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BUSN 5200 Final Exam – Take-Home Portion
Based on Cornett, Adair, and Nofsinger, 3e, chs. 7-10.
Name __________________________
Calculations (10 points each)
19. Here is a list of some large-cap US stocks and their betas as of Dec. 8, 2017. Suppose you have a portfolio consisting of 30% BRKB, 20% DIS, 20% AAPL, 15% CVX, and 15% HAL. What is the beta for the overall portfolio? (Hint: See p. 250)
Company
Long-term average beta
Apple (AAPL)
1.11
Berkshire Hathaway Cl B (BRKB)
0.8
Chevron (CVX)
1.16
Disney (DIS)
1.03
Halliburton Co. (HAL)
1.47
20. FedEx stock ended Year 1 at $103.39 per share. It paid a $0.35 per share dividend in Year 2 at $106.69. If you owned 200 shares of FedEx, what was your dollar return and percent return?
21. For the year to date, suppose Norfolk Southern earned a –1.34% return, Raytheon earned a 7.96% return, and Pepsico earned 0.88%. If you have a portfolio made up of 30% Norfolk Southern, 25% Raytheon, and 45% McDonald’s, what is your portfolio return?
22. Determine the interest payment for the following three bonds: 3½% coupon corporate bond (paid semiannually), 4.25% coupon Treasury note, and a corporate zero coupon bond maturing in ten years. (Assume a $1,000 par value.)
Fall 2, 2017 1
BUSN 5200
Take-Home Portion
Name __________________________
Complete four of the following five problems for 7 points each. If you complete all five, I will not grade the last problem.
31. Fill in the blanks in the income statement below.
($ millions)
Net revenues or sales $4076
Cost of goods sold 3207
Gross profit _________
Operating expenses:
Selling, general, and admin. 227
Depreciation 206
Operating income (EBIT) _________
Interest 3
Income before taxes _________
Income taxes 165
Net income _________
32. Fill in the table below with “+” and “–“ signs as appropriate.
Operating
Investing
Financing
Explanation
Building up a pile of cash, possibly looking for an acquisition
Operating cash flow and sale of fixed assets are being used to pay down debt.
Operating cash flow problems are being covered by sale of fixed assets, borrowing, and owner contributions.
Sale of fixed assets is financing operating cash flow shortages.
33. Given the tax brackets below, compute the tax bill on a single proprietor with a $78,000 taxable income, assuming no exemptions, exclusions, or deductions. Show your work.
http://taxfoundation.org/blog/irs-releases-2015-tax-brackets
34. Time value of money (hint—see chapter 4)
You may use a financial calculator or spreadsheet to compute your answers.
a. Suppose you are told that your uncle is going to sell his company in 3 years and give you half the value of the company. The total value of the company is $1 million. What is the present value of the money you will receive, assuming a discount rate of 8%?
b. You are faced with some expensive home repairs, due to flood damage for which you do not have insurance. The contractor tells you that you can repair the damage now, at a cost of $25,000, but if you wait, the cost will increase due to mold and rot that will likely set in. He estimates that the costs will rise to $30,000 if you wait a year. If you do the repairs now, you will have to put the cost on your credit card at 14% interest. But if you wait, you can pay cash and not pay any interest. Should you wait or do the repairs now? (Hint: see Example 4-4.)
35. Time value of money (hint—see chapter 5)
You may use a financial calculator or spreadsheet to compute your answers.
a. What is the present value of a $700 annuity payment over six years if the interest rate is 10%?
b. What is the future value of a $900 annuity payment over five years if interest rates are 8%?
c. Suppose you would like to buy a car, and have decided you can afford to pay $400 a month. How much can you borrow if you are offered an interest rate of 6 percent for a 5-year loan?
d. For the situation in part c, if you were offered an interest rate of 7 percent for a 6 year loan, how much could you borrow for the same $400 a month payment?
Fall 2, 2017 1
