Chapter 4

1. ABC had sales of $300,000, year-end total assets of $100,000. What was ABC's
total assets turnover ratio?
2. Baker Brothers has account receivable of $600,000, and its annual sales are
$7,300,000. What is its Days sale outstanding (DSO)? Assume that it uses a 365-day
year?
3. Byron Brooklyn has just reported $13 million of net income. Its EBIT was $20.8
million, and its tax rate was 35%. What was its interest expense?
4. Amazon has just reported its Net income as 1 million dollars and its Return on
asset (ROA) was 5%. What was the company’s total asset?
Chapter 5:
Công thức tính FV, PV của 1 số tiền
Công thức tính FVA, PVA của 1 chuỗi tiền đều
Công thức tính FV, PV của chuỗi tiền ko đều
Công thức tính FV, PV của chuỗi tiền đều vô tận

Short answer:
1. What is the future value of a 7-year ordinary annuity with annual payments of
$300, evaluated at a 10 percent interest rate?
2. If a 5-year ordinary annuity has a present value of $10,000, and if the interest rate
is 10 percent, what is the amount of each annuity payment?
3. What is the PVA of an annuity due with 10 payments of $300 if the appropriate
interest rate is 10%?
4. Your parents will retire in 25 years. They think they will need $1,000,000 at
retirement. How much do they have to save in a bank account today to meet their goal if
the bank pay 9% annual interest?
5. How much will you have in your saving account after 10 years if you intend to
deposit $500 each year, with the first payment to come one year from now? Assuming
that the interest is 8%.
6. Calculate the investment’s present value with the following cash flows: Year 1 =
3,000; Year 2 = 4,000; Year 3 = 3,000; Year 4 = 5,000. The discount rate is 9 percent.
7. Your bank account pays an interest rate of 8 percent, interest is compounded
annually. Your plan is to deposit $1,000 in the account today. You also plan to deposit
$5,000 in the account at the end of each of the four years. How much will you have in the
account at the end of the fourth year, after making your final deposit?
8. A bank has recently lent The Venetian hotel $100,000 for purchasing new vending
machines. The loan will be paid fully for 5 years in equal annual installments. The
interest rate on the loan is 10 percent, and payments are made at the end of each year. The
first payment will come 1 year from now. How much is The Venetian’s payment each
year?

Problem
 1. A bank recently loaned you $15,000 to buy a car. The loan is for five years and is
fully amortized. The interest rate on the loan is 11 percent, and payments are made at the
end of each year.
a. What are your annual car payments??
b. Set the amortized schedule.

2. Suppose you borrowed $500,000 on a student loan at a rate of 8% and must repay
it in six equal installments at the end of each of the next 6 years.
a. How large must your payments be? The first payment comes one year from now.
b. Set the loan amortized schedule.
c. What is the total dollar amount of interest you will pay during the first three years
of your mortgage?
Chapter 7
Short answer:
1. A bond that matures in 10 years has a par value of $1,000 and an annual coupon
payment of $50; its market interest rate is 9%. What is its price?
2. What is the price today of a 7-year bond which has a par value of $1,000 and an
annual coupon of 7%? Assuming that its yield to maturity is 6%
Problem
1. A bond with 10 years to maturity has a face value of $1,000. The bond pays an 8
percent annual coupon, and the bond has a 9 percent nominal yield to maturity.
a. Determine the annual coupon interest.
b. What is the price of the bond today?
c. What is the price of the bond 4 years from now?
2. A bond with 10 years to maturity has a face value of $1,000. The bond pays an 8
percent semiannual coupon, and the bond has a 9 percent nominal yield to maturity.
a. Determine the semiannual coupon interest.
b. What is the price of the bond today?
Chapter 8
Short answer:
1. An individual has invested $35,000 in stock A with a beta of 0.8, $40,000 in stock
B with a beta of 1.4 and $50,000 in stock C with a beta of 1.7. If these are the only three
investments in her portfolio, what is her portfolio's beta?
2. Assume that the risk-free rate is 5% and the expected return on the market is 7%.
What is the required rate of return on a stock with a beta of 1.5?
3. What is the stock’s beta if the risk-free rate is 7%, the expected return on the
market is 11% and the required rate of return on that stock is 15%?
4. Assume that the risk-free rate is 5% and the market risk premium is 6%. What is
the expected return for the overall stock market?
5. What is the market risk premium of a stock with a beta of 1.2? Assume that the
risk-free rate is 2% and the required rate of return on a stock 12%.
6. A man has invested in 3 stocks: $10,000 in stock A, $15,000 in stock B, $20,000
in stock C. The expected rate of return is 10%, 15% and 20% respectively. Calculate the
required rate of return of his portfolio.

Problem
1. Assume an investor is considering these two assets. The assets’ possible returns and related
probabilities (that is, the probability distributions) are as follows:
Asset X Asset Y
Probability Rate of Return Probability Rate of Return
0.1 -15% 0.1 -15%
0.1 -10% 0.1 -10%
0.2 -5% 0.2 -5%
0.3 15% 0.2 15%
0.1 20% 0.2 20%
0.2 25% 0.2 25%
a. Determine the expected rate of return of each asset.
b. Determine the standard deviation of each asset.
c. Which assets should be preferred? Explain.
d. If he intends to invest $30,000 in asset X (with a beta of 1.5) and $70,000 in asset
Y (with a beta of 1.3). What is his portfolio’s beta and expected rate of return?
 2. Suppose you are the money manager of an investment fund. The fund consists of four
stocks with the following investments and betas:
Stock Investment Beta
A 2,000 0.5
B 3,000 0.8
C 4,000 1.5
D 5,000 1.7

If the market’s required rate of return is 8% and the risk-free rate is 4%.
a. Calculate the required rate of return for each stock.
b. Calculate the beta of the fund.
c. What is the fund’s required rate of return?
Chapter 9
Short answer:
1. What is the current value per share of a stock has just paid a dividend (D0=$5) of
$5 and the dividend is expected to grow at a constant rate of 8% per year and the required
rate of return on the stock is 15%?
2. A stock is currently selling at $50.00. The stock is expected to pay a dividend of
$3.0 at the end of this year. What is the required rate of return? Assume that the stock
grows constantly at 8%.
3. Firm A is expected to pay a dividend of $1.00 at the end of the year (D1=$1.00).
The required rate of return (rS) is = 11%. Other things held constant, what would the
stock’s price today be if the dividend is expected to remain constant over time (zero
growth rate)?
4. Miny Corporation has just paid a dividend of $2.00, and its required rate of return
is 15%. If dividends are expected to grow at a constant rate (g) of 10%, what is Miny’s
expected stock price 3 years from now?

Problem
1. You are considering an investment in Keller Corp’s stock, which is expected to
pay a dividend of $3.00 a share at the end of the year (D1= $3.00) and has a beta of 1.5.
The risk-free rate is 5%, and the market risk premium is 4%. Its dividend is expected to
grow constantly of 5% a year. Assuming the market is in equilibrium.
a. What is the required rate of return on Keller Corp’s stock?

b. What is the firm’s intrinsic value today ( )?

2. Your company paid a dividend of $2.00 last year. The growth rate is expected to
be 4 percent for 1 year, 5 percent the next year, then 6 percent for the following year, and
then the growth rate is expected to be a constant 7 percent thereafter. The risk-free rate is
5 percent and the return on the market is 9 percent. The company’s beta is 1.25.
a. Determine the expected devidend for each of the next 4 years.
b. Calculate the required rate of return.
c. What is the expected stock pric e after 3 year ( )?
d. What is the current stock price ( )?
 e. Should the investors buy your company’s stocks if its current market price is
$150?
f. What is the expected stock price after 1 year?
Chapter 11
Short answer:
1. Project A has a 10 percent cost of capital and the following cash flows: Year 0 = -
$500; Year 1 = 150; Year 2 = 150; Year 3 = 250; Year 4 = 250. What is Project A’s Net
present value (NPV)?
2. A project has an initial investment of $10,000 and has cash flows of $3,000 per
year for five years. Calculate the payback period of the project. Assume that the WACC
is 10%.
3. Project A has a 10 percent cost of capital and the following cash flows:
Year Project A
0 -$500
1 150
2 150
3 250
4 250
What is Project A’s Internal rate of return (IRR)?

Problem
1. A firm with a WACC of 10% is considering the following mutually exclusive projects:
Year Project A Project B
0 -$400 -$400
1 250 100
2 250 100
3 50 200
4 50 200

a. Determine Net present value and Rate of return of Project A.

b. Determine Net present value and Rate of return of Project B.
c. Which project would you recommend? Explain.
d. Calculate the payback period of each Project.

2. The ABC restaurant is considering to open a new branch. For the two options
under consideration, management has estimated the following relevant annual net cash
flows (in million dollar):
Project X Project Y
Year Cash Flow Cash flow
0 - 400 - 600
1 55 300
2 55 300
3 55 50
4 225 50
5 225 49
Assuming the WACC is 10%
a. Determine which project would be selected on the basis of the IRR criterion.
b. Determine which project would be selected on the basis of the NPV criterion.
c. Calculate discounted payback period of each project.
d. Is there a conflict in the result between NPV and IRR? Which project should be
accepted?