SHOW WORK Please>>>>

1. Your current portfolio?s returns over the past three years looked like this:

	Yr. 1	Yr. 2	Yr. 3	E(CF)	?
Your Portfolio CF	100	100	100	100	0

The past three years are representative of a good year, an average year and a bad year for you.

You are considering adding one of these two equally priced assets to your portfolio:

	Yr. 1	Yr. 2	Yr. 3	E(CF)	?
New Asset 1	2	6	10	6	4
New Asset 2	10	6	2	6	4

Would you have a preference for which asset to add to your portfolio? Why or why not?

2. Medical Technology is a new, rapidly growing firm that produces specialized medical instruments. They sell to hospitals and other surgical units, and a substantial portion of their sales are to foreign governments. Typical payable terms in the industry are payment with 30 days.

They recently reported the following financial information:

Sales $225,000

Cost of sales 180,000

Inventory 33,000

Accounts receivable 72,000

Accounts payable 30,000

# of Days per year 365

Compute the additional working capital period for Advanced Medical.

Comment on their working capital financing period. What actions might medical take to improve their situation?

3. Consider the information below for Palmolive, Company and its industry

		USD in millions
Palmolive	2012	2013	2014	2015
Revenue	16,734	17,085	17,420	17,277
Net income	2,431	2,472	2,241	2,180
Total Assets	12,724	13,394	13,876	13,459
Shareholders? Equity	6,953	7,163	7,303	7,917
Industry				2015
Profit Margin				10.58%
Total Asset Turnover				0.74
Leverage				2.28
ROE				17.85%

a. Calculate the return on assets and the return on equity for each year.

b. Discuss the changes in returns from year to year using the decomposition of ROE.

c. Comment on Palmolive?s? ROE in 2015 relative to the industry.

5. Managing working capital financing needs combines which of the following items:

I. Sustainable growth rate

II. Cash Disbursements Budget

III. Cash Collections Budget

IV. Cash Flow Budget

A) Items I

B) Items I, II

C) Items II, III, IV

D) Items I, II, III, IV

6. Which of the following ratios do not influence a firm?s sustainable growth rate?

A) Total asset turnover

B) Profit margin

C) Price-earnings ratio

D) Retention rate

7. The following data pertain to Mice Labs:

	Sales
Sales	$1,120,000
Cost of Sales	$784,000
Inventory	$110,000
Accounts receivable	$73,000
Accounts payable	$41,000

Compute the additional working capital period for Flex. Assume a 365 day year for calculations.

A) 55.9

B) 51.2

C) 23.8

D) 19.1

8. You are comparing two stocks. Stock X has an expected annual return of 8 percent every year with no variability. Stock Y has an expected return of 8 percent as well, but a 1.6 standard deviation and five years of the following returns, with the most recent return reported last: 6 percent, 7 percent, 8 percent, 9 percent and 10 percent. Under what conditions would you prefer stock Y?

A) No conditions. Stock X and Stock Y are identical in preference.

B) If the recent trend in returns was going to continue in the future, the expected return on X is likely to decrease.

C) If the recent trend in returns was going to continue in the future, the expected return on Y is likely to increase.

D) If the recent trend in returns was going to continue in the future, the expected return on Y is likely to decrease.

9. If you randomly added more stocks to a portfolio of unrelated assets, what would happen to the portfolio standard deviation?

A) The standard deviation would remain unchanged.

B) The standard deviation would fall, but would remain positive as non-diversifiable risk remains.

C) The standard deviation would fall, but would remain positive as diversifiable risk remains.

D) The standard deviation would decline to zero as all risk is diversified away.

10. The following events occurred in 2014 for the Levi Company.

September 9	Received delivery of $24,000 merchandise for later sale. The merchandise was purchased on account.
September 25	Sold one-quarter of the September 9th delivery for $7,200. Keahi received $4,500 in cash and an accounts receivable for $2,700.
September 30	Paid $13,000 toward merchandise received on September 9th.
October 11	Received $2,700 owed from September 25th sale.
October 17	Paid remaining $11,000 toward merchandise received on September 9th.
October 29	Sold remaining merchandise for $24,300, receiving entire amount in cash.

a) Identify the proper amount and month to record cash inflows and outflows on the statement of cash flows for each of the above transactions

b) Identify the proper amount and month to record revenues and expenses on the income statement for each of the above transactions.

4. Calculate the internal rate of return for a project that has upfront costs of $7 million and cash flows of $2.5 million per year for each of the next four years. The risk adjusted project discount rate is 12%.