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ADV FM Assignment

This document outlines an individual assignment for MBA extension students at Samara University's College of Business and Economics, focusing on advanced financial management concepts. The assignment includes various financial problems related to current liabilities, present value calculations, savings account growth, bond pricing, investment opportunities, and project evaluations. Students must submit handwritten assignments by the final exam date, with specific instructions and calculations required for each problem.

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4 views2 pages

ADV FM Assignment

This document outlines an individual assignment for MBA extension students at Samara University's College of Business and Economics, focusing on advanced financial management concepts. The assignment includes various financial problems related to current liabilities, present value calculations, savings account growth, bond pricing, investment opportunities, and project evaluations. Students must submit handwritten assignments by the final exam date, with specific instructions and calculations required for each problem.

Uploaded by

biniyammengistu24
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Samara University

College of Business and Economics


Departments of Accounting and Finance
Course tittle: Advanced Financial Management
Target Group: MBA extension students
Individual assignment
This is an assignment you are expected to do on your own. The assignment should be submitted
in hand written form and copy from other will losses your result. It carries 30 Points. After
completing this assignment, be certain to write name and Id.no on the first page. (Show all
necessary steps neatly!) Submission date: On the Final exam date of this course
1. Ace Industries has current assets equal to $3 million. The company’s current ratio is 1.5, and
its quick ratio is 1.0. What is the firm’s level of current liabilities? What is the firm’s level of
inventories?
2. Assume that you just won the state lottery. Your prize can be taken either in the form of
$40,000 at the end of each of the next 25 years or as a single payment of $500,000 paid
immediately.
a) If you expect to be able to earn 5 percent annually on your investments over the next 25
years (i.e., 5percent is the appropriate discount rate), ignoring taxes and other
considerations, which alternative should you take? Assume that your only decision
criteria are selecting the option with the highest present value.
b) Would your decision in part be altered if you could earn 7 percent rather than 5 percent
on your investments over the next 25 years?
3. Robert Blanding’s employer offers its workers an optional two-month unpaid vacation after 7
years of service to the firm. Robert, who just started working for the firm, plans to spend his
vacation touring Europe at an estimated cost of $24,000. To finance his trip, Robert plans to
make an annual deposit of $2,500 into a savings account at the end of each of the next seven
years (the first deposit will occur one year from today). The account pays 8% annual interest.
a) Will Robert’s account balance in seven years be enough to pay for his trip?
b) Suppose Robert increases his annual deposit to $2,700. How large will his account
balance be in seven years?
4. Jackson Corporation’s bonds have 12 years remaining to maturity. Interest is paid annually,
the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield
to maturity of 9%. What is the current market price of these bonds?
5. A company has an investment opportunity costing $40,000 with the following expected net
cash flow after taxes and before depreciation.
Year 1 2 3 4 5 6 7 8 9 10
Net cash $7,000 7,000 7,000 7,000 7,000 8,000 10,000 15,000 10,000 4,000
flow

Using 10% as the cost of capital, determine the following


a. Payback period
b. Net present value at 10% discount factor
c. Profitability index at 10% discount factor
d. Internal rate of return with the help of 10% and 15% discount factor.
6. From the following information calculate the net present value of the two projects and
suggest which of the two projects should be accepted assuming a discount rate of 10%.

Particulars project-X project-Y


Initial investment $20,000 30,000
Estimated life 5years 5years
Scrap value $ 1,000 $2,000

The profits before depreciation and after taxes (cash flows) are as follows:
Particulars year-1 year-2 year-3 year-4 year-5
Project-X 5,000 10,000 10,000 3,000 2,000
Project-Y 20,000 10,000 5,000 3,000 2,000

Submission Date: May 30, 2017 E.

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