FINAL EXAM  last update 9 May 07
This is a DRAFT.  Consider it an aid, a hint -  not a promise or a contract.  Some of the numbers used as examples may not be reasonable or even internally consistent in the problem.

1.  Objective of the Firm:  Define, elaborate.

2.  Risk & Return of Stocks and Bonds:  How are returns calculated for stocks? What are the models?  What are the variables used in the models? How about bonds?   How is risk defined?  What data is required to make these calculations?

3.  Returns on a Portfolio:  Use "weighted average return" to calculate the historical returns on a two stock (ABC & DEF) portfolio, given their last night closing price of $49.75 & $35.50; last years returns of 9.18% & 7.48%; and number of shares 900 & 500

4.  Rate to Yield:  Calculate the effective yield on a $10,000, 4 year CD with a quoted rate of 2.34% compounded [hourly, daily, weekly, monthly, or quarterly]

5.  a)    What are monthly payments on a 5 year, $19,000 auto loan, at a rate of 8.75%
     b) What are the total interest payments over the life of this loan?

6.  Calculate the first two periods of an amortization table for a $250,000 loan, at 7.5 %, with monthly payments of $2013.98  for 20 years.

7.  Use Rodreguez's Model to calculate the yield to maturity on a bond, given the following data from the WSJ:  ABC 9.25s49  Close@105 1/2

8. Use CAPM to calculate the expected return for a security with a beta of 1.9, given that a US Treasury yields 3.9% and the expected return on the market is 9.9%.  Draw the related SML.

9. a) Calculate the NPV of the following cash flow using a discount rate of  14.5 %.  
                                 yr0    yr1    yr2    yr3    yr4    yr5
Cash Flow ($000)     <100>   55      65     75      85     95
b) What is the theoretical impact on stock price, given a quarter of a million shares outstanding?

10.  Calc IRR* for the previous investment, using the original 14.5 % discount rate as the reinvestment rate.

11.  How much would YOU pay for a perpetuity that paid $100,000 per year?

12.  Given the "actuals", generate a "plan".  Assume no change in "capital structure"[i.e. no change in debt, preferred, or common], dividend policy is "constant payout ratio", Plan sales are given.  Round each account to nearest thousand. 

13.  Calculate the two following ratios [2 of the 10 used in term paper] based on the "actuals" given.  Given last year's ratio was 3.24  and the industry standard is 2, discuss the significance of the ratio.

14.  Calculate the component costs of Debt (After/tax), Pref, Comm, & RE given the following data: 1) for debt, use data in quest #7 above with transaction costs of $2 plus the effective tax rate from the ACTUALS, 2) for Pref, div=7.00/sh, trans=1.5%, close=$85, 3) for common, last yr div =$2/sh, close =$90.00, trans =$1.75 , growth =9%.

15. Assume the following component costs (perhaps different than those calculated in #14 above),  and the capital structure from the "ACTUALS" (above), calculate the weighted average cost of capital (WACC). Debt (AfterTax) = 9% Preferred =12% Common = 15% Retained Earnings = 14%

16. Use the "actuals" (above) and the "alternative leverage models" to calculate the firms operating, financial, and total leverage. (DOL, DFL, DTL)

17.  MM's Trade-Off Model: identify the variables

18.   A dividend policy question, like, "Who coined the phrase "signaling effect".  What does the expression mean?"

19. a) What did the DJIA close at last night? b) Assuming that the DJIA closed at 12487.02 at the beginning of the semester(26 Jan 07), what was its return (based on price changes) through the period ending last night? c)  a related question.