Fin 534 Homework Set 21127

FIN 534 – Homework Set #2 Use the following information for Questions 1 and 2: Years0 1 2 3 Cash Flow $(50.00) $100.00 $75.00 $50.00 rate = 0.10 Present Value = $127.69 0.944553% Periods/Months = 9 Payment= 0Present Value = -100 October 1 (Future Value) = $108.83 Use the following information for Questions 3 and 4: Years to Mat: 10 Coupon rate: 9% Annual Pmt: $90.00 Current price: ($887.00) Discount Par value = FV: $1,000.00 10.91% Years to Mat: 10 Coupon rate: 9% Annual Pmt: $90.00 Current price: ($1,134.20) Premium Par value = FV: $1,000.00 7.08% Years to Mat: 10 Coupon rate: 9% Annual Pmt: $90.00 Current price: ($887.00) Discount Par value = FV: $1,000.00 10.91% Current Yield = 10.15% Capital Gains Yield = 0.77% Years to Mat: 10 Coupon rate: 9% Annual Pmt: $90.00 Current price: ($1,134.20) Premium Par value = FV: $1,000.00 7.08% Current Yield = 7.94% Capital Gains Yield = -0.85% Assume that you are nearing graduation and have applied for a job with a local bank. The bank’s evaluation process requires you to take an examination that covers several financial analysis techniques. The first section of the test asks you to address these discounted cash flow analysis problems: 1. What is the present value of the following uneven cash flow stream −$50, $100, $75, and

FIN 534 – HOMEWORK SET 1 2 Homework Set 1 Calculating of the free cash flows and financial ratios asses the financial strength of a firm. The purpose of management is wealth maximization of shareholder’s wealth hence determining how a business operates and sustains itself is critical. Financial statements and financial ratios are essential data for managers in their strategy to reach the goal of wealth maximization. What is the Free Cash Flow for 2013? Income Statements and Balance Sheet Balance Sheet 2013 2012 Cash $ 9,000 $ 7,282 Short-term investments 48,600 20,000 Accounts receivable 351,200 632,160 Inventories 715,200 1,287,360 Total current assets $ 1,124,000 $ 1,946,802 Gross fixed assets 491,000 1,202,950 Less: Accumulated depreciation 146,200 263,160 Net fixed assets 344,800 939,790 Total assets $ 1,468,800 $ 2,886,592 Liabilities and Equity Accounts payable $ 145,600 $ 324,000 Notes payable 200,000 720,000 Accruals 136,000 284,960 Total current liabilities $ 481,600 $ 1,328,960 Long-term debt 323,432 1,000,000 Common stocks (100,000 shares) 460,000 460,000 Retained earnings 203,768 97,632 Total equity $ 663,768 $ 557,632 Total liabilities and equity $ 1,468,800 $ 2,886,592

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