BUSN 5200 Week 1 to 8
Homework
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BUSN 5200 Week 1 Homework
1. Describe the field
of finance. How is it different from the
field of accounting?
2. In a typical
corporation the finance function is divided into two divisions, or
departments. What are they? What does each department do?
3. What are the three
forms of business generally encountered in the US? What are the main defining characteristics of
each?
4. What is the basic
financial goal of a business?
5. In the context of
a corporation seeking to maximize the wealth of its owners, how is “wealth”
defined?
6. What are the three
main factors affecting the market price of a corporation’s stock?
7. What’s wrong (if
anything) with saying the basic financial goal of a business is to “maximize
profits?”
8. How would you
state the basic goal of a non-profit firm?
9. The Internet
company Google managed to avoid $2 billion in international income taxes in
2011 by moving a hefty sum of its revenues to subsidiaries in Bermuda,
according to CNBC, which cited a report by Bloomberg.[1] The search giant reportedly stashed $9.8
billion in revenues to its shell company in Bermuda — which doesn't have a
corporate income tax — last year allowing the company to shave its overall tax
rate by almost 50 percent. Google's Bermuda
move was disclosed in a Nov. 21 filing by a subsidiary in the Netherlands.
While the company's move to shift funds to the country was legal, it could spur
the growing global criticism of corporate tax avoidance. What do you think? Is Google’s action ethical? Why or why not?
10. What is “the
agency problem?”
BUSN 5200 Week 2 Homework
Assignment
- Define the process of accounting.
- What are the three major divisions in the accounting field?
- What is the Fundamental Accounting Equation?
- What is the purpose of a balance
sheet? What are some examples
of typical balance sheet accounts?
- What is the purpose of an income
statement? What are some
examples of typical income statement accounts?
- What is the purpose of a statement
of cash flows? What are some
examples of typical statement of cash flow accounts?
·
7. Based on the financial information below,
prepare an income statement and a balance sheet for Joe’s-Fly-by-Night Oil
company for the year ended December 31, 2012.
Unless otherwise indicated, assume all information below is either for
the year 2012 or as of December 31, 2012.
BUSN5200 Week 3 Homework Assignment
For Week 3, please complete the following for Joe’s
Fly-By-Night Oil Company, whose latest income statement and balance sheet are
shown below:
• Prepare a graph of sales and net income for
the years 2009 – 2012. For the purposes
of this exercise, assume the following historical sales and net income figures
for Joe’s Fly-By-Night Oil:
o
o
The following graph
illustrates trends in population growth compared to the price of gas:
o
Another factor that can affect the company’s
sales is the price of oil. The following
graph illustrates gas and crude oil prices:
• Prepare a pie chart of Joe’s Fly-By-Night
Oil’s expense distribution for 2012 and comment on the results displayed.
o
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Prepare a pie chart of Joe’s Fly-By-Night Oil’s
asset distribution for Dec 31, 2012 and comment on the results displayed.
o
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Prepare a pie chart of Joe’s Fly-By-Night Oil’s
capital structure for Dec 31, 2012 and comment on the results displayed.
o
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BUSN5200 Week 4 Homework Assignment
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For Week 4, please complete the following for
Joe’s Fly-By-Night Oil Company, whose financial statements are shown below:
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• Prepare a ratio analysis for the fiscal year
ended Dec 31, 2012. Organize your
analysis per the following outline:
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BUSN5200 Week 5
Homework Assignment - Copy
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Question 1. Prepare a budget for
this year for the Administrative Department at Tom’s Toyota Company based on
the following information:
Question 2. Define a “Static
Budget.”
Question 3. Define a “Flexible
Budget.”
Question 4. Define the term
“Zero-based Budgeting.”
Question 5. Define “Period
Budgets.”
Question 6. Define “Rolling
Budgets.”
·
Question 7. Big Bob's
Discount Appliances expects sales of $5,000, $5,000, and $10,000 during April,
May, and June (big sale in June). To
build business, Big Bob lets all customers buy on credit, and all do so. In the past, 50% of Big Bob's sales have been
collected during the month of sale, 40% are collected the following month, and
10% the month after that. If this trend
continues, what will be Big Bob's total cash collections in the month of June?
Question 8. Little Louie’s
expects to have $100 in cash on hand at the beginning of June, and the
company's target cash balance is $100.
Net cash flow for June is minus $300.
Assuming that Little Louie’s borrows to meet short‑term cash needs and
pays back as soon as surplus cash is available, what will be the company's
ending cash balance after financing at the end of June?
Question 9. Ma & Pa
Kettle’s Chili Company has begun selling a new chili recipe and they want you
to help them with next year’s budgeted financial statements. Using the worksheet below, complete Ma &
Pa’s forecast and answer the questions which follow.
Assumptions:
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BUSN5200 Week 6 Homework Assignment
For Week 6,
please turn in the answers to the following questions:
- Why do we say money has time value?
2.
Why is it important for business managers to be familiar with time value
of money concepts?
3.
Define Present Value.
4.
Define Future Value.
5.
What are present value and future value interest factors? (as in PVIF and FVIF)
6.
(calculating future value) You
buy a 6 year, 8% CD for $1,000. Interest
is compounded annually. How much is it
worth at maturity?
7.
(calculating present value)
What's the present value of $1,000 to be received in 8 years? (Your required rate of return is 7% a year.)
8.
(calculating the rate of return)
A friend promises to pay you $600 two years from now if you loan him
$500 today. What interest rate is your
friend offering you?
9.
(calculating the future value of an annuity) If you invest $100 a year for 20 years at 7%
annual interest, how much will you have at the end of the 20th year?
10.
(calculating the present value of an annuity) How much would you be willing to pay today
for an investment that pays $800 a year at the end of the next 6 years? (Your required rate of return is 5% a year.)
Case Study Tasks:
1. Refer to the Case Study topic lecture on the
Week 5 Content page. Using the information you obtained last week, complete the
Part 3, Ratio Analysis
BUSN5200 Week 7 Homework Assignment
1. (Monthly compounding) If you bought a $1,000 face value CD that
matured in nine months, and which was advertised as paying 9% annual interest,
compounded monthly, how much would you receive
when you cashed in your CD at maturity?
2. (Annualizing a monthly rate) You credit card statement says that you will
be charged 1.05% interest a month on unpaid balances. What is the Effective Annual Rate (EAR) being
charged?
3. (FV of annuity due) To finance your newborn daughter’s education
you deposit $1,200 a year at the beginning of each of the next 18 years
in an account paying 8% annual interest.
How much will be in the account at the end of the 18th
year?
4. (Rate of return of an annuity) Paul's Perfect Peugeot says they'll sell you
a brand new Italian “Iron Man” motor scooter for $1,699. Financing is available, and the terms are 10%
down and payments of $46.57 a month for 40 months. What annual interest rate is Paul
charging you?
5. (Rate of return of an annuity) You would like to have $1,000,000 40 years
from now, but the most you can afford to invest each year is $1,200. What annual rate of return will you have to
earn to reach your goal?
6. (Monthly loan payment) Best Buy has a flat-screen HDTV on sale for
$1,995. If you could borrow that amount
from Carl's Credit Union at 12% for 1 year, what would be your monthly
loan payments?
12%/year =
1%/month
7. (Solving for an annuity payment) You would like to have $1,000,000 accumulated
by the time you turn 65, which will be 40 years from now. How much would you have to put away each year
to reach your goal, assuming you're starting from zero now and you earn 10%
annual interest on your investment?
8. (PV of a perpetuity) If your required rate of return was 12% a
year, how much would you pay today for $100 a month forever?
9. (PV of an uneven cash flow stream) what is
the PV of the following project?
(Assume r = 10%)
10. (FV of an uneven cash flow stream) what is
the FV at the end of year 4 of the following project?
(Assume r = 10%)
BUSN5200 Week 8 Homework Assignment
Question 1.
List the three steps that make up the general approach to capital
budgeting.
Question 2.
Define an “Incremental cash flow” as the term is used in capital
budgeting.
Question 3.
Your firm is considering buying a new machine that costs $200,000, is
expected to generate $110,000 in new revenue each year and will cost $45,000 a
year to operate. If your firm's marginal
income tax rate is 35% what is the Net Cash Flow your firm will realize from
the new machine during the first year?
Assume the MACRS depreciation rate for the machine for year 1 is 20%. Note - do not include the cost of the machine
in your answer.
Question 4. Define the payback period method in
capital budgeting and state the payback period decision rule.
Question 5. What is the payback period of the
following project?
Question 6:
a. What is the firm’s Breakeven
Point in units?
Question 7.
Define the Net present Value (NPV) method in capital budgeting and state
the NPV decision rule. In economic
terms, what does the NPV amount represent?
Question 8.
Your firm is looking at a new investment opportunity, Project Alpha,
with net cash flows as shown below.
Calculate project Alpha's Net Present Value (NPV), assuming your firm’s
required rate of return is 10%.
Question 9.
Define the Internal Rate of Return (IRR) method in capital budgeting and
state the IRR Decision rule.
Question 10.
Calculate the IRR of the project shown below.
Question 10.
Calculate the IRR of the project shown below.
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