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Business Finance BADM 310 Midterm - online 100 POINTS Instructions: Spring 2017 Please use type = 0 in excel equations. E.g. when calculating payment using PMT = (rate, nper, pv, fv, type). Put 0 for type. Good luck! 1. Your first job pays your $45,000 first year, $48,000 second year and $49,000 third year. Then you switch to another job and make $53,000 in the first year. Your pay increases by 4% for the next six years (10 years total). (15 PTS) a. What is your salary in the 10th year? - (5PTS) b. The Government tells you that the inflation is on average 2.3%. What is the Present Value (PV) of the salary you make in the 10th year? - (5 PTS) c. What is the PV if the inflation is 5% - (5PTS) 2. Financial Statements Assets ABC CORPORATION Balance Sheet Year Ended December 31 (in $ millions) 2006 2005 Liabilities & Stockowner's Equity Current Assets 2006 2005 Current Liabilities Cash 22.2 19.5 Accounts Payable Accounts Receivables 18.5 13.2 Notes Payable / Short-Term Debt Inventories 14.2 14.3 Current Maturities of Long-Term Debt Other Current Assets 2.0 1.0 56.9 48.0 Land 22.2 20.7 Long-Term Debt Buildings 36.5 30.5 Capital Lease Obligations Total Current Assets Long Term Assets Equipment Other Current Liabilities Total Current Liabilities 39.7 33.2 (18.7) (17.5) Net Property, Plant, and Equipment 79.7 66.9 Goodwill 22.0 --- Other Long-Term Assets 21.0 14.0 Total Liabilities 122.7 80.9 Stockholder's Equity 179.6 128.9 Total Assets Total Debt Deferred Taxes Other Long-Term Liabilities Total Long Term Liabilities Total Liabilities and Stockholder's Equity ABC Corporation Income Statement Year Ended December 31 ($ in millions) 2006 Total Sales 2005 188.8 176.1 Cost of Sales (153.4) (147.3) Gross Profit 35.4 28.8 Selling, General and Administration Expenses (13.5) (13.0) Research and Development (9.2) (7.6) Depreciation and Amortization (2.2) (1.1) Operating Income 10.5 7.1 ---- ---- Other Income Instructor: Mustafa Maqbool 24.5 4.5 3.2 13.3 12.3 3.0 4.0 50.0 45.0 98.9 56.3 --- --- 98.9 56.3 7.6 7.4 Long-Term Liabilities Less Accumulated Depreciation Total Long Term Assets 29.2 Page 1 ---- ---- 106.5 63.7 156.5 108.7 23.1 20.2 179.6 128.9 Business Finance BADM 310 Midterm - online Earnings Before Interest and Tax (EBIT) Interest Income (or Expense) Pretax Income Taxes Net Income 100 POINTS 10.5 7.1 (7.7) (4.6) 2.8 2.5 (0.7) (0.6) 2.1 1.9 Earnings per share $0.556 $0.528 Diluted Earnings Per Share $0.526 $0.500 Spring 2017 ABC Corporation has 3.8 million shares outstanding and shares are trading for $15 A) Calculate the following for 2005. - (30PTS, Two Points Each) a) Quick Ratio = .75 b) Current Ratio = 1.07 c) Market to Book Ratio =8.59 d) Debt to Equity Ratio = 5.38 e) Enterprise Value = f) EPS g) Operating Margin h) Net Profit Margin i) Return on Equity j) P/E Ratio k) Inventory Turnover l) Days of Sales Outstanding m) ROA n) ROE o) Did the tax rate increase from 2005 to 2006? If so, by how much? 3. Go to finance.yahoo.com and lookup BABA (Alibaba Group Holding Ltd). What are the following numbers? (5 PTS) a. Share Price - (2.5PTS) b. Total Cash Per Share (under Key Statistics) - (2.5PTS) 4. Analyze the following table to answer the questions Inventory Project Sales for Oct, 2014 Actual Sales for Oct, 2014 Project Sales for Nov, 2014 Product 1 100 1,000 800 1,200 Minimum inventory is set at 15%. How many units of Product 1 should be manufactured? (10 PTS) 5. James makes $120,000 a year ($10,000 a month). He pays 25% in taxes and his living expenses are $6,000 a month. He wants to invest the remaining for 30 years at 5%. How much will his portfolio be after 30 years? NOTE that he contributes every month into his portfolio. (10 PTS) 6. Susanne invests $9,000 now and again towards the end of year 3. She gets a following return for 6 years. Instructor: Mustafa Maqbool Page 2 Business Finance BADM 310 Midterm - online Year Cash Flow 0 1 2,000 2 3,000 100 POINTS 3 4,000 4 4,000 Spring 2017 5 5,000 6 5,000 Assume Discount rate is 7%, answer the following (15 PTS) a. What is the Net Present Value of these cash flows? Should Susanne make invest in this opportunity? -(5 PTS) b. What is the future value of Net Cash Flow (end of year 6) - (5 PTS) c. If Susanne had another opportunity where her NPV would be $2000. What is her opportunity cost? - (5 PTS) 7. Edward signs a 30 year mortgage at 3.5% compounded monthly. The price of his house is $200,000. He makes a down payment of 40,000. Answer the following: (15 PTS) a. What will be his monthly payments? - (5 PTS) b. After 5 years, he makes a one-time payment of $50,000 (against the remaining principle). How many months will he have remaining on his mortgage? To avoid any confusion, he will have exactly 25 years remaining before he makes the $50,000 in payment. - (5 PTS) c. Edwards decides that instead of reducing the NPER after making the $50,000, he requests the bank to keep the NPER to 25 years and reduce his monthly payment instead. What will be his monthly payment going forward? - (5 PTS) Instructor: Mustafa Maqbool Page 3