财务管理试卷及答案（英文版）

Examination Problems for Fundamentals of Financial Management 2004-2005 (Paper B)

I. Multiple Choice (20 points) (Please write your answer in the following table) 题1 号 选 项 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1. ( ) is concerned with the acquisition, financing, and management of assets with some overall goal in mind.

A. Financial management B. Profit maximization C. Agency theory D. Social responsibility

2.A major disadvantage of the corporate form of organization is the ( ). A. double taxation of dividends

B. inability of the firm to raise large sums of additional capital C. limited liability of shareholders D. limited life of the corporate form.

3. Interest paid (earned) on both the original principal borrowed (lent) and previous interest earned is often referred to as ( ).

A. present value B. simple interest C. future value D. compound interest

4. If the intrinsic value of a share of common stock is less than its market value, which of the following is the most reasonable conclusion? A. The stock has a low level of risk.

B. The stock offers a high dividend payout ratio. C. The market is undervaluing the stock. D. The market is overvaluing the stock.

5. A 250 face value share of preferred stock, pays a 20 annual dividend and investors require a 7% return on this investment. If the security is currently selling for 276, what is the difference (overvaluation) between its intrinsic and market value (rounded to the nearest whole dollar)? A. approximately 26 B. approximately 10 C. approximately 6 D. approximately 1

6. Felton Farm Supplies, Inc., has an 8 percent return on total assets of 300,000 and a net profit margin of 5 percent. What are its sales?

A. 3,750,000 B. 480,000 C. 300,000 D. 1,500,000

7. A company can improve (lower) its debt-to-total asset ratio by doing which of the following?

A. Borrow more. B. Shift short-term to long-term debt. C. Shift long-term to short-term debt. D. isssue common stock.

8. The DuPont Approach breaks down the earning power on shareholders' book value (ROE) as follows: ROE = ( ). A. Net profit margin × Total asset turnover × Equity multiplier B. Total asset turnover × Gross profit margin × Debt ratio C. Total asset turnover × Net profit margin D. Total asset turnover × Gross profit margin × Equity multiplier 9. Which of the following items concerns financing decision? ( )

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A. sales forecasting B. bond issuing C. receivables collection D. investment project selection

10. Which of the following items is the function of a treasurer? ( )

A. cost accounting B. internal control C. capital budgeting D. general ledger

11. For financial instruments, ( ) is judged in relation to the ability to sell a significant volume of securities in a short period of time without significant price concession. A. maturity B. marketability C. default D. inflation

12. ( ) is the value at some future time of a present amount of money, or a series of payments, evaluated at a given interest rate.

A. future value B. present value C. intrinsic value D. market value

13. Ellesmere Corporation issues 1 million $1 par value bonds. The stated interest rate is 6% per year and the interest is paid twice a year. What is the real interest rate of the bond? ( ) A. 6% B.3% C. 12% D. (1+6%/2)2-1

14. Assume that dividends of a common stock will be maintained at D forever, and the required return of the stockholder is r, the par value of the stock is m, the value of the stock is ( ) A. m B. m+D C. m+D/r D. D/r

15. Which of the following items has the most risk? ( )

A. treasury bill B. corporate bond C. preferred stock D. common stock 16. ( ) equals the gross profit divided by net sales of a firm.

A. gross profit margin B. net profit margin C. return on investment D. return on equity 17. ( A ) is the ratios that measure a firm’s ability to meet short-term obligations A. liquidity ratios B. leverage ratios c. coverage ratios D. activity ratios

18. ( A ) is the result of Net Profit Margin × total asset turnover × (total assets/shareholders’ equity)

A. Return on equity B. return on investment C. current ratio D. quick ratio 19. Government tax law adjustment is ( A ) to a firm.

A. general economic risk B. inflation and deflation risk C. firm-specific risk D. international risk

20 ( A ) equals the gross profit divided by net sales of a firm.

A. gross profit margin B. net profit margin C. return on investment D. return on equity

II. Statement judgement (10 Points) (Please write your answer in the following table) 题号 1 2 3 4 5 6 7 8 9 10 √或× 1. Until around the first half of the 1900s, financial managers primarily raised funds and managed their firm’s cash positions. ( )

2. In general, the higher the marketability of a security, the greater the yield necessary to attract investors ( )

3. Discount Rate is the interest rate used to convert future values to present values. ( )

4. The expected return of a portfolio is simply a weighted average of the expected return of the securities comprising that portfolio ( )

5. The type of analysis varies according to the specific interests of the party involved ( )

6. In a sole proprietorship, the owner is personally responsible for all financial obligations of the

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firm. ( )

7. When a stock goes \ ( )

8. The market price of a particular bond is much greater today than it was yesterday. The calculated yield to maturity (YTM) based on today's market price would, therefore, be greater than the calculated YTM based on yesterday's market price. ( )

9. A short average collection period assures us that accounts receivable are being efficiently managed. ( )

10. Simple interest is interest that is paid on only the original amount borrowed (lent) ( )

III. Questions (10 points) (Please write your answer on the answer paper)

1. The method of depreciation does not alter the total amount deducted from income during the life of an asset. What does it alter and why is that important? (5 )

2. What is primary and secondary market? (5)

IV. Problems (60 Points) (Please write your answer on the answer paper)

1. you need to have $100000 at the end of 10 years. To accumulate this sum, you have decided to save a certain amount at the end of each next 10 years and deposit it in the bank. The bank pays 8% interest compounded annually for long-term deposit. How much will you have to save each year? (PVIF(8%,10)=0.463, PVIFA(8%,10)=0.671, FVIF(8%,10)=2.159, FVIFA(8%,10)=14.487)

2.Just today, Bird Seed Company’s common stock paid a $1.50 annual dividend per share and had a closing price of $24. Assume that the market’s required return for this investment is 12% and that dividends are expected to grow at a constant rate forever. a. calculate the implied growth rate in dividends.

b. what is expected dividend yield and capital gains yield?

3. The data for various companies in the same industry are as follows: (amounts are in million dollars) Company Sales Total assets Net income Net profit margin Total assets turnover 10 8 3 A 15 10 2 B 8 6 4 C 7 4 2 D 6 5 3 E 12 9 3 F Determine the total asset turnover, net profit margin, and write your computation result in the table.

4. You expect to deposit the following cash flows at the end of years 1 through 5, 1,000; 4,000; 9,000; 5,000; and 2,000 respectively. Alternatively, you could deposit a single amount today at the beginning of year 1 (end of year 0). How much is the single deposit needed to be today if you can earn 10% compounded annually? (10/ )

5.Stock A has an expected growth rate of 16% for the first 3 years and 8% thereafter. Each share of stock just received an annual 3.24 dividend per share. The appropriate discount rate is 15%.

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What is the value of the common stock under this scenario? (10/ )

6. The following common stocks are available for investment:

COMMON STOCK (TICKER SYMBOL) BETA Nanyang Business Systems (NBS) 1.40 Yunnan Garden Supply, Inc. (YUWHO) .80 Bird Nest Soups Company (SLURP) .60 Wacho.com! (WACHO) 1.80 Park City Cola Company (BURP) 1.05 Oldies Records, Ltd. (SHABOOM) .90

a. If you invest 20 percent of your funds in each of the first four securities, and 10 percent in each of the last two, what is the beta of your portfolio? (5/ )

b. If the risk-free rate is 8 percent and the expected return on the market portfolio is 14 percent, what will be the portfolio's expected return? (5/ )

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Solutions (B)

I. Multiple Choice (20 points) (Please write your answer in the following table) 题1 号 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 B A D D D A A A A A 选A A D D B B D A B C 项 II. Statement judgement (10 Points) (Please write your answer in the following table) 题号 1 2 3 4 5 6 7 8 9 10 × √ √ √ √ √ × × √ √或× √ III. Questions (10 points) (Please write your answer on the answer paper) 1. Depreciation changes the timing of tax payments. The longer these payments can be delayed,

the better off the business is.

2. A primary market is a “new issues” market. Here, funds raised through the sale of new

securities flow from ultimate savers to the ultimate investors in real assets

In a secondary market, existing securities are bought and sold. Transactions in these already existing securities do not provide additional funds to finance capital investment

IV. Problems (60 Points) (Please write your answer on the answer paper) 1. Answer:

100000=A FVIF(8%,10)=14.487A A=100000/14.487=6903

2. Answer:

a. 24=1.5(1+g)/(0.12-g), g=0.054

b. dividend yield=0.12-g=0.066, capital gains yield=0.054

3. Answer: Company Sales Total assets Net income Net profit margin Total assets turnover 10 8 3 0.3 3.3333 A 15 10 2 0.1333 7.5 B 8 6 4 0.5 2 C 7 4 2 0.2857 3.5 D 6 5 3 0.5 2 E 12 9 3 0.25 4 F 4. 1. (10/ ) Many different methods to lead to a correct solution.

PV of this mixed flows problem = 1,000(PVIF10%,1) + 4,000(PVIF10%,2) + 9,000(PVIF10%,3) + 5,000(PVIF10%,4) + 2,000(PVIF10%,5) = 15,633.62.

5. (1) Determine the annual dividends.

D0 = $3.24 (this has been paid already) D1 = D0(1+g1)1 = $3.24(1.16)1 =3.76 D2 = D0(1+g1)2 = $3.24(1.16)2 =4.36 D3 = D0(1+g1)3 = $3.24(1.16)3 =5.06 D4 = D3(1+g2)1 = $5.06(1.08)1 =5.46 P3 = 5.46 / (.15 - .08) = $78 [CG Model] (2) Determine the PV of cash flows.

PV(D1) = D1(PVIF15%, 1) = 3.76 (.870) = 3.27 PV(D2) = D2(PVIF15%, 2) = 4.36 (.756) = 3.30 PV(D3) = D3(PVIF15%, 3) = 5.06 (.658) = 3.33

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PV(P3) = P3(PVIF15%, 3) = 78 (.658) = 51.32

(3) Calculate the intrinsic value by summing all the cash flow present values. V = 3.27 + 3.30 + 3.33 + 51.32

6. a) (5/ ) The beta of a portfolio is simply a weighted average of the betas of the individual securities that make up the portfolio.

TICKER SYMBOL BETA PROPORTION WEIGHTED BETA NBS 1.40 .2 .280 YUWHO .80 .2 .160 SLURP .60 .2 .120 WACHO 1.80 .2 .360 BURP 1.05 .1 .105 SHABOOM .90 .1 .090 1.0 1.115 The portfolio beta is 1.115.

b) (5/ ) Expected portfolio return=.08 + (.14 - .08)(1.115)= .08 + .0669 = .1469 or 14.69%

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