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Date Posted: 03:34:26 08/05/00 Sat
Author: Bob
Subject: Re: Sample Final questions
In reply to: Jenny Canova 's message, "Sample Final questions" on 18:09:06 08/04/00 Fri

> I am having trouble calculating the answers to the
> following questions. Can anyone help?
>
> (1) Final 5 question #18 I thought the answer s/b A
> 400K=150+250

See page 412. We accept all postive NPV projects, thus C,D,E for 615K investment.


>
> (2) Final 6 question #6 why is the answer not 2437.56 E
>
See my other message, the interest rate is 6.09% since we need a six month effective rate.


> (3) Final 4 question #14 how do you calc std dev of
> port w/o having the correlation coefficient?

Form a portfolio of the two stocks in each state of nature. 5%, 17.5%, and 30%. Then solve for standard deviation as if it was a single stock.


>
> (4) Final 4 question #17 why is the answer not C
> 1.45=(.3*1.5) + (.5*2) +(.2*0)?
>
You solved this correctly. Maybe there is is a typo in the answer key.



> (5) Final 3 question #20 I used CF0=(14Mill)
> CF1-15=1.28Mill=[(1.43Mill-.93Mill)*.7 + .93] I/Yr=10%
> ==> NPV=(4.2642Mill) and IRR=4.236% but that's not
> anywhere close to the answer.

Net income already has the taxes deducted, therefore the annual cash flow is Net Income + Depreciation or 1.43 million + (14 million/15 years). To solve this, we have to assume the company is all equity.



>
> Thanks to anyone who can help!
> Jenny

Anytime.

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Replies:

  • Re: Sample Final questions -- kiran, 04:30:42 03/15/05 Tue
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