BUS 3115 Financial Management Exam Spring 2014



Balance Sheet & Income Statement may be found on pp. 132-133 of text, answer
only the questions in this assignment.
1. Using the Balance Sheet & Income Statement complete the following a
Statement of Stockholder’s Equity for the year ending 12/31/2014.
Common Stock
# of Shares Retained Stockholders
Amount Earnings Equity
Balances, 12/31/2013 $ $
2014 Net Income
Cash Dividends
Addition/Subtraction to
Retained Earnings
Balances, 12/31/2014 $ $ $
2. Using the Balance Sheet and Income Statement construct the
Operating Activities section of the Stament of Cash Flows for the period ending 12/31/2014.
Statement of Cash Flows Bitmap Bitmap Bitmap
Operating Activities Bitmap Bitmap
Net Income
Depreciation and amortization
Increase in accounts payable
Increase in accruals
Increase in accounts receivable
Increase in inventories
Net cash provided by operating activities (could be positive or negative)
3. What is the Market Value Added for Corrigan Corp as of 12/31/2014
MVA= Price X # of shares outstanding less total Equity
Price x # of shares =
Less Total Equity=
4. From internet research provide the following ratios for Proctor & Gamble
Corp. as of (symbol pg).
Quick Ratio
Return on Assets
Return on Equity
Inventory Turnover
Price/Earnings Ratio
Site Source of Information and date compiled: __________________________________________
5-6 Your brother-in-law has just won the lottery and is coming to you for free advice. There
are two payment options from which to choose. He can elect to receive Option 1) 10 annual
end of yearpayment of $7 million, or Option 2) 30 annualend-of-yearpayments of $4million.
If he expects to earn an 8% return which option offers the highest present value?
6. Option 1 7. Option 2
N= N=
Option with highest Present Value ______________
7. You are the financial advisor for a rookie quarterback that is in the process of negotiating
his first contract. The team’s general manager has offered him three possible contracts.
Each of the contracts lasts for four years. All of the money is guaranteed and is paid
at the end of each year. The payment terms of the contracts are listed below:
Year Contract 1 Contract 2 Contract 3
1 $1.5 million $1.0 million $3.5 million
2 1.5 million 1.5 million 0.5 million
3 1.5 million 2.0 million 0.5 million
4 1.5 million 2.5 million 0.5 million
The quarterback discounts all cash flows at 12%. Based on net present value of cash flows,
which of the three contracts offers the most value?
Contract 1 Contract 2 Contract 3
Best contract is: ______#1 ______#2 ______#3
8. You have two credit card offers, your decision on which card to accept is based entirely on
the rate of interest or Effective Annual Rate (EAR). Bank A will charge a rate of 12%
compounded monthly, Bank B will charge 13% compounded quarterly. Calculate the
EAR to determine which card you would choose.
EAR Bank A 12.68%
EAR Bank B 13.64%
Most favorable? Bank A_X_ Bank B___
9. You saved $5,000 and intend to use this savings as a down payment on a new car. After careful
examination of income and expenses, you conclude that the most you can afford to spend each
month on a payment is $425. If the APR on your loan is 10%, what is the price of the most
expensive car you can afford if the car is financed for 48 months?
(Be sure to consider your down payment to arrive at the price of the vehicle)
Price of the car you can purchase:
10. Your firm is considering a financing opportunity to purchase some equipment.
The loan is for $10,000, interest rate is 5% and it is for a three year term, payments are due in 3
annual installments. In order to determine the impact on the firm’s income statement
and taxes your boss, who has no use for computers, has asked you to present a three
year amortization schedule indicating the amount of principal and interest due each year,
the repayment of principal and ending balance in each year. On the table below complete
the ammortization schedule for this loan.
Year Beg. Bal Pymt. Interest Principal Balance
1 $10,000 3596.51 $428 3168.46 6831.54
2 $6,832 3596.51 $266 3330.57 3500.97
3 $3,501 3500.97 $96 3500.97 0


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