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MGFD10H3 Study Guide - Midterm Guide: European Route E20, European Route E80

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orangemarten976
7 Jan 2016
School
UTSC
Department
Finance
Course
MGFD10H3
Professor
Derek Chau

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Document Summary

Question 1 (a) assets: (b) margin = 220,000/330,000 = 0. 67 (c) total assets = 75*3,000 + 600*pb. Will not receive a margin call. (d) loan balance on nov 1, 2009: 110,000* (1. 01)6 = 116,767. 22. Loan after sales of stock b: 116,767. 22 0. 5*(600)*(90) = 89,767. 22. , or when pa = 42. 75 (e) on may 1, 2010, you have. Amount withdrawn on nov 1, 2009 plus interest: 27,000*(1. 02)6. Stock a return = (80 75)/75 = 0. 0667. Ending value: 1* (1 + (0. 0667 + 0. 1)/2) = 1. 0833. Return = (6,450,000 5,850,000)/5,850,000 = 0. 1026 (iii) stock a return = (249 225)/225 = 0. 1067 (iv) ending value: 1* (((1. 1067)*(1. 1))0. 5) = 1. 1033. Question 3 (a) b = (100 20)/100 = 0. 8. Stock b return = (66 60)/60 = 0. 1. Ending value: 1* (1 + (0. 1067 + 0. 1)/2) = 1. 1033. Ucf (fcff) = 152. 86*(1 0. 3) + 40 60 15 = 72 (d)

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Related Questions

1. A discount factor:

A. Is the same as compounding future cash flow B. performs the reverse function of a compounding interest rate C. allows investors to quantify a figure which will assist them in comparing alternative investments D. b and c E. a, b and c

2. As the interest rate used to discount future cash flows is decreased present value of the future cash in-flows: A. increases B. decreases C. stays the same

3. Most bonds pay interest: A. monthly B. quarterly C. semi-annually D. annually E. none of the above

4. How much money will Jane have in 3 years if the money compounds at the annual rate of 10% and she sets aside $1000: A. $1300 B. $1331 C. $1406 D. $1420 E. None of the above

5. When performing sensitivity analysis:

A statistical methods should not be employed B. electronic spreadsheets make the job more manageable C. assumptions should be changed one at a time D. all of the above E. B and C

6. A differential analysis: A. can be used to compare an alternative to the status quo B. can be used to compare any set of alternative C. is easier to comprehend if a consistent frame of reference is employed D. B and C E. A, B, C

7. When projected assets are less than projected liabilities and equity the firm will have:

A a need for debt B. need for equity C. excess cash D. none of the above

8. If the bonds coupon rate is less than the general interest rate in the market the bond will sell at:

A premium B. discount C. neither A or B

9. Present value calculations: A. can help the creation of value B. can provide managers with a means of identifying the investment choices C. do not help the creation of value D. A and B E. B and C

10. When projected assets are more than projected liabilities and equity the plug will be:

A notes payable B. notes receivable C. cash D. none of the above

11. Earl is saving for a pair of jet skis, how much money must Earl put aside now to receive $14,000 six years from now if the money is compounding at an 8% annual compound rate:

A $8847 B. $8800 C. $8822 D. $8810 E. none of the above

12. Which of the following methods helps to size the investments: a. payback b. present value payback c. present value index d. irr e. none of the above

13. Jones company acquires the Mathis company. Jones is in a totally unrelated business to mathis. This is an example of: a. vertical integration b. horizontal integration c. diversification d. none of the above

14. The bond’s yield to maturity calculation is similar to a __________ calculation

a. NPV b. IRR c. payback d. discounted payback e. none of the above

15. If the bonds coupon rate is equal to the general interest rates in the market, the bond will sell at a: a. premium b. discount c. neither A nor B

16. synergy may result from: a. enhanced cash flow b. diversification c.excess cash d. all of the above

17. profit margin and asset turnover are combined to yield: a. EPS b.Payout c. ROA d.ROE e. none of the above

18. the ______matches revenues with expense for the entire accounting period: a, balance sheet b. cash flow statement c. statement of retained earnings d. income statement e. none of the above

19. which of the following would be included amoung the investment numbers of a capital budget? A. purchase price of the asset b. trade-in value of and asset being replaced c. investment tax credit from acquisition d. installation costs of the machinery e. all of the above

20. economic value is the same as: a. book value/net asset value b. owners equity c. none of the above

E13-5 Matching Each Ratio with Its Computational Formula LO 13-4, 13-5, 13-6, 13-7
Match each definition with its related ratios or percentages by selecting the appropriate letter in the drop down provided.
Definitions: Ratios or Percentages Definitions
A. Net Income (before extraordinary items) ÷ Net Sales 1 Profit margin
B. Days in Year ÷ Receivable Turnover ratio 2 Inventory turnover ratio
C. Net Income ÷ Average Stockholders’ Equity 3 Average collection period
D. Net Income ÷ Average Number of Shares of Common Stock Outstanding 4 Dividend yield ratio
E. Return on Equity − Return on Assets 5 Return on equity
F. Quick Assets ÷ Current Liabilities 6 Current ratio
G. Current Assets ÷ Current Liabilities 7 Debt-to-equity ratio
H. Cost of Goods Sold ÷ Average Inventory 8 Price/earnings ratio
I. Net Credit Sales ÷ Average Net Receivables 9 Financial leverage percentage E
J. Days in Year ÷ Inventory Turnover Ratio 10 Receivable turnover ratio
K. Total Liabilities ÷ Stockholders’ Equity 11 Average days’ supply of inventory
L. Dividends per Share ÷ Market Price per Share 12 Earnings per share
M. Market Price per Share ÷ Earnings per Share 13 Return on assets
N. [Net Income + Interest Expense (net of tax)] ÷ Average Total Assets 14 Quick ratio
O. Cash from Operating Activities (before interest and taxes) ÷ Interest Paid 15 Times interest earned
P. Net Sales Revenue ÷ Net Fixed Assets 16 Cash coverage ratio
Q. (Net Income + Interest Expense + Income Tax Expense) ÷ Interest Expense 17 Fixed asset turnover ratio

FIN36058 EXAM III NAME:
PROBLEMS
I. (15 points) You have purchased a call option contract on Smith & Smith common stock. The option contract is for 100 shares. The option has an exercise price of $43.00 and S & S’s stock currently trades at $40.00. The option premium is quoted at $2.00.
a. If S & S’s stock price rises to $44.00, while you exercise the option? Calculate your net profit/loss on the option contract if (5 points).
b. If S & S’s stock price rises to $48.00, while you exercise the option? Calculate your net profit/loss on the option contract if (5 points).
c. If the stock price rises to $42.00, would you exercise or not exercise the option and what would be your gain or loss (3 points)?
d. You will make a profit on the option if the S & S stock price rises above what amount (2 points)?
To earn a profit, you must recoup the price you paid for the call, plus the exercise price:
II. (13 points) Green Backs Bank wishes to take a position in Treasury bond futures contracts, which
currently have a quote of 96-240. Green Backs thinks interest rates will go down over the period of
investment.
a. Should the bank go long or short on the futures contracts (3 points)?
b. Given your answer to part (a), calculate the net profit to Tree Row Bank if the price of the futures
contracts increases to 99-160 (5 points).
c. Given your answer to part (a), calculate the net profit to Tree Row Bank if the price of the futures
contracts decreases to 94-080 (5 points).
III. (20 points) The financial statements for MHM Bank (MHM) are shown below:
a. Calculate MHM’s total operating income (3 points).
b. Calculate MHM’s asset utilization ratio (3 points).
c. Calculate MHM’s ROA (3 points).
d. Calculate the dollar value of MHM’s earning assets (3 points).
e. Calculate the dollar value of MHM’s interest-bearing liabilities (3 points).
f. Calculate MHM’s spread (3 points).
g. Calculate MHM’s net interest margin (3 points).
h. Calculate MHM’s interest expense ratio (3 points).
Balance Sheet MHM Bank
Assets
Liabilities and Equity Cash and due from banks $ 8,200 Demand deposits $ 35,600
Demand deposits at other FIs
9,100
Small time deposits
32,900 Investments 9,600 Jumbo CDs 12,000
Federal funds sold
9,400
Federal funds purchased
3,300 Loans (less reserve for loan losses of 10,400) 74,800 Other liabilities 16,200
Premises
8,900
Equity
20,000
Total assets
$
120,000
Total liabilities/equity
$
120,000
Income Items for MHM Bank
Interest income
$ 9,380 Interest expense 3,856
Provision for loan losses
7,800 Noninterest income 6,044
Noninterest expense
4,300 Taxes (credit) - 132