101: Financial Management Syllabus (Spring 2013) Section: 101 Time/Room: TR 12:30 P.M. – 1:50 P.M. / 208 Ambler Learning Ctr. Course Coordinator: Dr. Howard Keen (“DRK”) Course Instructor: James Dooley Office Hours: By Appointment E-mail Address: jsdooley@verizon.net Office Telephone: 215-498-0157 Prerequisites |Economics 1101 (C051) and 1102 (C052); Accounting 2102 (0002) or 2521. Statistics 2101 (C021) or 2103. Any exception to the foregoing prerequisites can | |only be approved by the Department Chair. | | | | | | | |Course Description | | | | | This course provides a survey of the financial problems associated with the life cycle of a business firm. Topics include: financial analysis and planning, capital budgeting, cost of capital, and the sources and uses of business funds. While the emphasis is on decision making within a corporate environment, the tools taught in this course are just as relevant to other forms of business organization and to personal financial management. Course Objectives ...
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...Financed NPV is calculated by discounting annual FCFs to present (end of fiscal/calendar 2001). Here unlevered required rate of return (cost of capital) is used as a discount factor. NPV of Project in $K is = $1,228K @ Discount Factor 15.8% Appropriate Discount Rate We think the appropriate discount rate should be equal to unlevered required rate of return (cost of capital) for the project. Procedure 1. Asset Beta of Twin = 1.50 … Given, Case Material Project Asset Beta = 1.50 2. Market Risk Premium = 7.2% …Given, Case Material 3. Risk-free Rate = 5.0% …Given, Case Material 4. Using CAPM, Discount Rate = 5.0% + 1.50X7.2% = 15.8% Appropriate Discount Rate = Cost of Capital = 15.8% Question 2] Value the project using the Adjusted Present Value (APV) approach, assuming the firm raises $750,000 of debt to fund the project and keeps the level of debt constant in perpetuity. Detailed calculations for project’s NPV using APV approach and assuming $750K of debt in perpetuity is summarized in APPENDIX II. Procedure, Two-part Solution 1. Part I – NPV of Project assuming 100% Equity Financed. This NPV is same as in APPENDIX I using discount factor = 15.8% 2. Part II – NPV of Interest Tax Shield (ITS). ITS CFs are calculated using ITS = Debt X Cost of Debt X Tax Rate. Since debt levels are held constant in...
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...= ln (2) t= ln2ln(1+r)= ln2ln(1+0,07)=10.245 years (b) How many years would it take for $10,000 to grow into $1 million dollars in real terms? FV = PV (1+r)t 1,000,000 = 10,000 (1+0,07)t t ln (1+0,07) = ln (100) t= ln100ln(1+0,07)=68,06 years Problem 2. (a) Using the present value formula, explain why stocks are considered a good hedge against inflation. In the long run, common stocks should prove a good hedge against inflation. Ideally, expenses, income and corporate earnings should behave at least as good as inflation and so should stock prices, usually these price changes can be transferred to the consumer. Second of all, stocks usually incorporate a “growth factor” which usually goes in agreement with economic trends. Economies grow, and what investors expect is that companies will grow too. Using the present value formula, inflation has two components. A higher inflation should perpetuate a rise in expected future dividends as well as a rise in discount rates (r ) which account for higher inflation and a reduced purchasing power parity, therefore neutralizing the effect by making returns to be again lower. As interest rates decrease, people borrow money, spend more and...
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...BUS 530 FINancial Management Exam 1 Sample Questions Part I MULTIPLE CHOICE QUESTIONS ( ) 1. The principal-agent problem A. Occurs when managers have more incentive to maximize profits than the stockholders-owners do. B. Would not arise if the owners of the firm had complete information about the activities of the managers. C. In financial markets helps to explain why equity is a relatively important source of finance for American business. D. All of the above. E. Only A and B of the above. ( ) 2. In a partnership form of organization, income tax liability, if any, is incurred by: A. The partnership itself. B. The partners individually. C. Both the partnership and the partners. D. Neither the partnership nor the partners. ( ) 3. One common reason for partnerships to convert to a corporate form of organization is that the partnership: A. Faces rapidly growing financing requirements. B. Wishes to avoid double taxation of profits. C. Has issued all of its allotted shares. D. Agreement expires after ten years of use. ( ) 4. When a corporation fails, the maximum that can lose by an investor protected by limited liability is: A. The amount of the initial investment. B. The amount of the profit on the investment. C. The amount necessary to pay the corporation's debts. D. The amount of the investor's personal wealth. ( ) 5. Which of the following is not an advantage to incorporating a business? A. Easier access to financial markets...
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...Chapter 1 Multiple Choice Questions 1. This book is mainly about A) financial decisions made by households B) financial decisions made by corporations C) financial decisions made by governments D) none of the above Answer: B Type: Easy Page: 3 2. Finance, generally, deals with A) money B) markets C) people D) all of the above Answer: D Type: Easy Page: 3 3. The following are examples of the United States-based corporations except: A) General Motors B) Microsoft C) Bank of America D) Unilever Answer: D Type: Easy Page: 3 4. The following are examples of foreign-based corporations except: A) British Petroleum B) Volkswagen C) General Electric D) Sony Answer: C Type: Easy Page: 3 5. Businesses can be organized as A) sole proprietorships B) partnerships C) corporations D) any of the above Answer: D Type: Easy Page: 3 6. Generally, a corporation is owned by the: A) Managers B) Board of Directors C) Shareholders D) All of the above. Answer: C Type: Easy Page: 3 7. Limited liability...
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...make profits. The contents of the paper will examining Sensitivity Analysis, Weighted Average Cost of Capital (WACC), multiple valuation techniques in reducing risks, calculate NPV for future cash flows and work out pro forma cash flow budget for the next five years for the organization and analyze the companies projected earnings (UOP, 2009). Analysis of Different Alternatives Guillermo has three available alternatives to evaluate the furniture store. First alternative is to keep itself in the current position. The current managers use capital budgeting techniques to find the best project among the group of projects. Current budget for Guillermo is $42,577 net income before taxes could observe capital markets for just a short time to convince consumer the market rates are not at a constant. Guillermo has to pay his laborer the amount of $20 to $30 an hour including overtime to perform the amount of work necessary to have quality furniture for consumers to choose from. However, only one expected/required return for a given risk level in an efficient capital market (Emery, Finnerty, and Stowe p. 189). Second alternative is the Hi-Tech...
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...Capital (CON) Cost of Equity The cost of equity is comprised the cost of preferred stock and common stock. In this case, I am willing to focus on the cost of common stock because Nike did not pay any dividend after June 30, 2001(see Exhibit 4). The cost of common stock is the return needed on the stock by shareholders in which investors discount the expected dividends of the firm to ascertain its share price. To perceive this definition, let me bring you an example: Assume you want to invest on the stock of Nike, Inc. Your expected return is 12% for one year. The current share price is $42. Your benefit of the investment to purchase one share will be $5.04. If the company pay the dividend of $2.04 per share annually, the share value should increase to $45 in the next year to secure your benefit ($5.04). Therefore, the cost of equity is to cope with the risk of share price’s changes and the dividends paid by the company. There are two techniques to obtain the cost of equity as follows: 1) Capital Asset Pricing Model (CAPM) As you know, the Capital Asset Pricing Model (CAMP) establishes a rational relationship between Non-Diversifiable risk and return of all assets due to all companies can eliminate or decrease Diversifiable risk by playing on the type and return of assets. Here is the formula of CAPM: Rs = Rf + [ b * (Rm – Rf)] Where: Rs: Cost of equity Rf: Risk – free rate of return (commonly measured by the return on a U.S. Treasury bill) Rm: market...
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...Exercise 14-2 1. Discount = Par value - Issue price = $90,000 - $85,431 = $4,569 2. Total bond interest expense over the life of the bonds |Amount repaid | | | Six payments of $3,600 |$ 21,600 | | Par value at maturity | 90,000 | | Total repaid |111,600 | |Less amount borrowed | (85,431) | |Total bond interest expense |$ 26,169 | or: |Six payments of $3,600 |$ 21,600 | |Plus discount | 4,569 | |Total bond interest expense |$ 26,169 | 3. Straight-line amortization table | |Semiannual |Unamortized Discount |Carrying | | |Period-End | |Value | |(0) | 1/01/2011 |$4,569 |$85,431 | |(1) | 6/30/2011 | 3,807 ...
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...rate of return on the stock. Hint: consult pages 396-397 of your text book for correct formula. Please consult your syllabi for assignment grading criteria. 1. What is the stock’s value? In order to determine the stock’s value. I used the formula in the text E(P0)= D0 x [1 + E(g)] / R(Re) – E(g). In which D0 represents the most recent dividend, which has already been paid = $, E(g) represents the expected growth rate in dividends in the future=5%, and R(Re) represents the expected rate of return on the stock=15%. Therefore the formula is as follows: E(P0)= $2.00 x [1 + .05] / .15 - .05= E(P0)=$2.00 x 1.05 / .10= E(P0)= $2.10 / .10= $21.00 The stock’s value is $21.00 2. Suppose the riskiness of the stock decreases, which causes the required rate of return to fall to 13%. Under these conditions, what is the stock’s value? The formula used above would again be used in this situation, however the R(Re) which represents the expected rate of return on the stock now=13%. Therefore the formula is now as follows: E(P0)= $2.00 x [1 + .05] / .13 - .05= E(P0)=$2.00 x 1.05 / .08 E(P0)= $2.10 / .08= $26.25 The stock’s value is $26.25 3. Return to the original 15% required rate of return and assume a dividend growth rate estimate increase to 7% per year, what is the stock value? The formula used above would again be used in this situation, however the E(g) which represents the expected growth rate in dividends in the future is now increased to=7%. Therefore the...
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...Running Head: COMPANY VALUATION Company Valuation [Name of writer] [Name of institute] Company Valuation Introduction This is the case of a partnership business, Midwest Lightning Inc. (MLI) partnered between two entrepreneurs Jack Peterson and David Scott. Over the years these two partners have developed differences, which have escalated to the point of separation. Hence, in this assignment we are going to provide solution that would be required as the partnership culminates. Overview of the case The partners of the company Midwest Lightning have over the years developed differences and they are now at complete 180 degrees when it comes to their views about the business. The solution that has been suggested is that the partnership should end as the differences have become irreconcilable. In the course of separation, various issues have now arisen, regarding the valuation of the company and how much worth each partner should be accrued in the event of separation. 1) Evaluation of the company-Buy and Sell bids Allen Burke, the accountant of Jack Peterson and David Scott suggested a bid agreement. The agreement finalised was that both owners had agreed on the signing of a mutual buyout agreement. The agreement mentioned that the owners were to submit a secret bid in relation to what the other owner’s half of the business should be. The partner that would offer the maximum price would then buy out the share of other partner. A minimum...
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...you’re the inspiration, and to Diana and Jimmy, with joy and pride. Craig CONTENTS Preface PART 1 TIME VALUE OF MONEY Chapter 1 Single Cash Flow 1.1 Present Value 1.2 Future Value Problems Chapter 2 Annuity 2.1 Present Value 2.2 Future Value 2.3 System of Four Annuity Variables Problems Chapter 3 Net Present Value 3.1 Constant Discount Rate 3.2 General Discount Rate Problems Chapter 4 Real and Inflation 4.1 Constant Discount Rate 4.2 General Discount Rate Problems Chapter 5 Loan Amortization 5.1 Basics 5.2 Sensitivity Analysis Problems PART 2 VALUATION Chapter 6 Bond Valuation 6.1 Basics 6.2 By Yield To Maturity 6.3 System Of Five Bond Variables 6.4 Dynamic Chart Problems Chapter 7 Stock Valuation 7.1 Two Stage 7.2 Dynamic Chart Problems Chapter 8 The Yield Curve 8.1 Obtaining It From Bond Listings 8.2 Using It To Price A Coupon Bond 8.3 Using It To Determine Forward Rates Problems Chapter 9 U.S. Yield Curve Dynamics 9.1 Dynamic Chart Problems PART 3 CAPITAL BUDGETING Chapter 10 Project NPV 10.1 Basics 10.2 Forecasting Cash Flows 10.3 Working Capital 10.4 Sensitivity Analysis Problems Chapter 11 Cost-Reducing Project 11.1 Basics 11.2 Sensitivity Analysis Problems Chapter 12 Break-Even Analysis 12.1 Based On Accounting Profit 12.2 Based On NPV Problems Chapter 13 Three Valuation Methods 13.1 Adjusted Present Value 13.2 Flows To Equity 13.3 Weighted Average Cost of Capital Problems PART 4 FINANCIAL PLANNING Chapter...
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