FIN615
Final Exam Fall 2017

Record your answers to the questions on
the Excel answer sheet provided. You
must also SHOW YOUR WORK OR EXPLAIN YOUR
ANSWERS on all problems.

There are a total of 100 points in the exam. The exam is 30% of
your overall course grade.

The exam is open book, which means that you may refer to the text,
lectures, your notes, conference posts, and other course materials presented in
LEO for this class. You may not use Library services or the
Internet as to research questions.

This exam is an individual assignment. Collaboration is NOT
allowed on this exam. Under no circumstances should you seek the aid of
another person. Nor should you provide such aid to others.

All policies in the syllabus related to standards for submission
for graduate?level work and course specific grading policies, including
policies on plagiarism and other academic misconduct apply to this exam.

By putting your name on the exam/answer
sheet, you are promising to abide by the honor code.

1)
You are
thinking of buying a miniature golf course to operate. It is expected to
generate cash flows of $45,000 per year in years one through three and $55,000
per year in years four through eight. If the appropriate discount rate is 12%,
what is the most you would pay for this golf course?

2) Your team is evaluating two mutually
exclusive projects. The initial cost of
each investment is $50,000. The
probability of the cash flows is shown below. If the project will have a 5 year
life and the appropriate cost of capital is 9% calculate the following:

a) Expected value

b) NPV

c) Standard deviation

d) IRR

e) MIRR

Use
the information below for the next problem

3. Calculate the free cash flow

Use the following information for the next
problem

4. What is the expected return for Security X?

Use the
following information for the next three problems,

5. What is the NPV of above project if the
initial investment was $35,000? Assume a cost of capital of 11%

6. Calculate the IRR assuming a cost of
capital of 11%.

7. Calculate
the MIRR of the project assuming a cost of capital of 11%. ___________________________________________________________________________

8. Suppose
that you are approached with an offer to purchase an investment that will
provide cash flows of $1,600 per year for 18 years. The cost of purchasing this
investment is $9,200. You have an alternative investment opportunity, of equal
risk, that will yield 9% per year. What is the NPV that makes you indifferent
between the two options?

___________________________________________________________________

9. The Claustrophobic Solution, Inc., a
residential window and door manufacturer, has the following historical record
of earnings per share (EPS) from 2015 to 2007:

The company’s payout ratio has been 57%
over the last nine years and the last quoted price of the firm’s share of stock
was $15. Flotation costs for new equity will be 7%. The company has 34,000,000 of common shares of stock outstanding and
a debt-equity ratio of 0.45.

If dividends are expected to grow at the
same arithmetic average growth rate of the last nine years, what is the
dividend payment per share in 2016?

_________________________________________________________________________-

Use the following data for the next 3
questions

The following are the company sales
from 2000-2015

10. Fit an exponential trend curve to the data-
show the equation

11. Calculate the projected sales in 2016

12. What is the CAGR over the 2000-2015 period?

____________________________________________________________-

Use
the following data for the next 3 problems

Roxie’s Surf Shop is expanding their
product line, adding a high end surf board to their existing basic product.

Their fixed costs for the equipment needed
for the new boards is $5700 per month.

The new board will cost $278 per board and
they can be sold for $450.

13. How many new boards per month will they need
to sell to breakeven quantity per month?

14. If the fixed costs are reduced to $4800 per
month what is the new breakeven quantity?

15. If the fixed costs are $5300 and they want to
have at least $1000 per month in profit how many boards should they sell?

Use the information below for the next 4
answers

Debt 5,000 bonds par $1,000 with a maturity 20 years; semi
annual compounding. Coupon rate 8%. Price $1,310. Tax
rate=33%

Preferred 50,000 shares
of 3% par value $100 stock. Current price $63.00.

Common stock 72,000
shares currently selling for $87.00. The
beta of the firm is 1.17, the risk free rate is 2.78%, Market return (Rm)
=8.6%.

16.
Cost
of debt

17.
Cost
of preferred

18.
Cost
of equity

19.
WACC

Use
the following data for the remaining problems.

Capstone Quarry is analyzing whether
a new contract proposal will be a good idea.
The relevant data is shown below.
The net working capital will be paid in the same time period as the cost
of the equipment and will be recovered at the end of the project. Remember to calculate the after-tax gain or
loss of salvage as part of your terminal cash flow.

20. Find the cash flows for each year

21. Net present value

22. Payback period

23. Discounted payback

24. IRR

25. MIRR

Hint:

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