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Final Exam - Fall 2023

This document provides information about a final exam for a Master of Business Administration financial management course. The exam will take place in December 2023 and will be worth 25% of the student's grade. It contains 5 questions related to financial ratios, stock valuation, bond valuation, and capital structure. There are also 4 optional bonus questions about investment returns, annuity calculations, bond maturity, and project evaluation methods.

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hani.sharma324
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58 views5 pages

Final Exam - Fall 2023

This document provides information about a final exam for a Master of Business Administration financial management course. The exam will take place in December 2023 and will be worth 25% of the student's grade. It contains 5 questions related to financial ratios, stock valuation, bond valuation, and capital structure. There are also 4 optional bonus questions about investment returns, annuity calculations, bond maturity, and project evaluation methods.

Uploaded by

hani.sharma324
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Master of Business Administration (MBA)

Financial Management (FNCE 623)


Fall 2023 Final exam (25%) – Dec 2023 Time: 100 minutes

Student name: Student ID:


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1. Based on the following information:

For its most recent year a company had Sales (all on credit) of $83,000 and Cost of Goods Sold of
$52,500. At the beginning of the year, its Accounts Receivable were $8,000 and its Inventory was
$10,000. At the end of the year, its Accounts Receivable were $30,000 and its Inventory was $80,000
(above).

Calculate the following ratios:

a. Company working capital


b. Current ratio
c. Quick ratio
d. Inventory turnover
e. Receivable turnover

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2- Jackson Inc. will pay a 3.40 per share dividend next year. The company pledges to increase
its dividends by 4.5% per year indefinitly. If you require an 11% return on investment, how
much will you pay for the cppany’s stock today?

3- Big pond Inc. has an issue of preferred stock outstanding that pays a 4.7% dividend for the
next 11 years and will then cease paying dividend forever. If the required return on this stock is
10% what is the current share price?

4- To measure a firm's solvency as completely as possible, we need to consider

a. The firm's relative proportion of debt and equity in its capital structure
b. The firm's capital structure and the liquidity of its current assets
c. The firm's ability to use Net Working Capital to pay off its current liabilities
d. The firms leverage and its ability to make interest payments on its long-term debt
e. The firm leverage and its ability to turn its assets over into sales

Bonus Questions: ( optional)

1. Sina consulting Inc. invested $150,000 to help fund a company expansion project scheduled
for five years from now. How much additional money will they have five years from now if they
can earn 8% rather than 5.5% on this money?

2. How much should be deposited now if you wish to withdraw $14,500 monthly in perpetuity?
The annual interest rate is 9.5%.

3. NewVenture Inc. has an outstanding 4.5% semi-annual coupon bond with a current market
price of $878.90. The bond has a par value of $1,000 and a yield to maturity of 4.76%. How
many years is it until this bond matures?

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4. Belgravia Petroleum Inc. is trying to evaluate a project with the following cash flows: ( expected
rate of return 8.5%)

Year Cash Flow


0 -$ 655,000
1 $ 200,000
2 $ 300,000
3 -$ 50,000
4 $ 200,000
5 $ 200,000

As a financial manager, do you suggest they evaluate the project using NPV, IRR, or both? Why?

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