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Corporate Finance
FINC600 Week 1 Assignment - Homework Problems
FINC600 Week 2 Assignment - Homework Problems
FINC600 Week 3 Assignment - Homework Problems
FINC600 Week 4 Assignment - Homework Problems
FINC600 Week 5 Assignment - Homework Problems
FINC600 Week 6 Assignment - Homework Problems
FINC600 Week 7 Assignment - Homework Problems
FINC600 Week 1 Practice Quiz
FINC600 Week 2 Practice Quiz
FINC600 Week 3 Practice Quiz
FINC600 Week 4 Practice Quiz
FINC600 Week 5 Practice Quiz
FINC600 Week 6 Practice Quiz
FINC600 Week 7 Practice Quiz
FINC600 Week 8 Practice Quiz
FINC600 Midterm Quiz
FINC600 Week 1 Assignment - Homework Problems
Assignment Instructions
Complete the following problems in Microsoft Excel. Your work must be completed in the attached template.
Chapter 1: 1-6, 1-8
Chapter 2: 2-9, 2-12Chapter 3: 3-3, 3-4
Computations must be solved using Excel. Show all your work to earn partial credit. Essay questions require references.Submit to Assignments by midnight ET, Day 7 (Sunday).
1-6
In most large corporations, ownership and management are separated. What are the main implications of this separation?
1-8
We can imagine the financial manager doing several things on behalf of the firm’s stockholders. For example, the manager might:
a. Make shareholders as wealthy as possible by investing in real assets.
b. Modify the firm’s investment plan to help shareholders achieve a particular time pattern of consumption.
c. Choose high- or low-risk assets to match shareholders’ risk preferences.
d. Help balance shareholders’ checkbooks.
But in well-functioning capital markets, shareholders will vote for only one of these goals. Which one? Why?
2-9
A. The cost of an automobile is $10,000. If the interest rate is 5%, how much would you have to set aside now to provide this sum in five years?
B. You have to pay $12,000 a year in school fees at the end of each of the next six years. If the interest rate is 8%, how much do you set aside today to cover these bills?
C. You have invested $60,476 at 8%. After paying the above school fees, how much would you remain at the end of six years?
2-12
What is the PV of $100 received in:
A. Year 10 (at a discount rate of 1%)
B. Year 10 (at a discount rate of 13%)
C. Year 15 (at a discount rate of 25%)
D. Each of years 1 through 3 (at a discount rate of 12%)?
3-3
In February 2009 Treasury 6s of 2026 offered a semiannually compounded yield of 3.5965%. Recognizing that coupons are paid semiannually, calculate the bond's price.
3-4
Here are the prices of three bonds with 10-year maturities:
Bond Coupon (%) Price (%)
2 81.62
4 98.39
8 133.42
If coupons are paid annually, which bond offered the highest yield to maturity?
Which had the lowest?
Which bonds had the longest and shortest durations?
FINC600 Week 1 Practice Quiz
Corporate Finance
Week 1 Practice Quiz
Question 1 of 15
As a legal entity a corporation can perform the following functions except: I) borrow money; II) lend money; III) sue and be sued; IV) vote
A.I and II only
B.I, II, and III only
C.IV only
D.I, II, III and IV
Question 2 of 15
A firm's investment decision is also called the:
A. Financing decision
B. Liquidity decision
C. Capital budgeting decision
D. None of the above
Question 3 of 15
The following are important functions of financial markets: I) Source of financing; II) Provide liquidity; III) Reduce risk; IV) Source of information
A.I only
B.I and II only
C.I, II, III, and IV
D.IV only
Question 4 of 15
The mixture of debt and equity, used to finance a corporation is also known as:
A. Capital budgeting
B. Capital structure
C. Investing
D. Treasury
Question 5 of 15
The following are some of the actions shareholders can take if the corporation is not performing well:
A. Replace the board of directors in an election.
B. Force the board of directors to change the management team.
C. Sell their shares of stock in the corporation.
D. Any of the above
Question 6 of 15
Major disadvantages of the Sarbanes-Oxley Act of 2002 (SOX) are the following except:
A. good investor protection
B. increase in compliance costs
C. that it constrains managers' ability to run the firm
D. that it may discourage development of human capital in the firm
Question 7 of 15
Present Value is defined as:
A. Future cash flows discounted to the present at an appropriate discount rate
B. Inverse of future cash flows
C. Present cash flow compounded into the future
Question 8 of 15
Present Value of $100,000 that is, expected, to be received at the end of one year at a discount rate of 25% per year is:
· $80,000
B. $125,000
C. $100,000
D. None of the above
Feedback: PV = (100,000)/(1 + 0.25) = 80,000
Question 9 of 15
If the present value of a cash flow generated by an initial investment of $200,000 is $250,000, what is the NPV of the project?
· $250,000
B. $50,000
C. $200,000
D. None of the above
Feedback: NPV = -200,000 + 250,000 = 50,000
Question 10 of 15
According to the net present value rule, an investment in a project should be made if the:
A.Net present value is greater than the cost of investment
B.Net present value is greater than the present value of cash flows
C.Net present value is positive
D.Net present value is negative
Question 11 of 15
An annuity is defined as
A. Equal cash flows at equal intervals of time for a specified period of time
B. Equal cash flows at equal intervals of time forever
C. Unequal cash flows at equal intervals of time forever
D. None of the above
Question 12 of 15
The concept of compound interest is most appropriately described as:
A. Interest earned on an investment
B. The total amount of interest earned over the life of an investment
C. Interest earned on interest
D. None of the above
Question 13 of 15
The following entities issue bonds to raise long-term loans except:
A. The federal government
B. State and local governments
C. Companies
D. Individuals
Question 14 of 15
A 5-year treasury bond with a coupon rate of 8% has a face value of $1000. What is the semi-annual interest payment? Annual interest payment = 1000(0.08) = $80; Semi-annual payment = 80/2 = $40
A. $80
B. $40
C. $100
D. None of the above
Feedback: Annual interest payment = 1000(0.08) = $80;
Semi-annual payment = 80/2 = $40
Question 15 of 15
A bond with duration of 10 years has yield to maturity of 10%. This bond's volatility is:
A.9.09%
B.6.8%
C.14.6%
D.6.0%
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