Finance Paper

2430 words - 10 pages

College of Business and Finance
The MBA Program
Financial Management (FINC 501)
1st Semester (2012/2013)
Final Exam

Instructor: Dr. Wajeeh Elali
Date: December 13, 2012
Time: 6:00pm -8:00pm

|Student Name: |
|Student ID: |

***Suggested Solutions***
INSTRUCTIONS:
□ This is a CLOSED BOOK examination.
□ You are allowed TRANSLATION dictionaries ONLY.
□ You are permitted noiseless, non-programmable CALCULATORS.
□ You may use the opposite side of the paper for any rough work.
□ This ...view middle of the document...

Chapter 18 of this text has more to say on this topic.

This means it is morally right for managers to strive to maximize shareholder wealth, or the stock price, and morally wrong not to do so. When managers shirk their duties, or consume excessive perks, this is morally wrong. Maximizing shareholder wealth subject to ethical constraints is more than just a good idea—it is the right thing to do.

2 What are sunk costs? Give an example. Should we include sunk costs in the cash flow forecasts of a project? Why or why not?
Answer:

In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered. Thus, should not be included in the cash flow forecasts. Example: Marketing Research.

3. The market prices of several corporate bonds with face values of $1000 are summarized in the following table:

|Corporate Bond |Price |Trading Status |
|IGA |$1,090.75 |? Premium Bond |
|CISCO |$976.50 |? Discounted Bond |
| BMB |$1,000 |? Par Bond |
|TNN |$858.25 |? Discounted Bond |

For each bond, state whether it trades at a discount, at par, or at a premium.

Answer: Bond IGA trades at a premium. Bonds CISCO and TNN trade at a discount. Bond BMB trade at par.
Part II
Multiple Choice (45 marks)
Show ALL CALCULATIONS. Answers without supporting calculations will be deemed a guess and will not receive any credit.

1. You plan to invest some money in a bank account. Which of the following banks provides you with the highest effective annual rate of interest (EAR)?

a. GPR Bank; 12% with annual compounding.
b. ABS Bank; 12% with monthly compounding.
c. RBC Bank; 12% with quarterly compounding.
d. CBC Bank; 12% with daily compounding

Answer: d
Solution:
By inspection, we can see that d dominates a, b, and c because, with the same interest rate, the account with the most frequent compounding has the highest EAR. Thus, the correct answer must be d.

a. = (1+0.12/1)1 – 1 = 6.000%
b. = (1+0.12/12)12 – 1 = 6.167%
c. = (1+0.12/4)4 – 1 = 6.061%
d. = (1+0.12/365)365 – 1 = 6.183%

2. A firm with a minimum attractive rate of return (MARR) of 13% is evaluating four engineering projects. The internal rates of return (IRR) are as follows:

|Project |IRR |
|1 |12% |
|2 |15% |
|3 |14% |
|4 |10% |

The firm should

a. Accept project 3 and 1, and reject 2 and 4.
b. Accept project 1, 2,...

Other Papers Like Finance Paper

Micro Finance Essay

5439 words - 22 pages cooperatives have failed in brining financial inclusion and economic liberation. The present paper is a modest attempt in direction to study myths and realities associated with micro finance in the state. The paper explores the issues which have made micro-finance as a myth some and reality for some. Methodology: The study is based on the different studies and literature based on micro-finance. The data are collected primarily from secondary

Finance Assignment

4181 words - 17 pages JOURNAL OF ECONOMICS AND FINANCE EDUCATION  Volume 9  Number 2  Winter 2010 29 Using Microsoft Corporation to Demonstrate the Optimal Capital Structure Trade-off Theory John C. Gardner, Carl B. McGowan Jr., and Susan E. Moeller1 ABSTRACT In this paper, we apply the trade-off theory of capital structure to Microsoft. We use data for bond ratings, bond risk premiums, and levered CAPM betas to compute the cost of equity and the weighted

Corporate Finance

8553 words - 35 pages REPURCHASE & THE COST OF EQUITY CAPTIAL If a firm repurchases shares, then demand will increase in the market, which will lower the cost of equity capital. Thereby making financing through equity more cost effective (Finance Help Desk aka Vinnie, John, & Genevieve). 15) Financial disintermediation and the commercial paper market: Genevieve Term: Financial disintermediation and the commercial paper market Disintermediation

Managerial Finance

2413 words - 10 pages FIN-515 (Managerial Finance) Project Part A May 20, 2016 This paper is aimed at examining the financial statements of two companies namely Coca Cola and Pepsi which produce almost similar products, listed in the same stock market and fall within the same industry group. The rivalry between the two companies dates back a century and this debacle sometimes get personal and resonates in their marketing. The Pepsi brand suffered

Finance Description

3207 words - 13 pages FINANCE 305 : ESSENTIALS OF INVESTMENTS CHAPTER 1: Investments: Background and Issues. REAL ASSETS – assets used to produce goods and services. FINANCIAL ASSETS – claims on real assets or income generated by them. FIXED INCOME (DEBD) SECURITIES – are securities that pay a specified cash flow over and specific period. EQUITY – an ownership share in a corporation. DERIVATIVE SECURITIES – securities providing pay offs that depend on the

Basic Principles Of Finance

1067 words - 5 pages money with interest at fixed intervals. Thus a bond is like a loan: the holder of the bond is the lender the issuer of the bond is the borrower, and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Certificates of deposit or commercial paper are considered to be money market instruments and not bonds.

Real Estate Finance

1157 words - 5 pages and pillar industry of the national economy. However, China's real estate industry, compared with developed countries, is still in the initial stage of capital and technology. For the listed companies at this stage, having broad funding channels and effective management is the key to business success. Because of this, the financing structure has been an important research topic in the field of finance. And this research also has important

Finance

665 words - 3 pages Financial statements are the most common tool used for making business decisions. They consist of the balance sheet, income statement and statement of cash flows. The analysis tools used affect all aspects of a company not just a few. A systematic review of the resources a company used to achieve its mission is cost control. Cash flow should be kept at necessary levels for operations is one of the major benefits of cost control. It is a very

Finance

535 words - 3 pages FI 516 Week 1 Homework Chapter 14 Residual Dividends Middlesex Plastics Manufacturing had 2011 net income of $15.0 million. Its 2012 Net Income is forecast to increase by 8%. The company’s capital structure has been 35% Debt and 65% Equity since 2012, and the company plans to maintain this capital structure in 2012. 1. If Middle sex increases its cash dividends in 2012 at the same rate of growth as its Net Income rate, what will be

Finance

2438 words - 10 pages FIN 470 Exam1 - KEY 1. What is the primary disadvantage of the corporate form of organization? Name at least two advantages of corporate organization. The primary disadvantage of the corporate form is the double taxation to shareholders of distributed earnings and dividends. Some advantages include: limited liability, ease of transferability, ability to raise capital, and unlimited life. 2. Evaluate the following statement

Finance - 732 words

732 words - 3 pages ASSINGNMENT NO .1 TOPIC: FINANCIAL ANALYSIS (MUNDRA PORT) SUBMITTED TO: Mr Sachin Kyashap SUBMITTED BY: Jasneet Kaur COURSE: MBA (1ST YR) ROLL NO: Q3103 (B) 33 About the company Mundra Port and Special Economic Zone Limited (MPSEZL) is the developer and operator of the Mundra Port, one of the leading commercial private sector ports in India. The port is located in the Kutch District of Gujarat, on the northwest coast of India. The

Related Essays

Finance Essay 4674 Words

4674 words - 19 pages to be quite as fast-paced as Sales & Trading. MYTH OR ? REALITY Will a job in banking make me millions? You may earn more than in another industry, but a private jet will still be a stretch. • you will need to take professional exams “To be successful, you must be able to demonstrate passion for your work. Genuine passion is hard to fake.” WHAT IS CORPORATE FINANCE? Corporate Finance delivers the strategic advice and

Finance Essay 2403 Words

2403 words - 10 pages long-term debt ... This indicator PROVEN us well as the company G is one that sells on the Internet to start to need to take a certain number of credits in order to maintain its purchasing strategy. Company H and better established leader in their field does not need to borrow to make a profit at the end of the year. Thus according to the study conducted the first paragraph corresponds to H and the second company to company G Paper Products

Finance Essay 4709 Words

4709 words - 19 pages Copyright © Oxford Management Publishing 2009 Corporate Strategy Analysis: General Electric Co. (1981–2008) – A Case Study Stanislav Bucifal Introduction The General Electric Company (GE) is widely regarded as one of the world’s most successful corporations of the 20th century. This paper aims to analyse critically the corporate strategy of GE during the period from 1981 to 2008 under the leadership of two very different but equally

Finance Essay 3301 Words

3301 words - 14 pages Pharmaceuticals Ltd. 2. To identify and analyze Square Pharmaceuticals Policy measures that influences the flow of profit. 3. To identify different factors that affect profit earnings of Square Pharmaceuticals Ltd. 2.3. Scope and limitation of the study: There are huge scopes to work in this field. The scope & exposure of the paper has been wide ranging. The study, profitability analysis of “Square Pharmaceutical Ltd” has covered