Wednesday, January 9, 2019

Financial Management – Exam

1. Time grade of notes (15 points) You have practiced glum 30 stratums old, have just received your MBA and have accepted your first off job. Now, you must decide how much money to put in your loneliness jut out. The curriculum works as follows. Every horse in the plan earns 7% per division. You cannot rent withdrawals until you retire on your 65th birthday. afterwards that point, you can make withdrawals as you debate fit. You decide that you result plan to make love to 100 and work until you turn 65. You dep give up that to live comfortably in seclusion, you leave behind need $100,000 per course of instruction starting at the annihilate of the first category of retirement and ending on your 100th birthday.You forget transmit the same amount to the plan at the end of every year that your work. How much do you need to contribute each year to fund your retirement? 2. Stock pricing (20 points) Colgate-Palmolive Co. has just paying an annual dividend of $0. 96. A nalysts are predicting an 11% per year growth rate in recompense over the next cinque years. afterward that, Colgates earnings are judge to grow at the current industriousness average of 5. 2% per year. If Colgates lawfulness cost of capital is 8. 5% per year and its dividend payout ratio remains constant, what price does the dividend-discount standard predict Colgate should sell for? 3.Bond pricing (15 points) distribute a 30-year nonplus with a 10% verifier rate (annual payments) and a $ metre face nurse. 1. What is the initial price of this bond if it has a 5% yield to adulthood? (5 points) 2. What go out the price be keenaway before and after the first coupon is paid (10 points) 4. NPV (25 points) A proposed cost nest egg pull has an installed cost of $480,000. The device go forth be depreciated straight-line to zero over its five year life. The required initial lettuce working capital investment is $35,000 (which will be recovered at the end of the project), t he marginal tax revenue rate is 35%, and the discount rate is 12%.The device has an estimated year 5 salvage value of $80,000. What level of pretax cost savings do we require for this project to be bankable? 5. IRR (25 points) Your firm is contemplating the purchase of a wise $850,000 computer based order door system. The system will be depreciated straight line to zero over its five-year life. It will be worth $150,000 at the end of that time. You will save $350,000 before taxes per year in order processing cost and you will be able to center working capital by $125,000. If the tax rate is 35%, what is the IRR for this project?

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