FIN 610 Midterm Exam Instructions: Write your name on your exam. STUDENT NAME:______________________ The exam is individual work. It is to be your work and your work alone, with no assistance from classmates, family, friends or others. Your completed exam is due by 11:59 PM, (upload to your Assignments folder) by March 12. Exams submitted late will be penalized 5 points for each day up to three days late. Exams received more than three days after the due date will automatically receive an F. Furthermore, by proceeding with the exam you are agreeing not to share the exam content or your answers with anyone, including students who may take FIN 610 in the future. Please fill in (use capital letters ) your best choice for each question on the attached answer sheet and post it in your assignment folderby the due date—-March 12 Please read the questions carefully; there may be a little more to it than might be obvious at first reading. If you find a question challenging, try to take the question in parts, working from what you know to what you are trying to solve. Franks Dogs has beginning net fixed assets of $480 and ending net fixed assets of $530. Assets valued at $300 were sold during the year. Depreciation was $40. What is the amount of capital spending? A. $10 B. $50 C. $90 D. $260 E. $390 Please use the following Income Statement and Balance sheet for Questions 2 to 6 Income Statement for Fair Company 2016 Revenue $ 9,610 less COGS $ 6,310 less Depreciation $ 1,370 Gross Income $ 1,930 less S,G&A $ – EBIT $ 1,930 less Interest Expense $ 630 taxable income $ 1,300 Taxes $ 455 Net Income $ 845 Balance Sheet for Fair Company Assets Liabilities and Shareholder Equity 2015 2016 2015 2016 Cash 310 405 Accounts Payable 2720 2570 Accounts receivable 2640 3055 Notes Payable 100 0 Inventory 3275 3850 total current 2820 2570 Pre-paid expenses 0 0 Long-term debt 7875 8100 total current $ 6,225 $ 7,310 Common Stock 5000 5250 Next fixed assets (PPE) $ 10,960 10670 Retained Earnings 1490 2060 Total Assets $ 17,185 $ 17,980 $ 17,185 $ 17,980 What is the operating cash flow for 2016? A. $845 B. $1,930 C. $2,215 D. $2,845 E. $3,060 The 2015 equity multiplier ratio is : A. 11.53 B. 3.44 C. 2.65 D. 1.00 E. cannot compute with numbers given What are the accounts receivable turnover? A. 10.3 B. 3.44 C. 3.15 D. 3.37 E. cannot compute with numbers given What is the debt ratio for 2016? A. 80.7% B. 55.0% C. 59.3% D. 60.7% E. cannot compute with numbers given What is the ROE (Return on Equity) for 2016? A. 22.72% B. 13.02% C. 59.80% D. 18.75% E. 11.56% The Ajax Co. just decided to save $1,500 a month for the next five years as a safety net for recessionary periods. The money will be set aside in a separate savings account which pays 3.25% interest compounded monthly. It deposits the first $1,500 today. What is the value of this investment in 5 years? A. $82,964.59 B. $97,847.3 C. $83,428.87 D. $83,687.23 E. $84,998.01 8. You are scheduled to receive annual payments of $10,000 for each of the next 25 years. Your interest rate is 8.5%. What is the value of this stream of payments? A. $778,699 B. $900,217.67 C. $1,000,567.88 D. $786,677.92 E. cannot answer with given information 9. Consider a bond which pays 7% annually and has 8 years to maturity. The market requires an interest rate of 8% on bonds of this risk. What is this bond’s price? A. $ 942.53 B. $ 911.52 C. $ 941.74 D. $1,064.81 E. None of the above. 10. A General Co. bond has an 8% coupon and pays interest annually. The face value is $1,000 and the current market price is $1,020.50. The bond matures in 20 years. What is the yield to maturity? A. 7.79% B. 7.82% C. 8.00% D. 8.04% E. 8.12% 11. All else equal, the payback period for a project will decrease whenever the: A. duration of a project is lengthened. B. cash inflows are moved earlier in time. C. assigned discount rate decreases. D. required return for a project increases. E. initial cost increases. 12. Graphing the NPVs of…
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