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Mike Brown

BUSN 5200 Managerial Finance Complete Class

Mike Brown

BUSN 5200 Managerial Finance Complete Class


BUSN 5200 Week 1 to 8 Homework


BUSN 5200 Week 1 Homework


1. Describe the field of finance. How is it different from the field of accounting?

2. In a typical corporation the finance function is divided into two divisions, or departments. What are they? What does each department do?

3. What are the three forms of business generally encountered in the US? What are the main defining characteristics of each?

4. What is the basic financial goal of a business?

5. In the context of a corporation seeking to maximize the wealth of its owners, how is “wealth” defined?

6. What are the three main factors affecting the market price of a corporation’s stock?

7. What’s wrong (if anything) with saying the basic financial goal of a business is to “maximize profits?”

8. How would you state the basic goal of a non-profit firm?

9. The Internet company Google managed to avoid $2 billion in international income taxes in 2011 by moving a hefty sum of its revenues to subsidiaries in Bermuda, according to CNBC, which cited a report by Bloomberg. The search giant reportedly stashed $9.8 billion in revenues to its shell company in Bermuda — which doesn’t have a corporate income tax — last year allowing the company to shave its overall tax rate by almost 50 percent. Google’s Bermuda move was disclosed in a Nov. 21 filing by a subsidiary in the Netherlands. While the company’s move to shift funds to the country was legal, it could spur the growing global criticism of corporate tax avoidance. What do you think? Is Google’s action ethical? Why or why not?

10. What is “the agency problem?”



BUSN 5200 Week 2 Homework Assignment



1. Define the process of accounting.

2. What are the three major divisions in the accounting field?

3. What is the Fundamental Accounting Equation?

4. What is the purpose of a balance sheet? What are some examples of typical balance sheet accounts?

5. What is the purpose of an income statement? What are some examples of typical income statement accounts?

6. What is the purpose of a statement of cash flows? What are some examples of typical statement of cash flow accounts?

7. Based on the financial information below, prepare an income statement and a balance sheet for Joe’s-Fly-by-Night Oil company for the year ended December 31, 2012. Unless otherwise indicated, assume all information below is either for the year 2012 or as of December 31, 2012.


BUSN5200 Week 3 Homework Assignment

For Week 3, please complete the following for Joe’s Fly-By-Night Oil Company, whose latest income statement and balance sheet are shown below:

• Prepare a graph of sales and net income for the years 2009 – 2012. For the purposes of this exercise, assume the following historical sales and net income figures for Joe’s Fly-By-Night Oil:

o The following graph illustrates trends in population growth compared to the price of gas:

o Another factor that can affect the company’s sales is the price of oil. The following graph illustrates gas and crude oil prices:

• Prepare a pie chart of Joe’s Fly-By-Night Oil’s expense distribution for 2012 and comment on the results displayed.


• Prepare a pie chart of Joe’s Fly-By-Night Oil’s asset distribution for Dec 31, 2012 and comment on the results displayed.


• Prepare a pie chart of Joe’s Fly-By-Night Oil’s capital structure for Dec 31, 2012 and comment on the results displayed.


BUSN5200 Week 4 Homework Assignment


• For Week 4, please complete the following for Joe’s Fly-By-Night Oil Company, whose financial statements are shown below:

• • Prepare a ratio analysis for the fiscal year ended Dec 31, 2012. Organize your analysis per the following outline:

BUSN5200 Week 5 Homework Assignment

Question 1. Prepare a budget for this year for the Administrative Department at Tom’s Toyota Company based on the following information:

Question 2. Define a “Static Budget.”

Question 3. Define a “Flexible Budget.”

Question 4. Define the term “Zero-based Budgeting.”

Question 5. Define “Period Budgets.”

Question 6. Define “Rolling Budgets.”

Question 7. Big Bob’s Discount Appliances expects sales of $5,000, $5,000, and $10,000 during April, May, and June (big sale in June). To build business, Big Bob lets all customers buy on credit, and all do so. In the past, 50% of Big Bob’s sales have been collected during the month of sale, 40% are collected the following month, and 10% the month after that. If this trend continues, what will be Big Bob’s total cash collections in the month of June?

Question 8. Little Louie’s expects to have $100 in cash on hand at the beginning of June, and the company’s target cash balance is $100. Net cash flow for June is minus $300. Assuming that Little Louie’s borrows to meet short term cash needs and pays back as soon as surplus cash is available, what will be the company’s ending cash balance after financing at the end of June?

Question 9. Ma & Pa Kettle’s Chili Company has begun selling a new chili recipe and they want you to help them with next year’s budgeted financial statements. Using the worksheet below, complete Ma & Pa’s forecast and answer the questions which follow.


BUSN5200 Week 6 Homework Assignment


For Week 6, please turn in the answers to the following questions:

1. Why do we say money has time value?

2. Why is it important for business managers to be familiar with time value of money concepts?

3. Define Present Value.

4. Define Future Value.

5. What are present value and future value interest factors? (as in PVIF and FVIF)

6. (calculating future value) You buy a 6 year, 8% CD for $1,000. Interest is compounded annually. How much is it worth at maturity?

7. (calculating present value) What’s the present value of $1,000 to be received in 8 years? (Your required rate of return is 7% a year.)

8. (calculating the rate of return) A friend promises to pay you $600 two years from now if you loan him $500 today. What interest rate is your friend offering you?

9. (calculating the future value of an annuity) If you invest $100 a year for 20 years at 7% annual interest, how much will you have at the end of the 20th year?

10. (calculating the present value of an annuity) How much would you be willing to pay today for an investment that pays $800 a year at the end of the next 6 years? (Your required rate of return is 5% a year.)

Case Study Tasks:

1. Refer to the Case Study topic lecture on the Week 5 Content page. Using the information you obtained last week, complete the Part 3, Ratio Analysis



BUSN5200 Week 7 Homework Assignment



1. (Monthly compounding) If you bought a $1,000 face value CD that matured in nine months, and which was advertised as paying 9% annual interest, compounded monthly, how much would you receive when you cashed in your CD at maturity?

2. (Annualizing a monthly rate) You credit card statement says that you will be charged 1.05% interest a month on unpaid balances. What is the Effective Annual Rate (EAR) being charged?

3. (FV of annuity due) To finance your newborn daughter’s education you deposit $1,200 a year at the beginning of each of the next 18 years in an account paying 8% annual interest. How much will be in the account at the end of the 18th year?

4. (Rate of return of an annuity) Paul’s Perfect Peugeot says they’ll sell you a brand new Italian “Iron Man” motor scooter for $1,699. Financing is available, and the terms are 10% down and payments of $46.57 a month for 40 months. What annual interest rate is Paul charging you?

5. (Rate of return of an annuity) You would like to have $1,000,000 40 years from now, but the most you can afford to invest each year is $1,200. What annual rate of return will you have to earn to reach your goal?

6. (Monthly loan payment) Best Buy has a flat-screen HDTV on sale for $1,995. If you could borrow that amount from Carl’s Credit Union at 12% for 1 year, what would be your monthly loan payments?
12%/year = 1%/month

7. (Solving for an annuity payment) You would like to have $1,000,000 accumulated by the time you turn 65, which will be 40 years from now. How much would you have to put away each year to reach your goal, assuming you’re starting from zero now and you earn 10% annual interest on your investment?

8. (PV of a perpetuity) If your required rate of return was 12% a year, how much would you pay today for $100 a month forever?

9. (PV of an uneven cash flow stream) what is the PV of the following project?
(Assume r = 10%)

10. (FV of an uneven cash flow stream) what is the FV at the end of year 4 of the following project?
(Assume r = 10%)



BUSN5200 Week 8 Homework Assignment



Question 1. List the three steps that make up the general approach to capital budgeting.
Question 2. Define an “Incremental cash flow” as the term is used in capital budgeting.
Question 3. Your firm is considering buying a new machine that costs $200,000, is expected to generate $110,000 in new revenue each year and will cost $45,000 a year to operate. If your firm’s marginal income tax rate is 35% what is the Net Cash Flow your firm will realize from the new machine during the first year? Assume the MACRS depreciation rate for the machine for year 1 is 20%. Note – do not include the cost of the machine in your answer.
Question 4. Define the payback period method in capital budgeting and state the payback period decision rule.
Question 5. What is the payback period of the following project?
Question 6: a. What is the firm’s Breakeven Point in units?
Question 7. Define the Net present Value (NPV) method in capital budgeting and state the NPV decision rule. In economic terms, what does the NPV amount represent?
Question 8. Your firm is looking at a new investment opportunity, Project Alpha, with net cash flows as shown below. Calculate project Alpha’s Net Present Value (NPV), assuming your firm’s required rate of return is 10%.
Question 9. Define the Internal Rate of Return (IRR) method in capital budgeting and state the IRR Decision rule.
Question 10. Calculate the IRR of the project shown below.
Question 10. Calculate the IRR of the project shown below.



BUSN 5200 Week 1 to 8 Quizzes Solution


BUSN 5200 Quiz for week 1


Note: In the questions below, the correct answer is identified with an asterisk

1. In a corporation, the Chief Financial Officer (CFO) usually reports to the:

a. Treasurer

b. Controller

c. Chief Operating Officer (COO)

d. VP of Financial Planning

2. The primary factor that separates the corporate form of business from partnerships and sole proprietorships is:

a. Corporations are larger than partnerships and sole proprietorships

b. The owners of corporations get to keep all the company’s profits

c. The owners of corporations run the business and have unlimited liability

d. Corporations are “legal persons” separate and distinct from their owners

3. The primary goal of a publicly-owned firm interested in serving its stockholders should be to

a. Maximize expected total corporate profit.

b. Maximize expected EPS.

c. Minimize the chances of losses.

d. Maximize the stock price per share.

e. Maximize expected net income.

4. By maximizing the earnings of the firm we will ensure that the price per share of common stock is maximized, hence shareholders’ wealth will also be maximized.

a. True

b. False

5. Which of the following is the best measure of the wealth of a firm’s stockholders?

a. The firm’s Net Income during the past year

b. Expected Earnings per Share during the coming year

c. Book Value (or Net Worth) as recorded on the balance sheet

d. The price of the firm’s stock on the open market

6. Consider the following firms:

Net Income Stock Price at Stock Price at
this year Beg of Year End of Year

Firm A: $10,000,000 $20 $10

Firm B: $(10,000,000) $10 $20

a. The manager of Firm A is doing a better job than B

b. The manager of Firm B is doing a better job than A

c. Neither manager is doing a good job

d. Both managers are doing a good job

7. The practice of locating a U.S. Firm’s corporate headquarters in Bermuda because Bermuda does not have a corporate income tax is:

a. Illegal

b. Irresponsible

c. Definitely unethical

d. Legal, but might be considered unethical by some

8. In corporations, the goals of management and the goals of the stockholders are

a. Always the same

b. Always different

c. Might be different

d. Must be different

9. The corporate website for McDonalds Corporation is:

a. www.mickie-d’




10. The CEO of McDonalds Corporation is:

a. Mr. Jim Skinner

b. Mr. Ray Kroc

c. Mr. Don Thompson

d. Ms. Jan Fields

e. Mr. Fred Turner



BUSN 5200 Quiz for week 2


Note: In the questions below, the correct answer is identified with an asterisk

1. The area of accounting called Financial accounting deals with:

a. producing financial statements for the organization
b. costs, budgets, production rates, labor rates, prices, and so on

c. providing third party reviews of other firms’ financial statements

d. maximizing the wealth of the firm’s owners

2. GAAP stands for:

a. Guaranteed Accounting Accuracy Program

b. Global Access to Accounting Processing

c. Government Accountability And Payment

d. Generally Accepted Accounting Principles

3. Assume Macy’s sells $20,000 worth of men’s suits in December 2013. The customers all put the purchases on their Macy’s charge accounts and pay for the suits in January, 2014. If Macy’s uses Accrual Accounting how much in Sales will they record in December 2013?

a. $0

b. $10,000

c. $20,000

d. $40,000

4. On a company’s balance sheet, Total Liabilities plus Total Equity always equals Total Assets

a. True

b. False

5. Family Market bought 1000 cases of beans in 2012 that it still has in a warehouse. The amount spent for the beans would be recorded on Family’s 2012 income statement as inventory expense.

a. True

b. False

6. The Retained Earnings account on the balance sheet lists wages that have been earned by employees that have not yet been paid to them.

a. True

b. False

7. In 2012 the Simon the Pieman corporation had $10 million in sales, $5.2 million in operating costs, and $200,000 in interest expense. It also paid 40% of it’s pre tax income to the U.S. government as income tax expense. Simon’s Net After tax Income for 2012 was:

a. $1,840,000

b. $600,000

c. $4,600,000

d. $2,760,000

8. How much did McDonalds have in Total Assets at the end of 2012? (in millions)

a. $4,922.1

b. $18.602.5

c. $15,293.6

d. $35,386.5

9. What was McDonalds’ Total Revenue in 2012? (in millions)

a. $18,602.5

b. $27,567.0

c. $8,964.5

d. $5,464.8

10. How much cash was provided by McDonalds’ operating activities in 2012? (in millions)

a. $5,464.8

b. $6,966.1

c. $0.4

d. $2,336.1

End of quiz

BUSN 5200 Quiz for week 3


Note: In the questions below, the correct answer is identified with an asterisk

1. (See Exhibit 2-2 on page 58 in your BUSN 5200 Custom text Version 2) Assume Main Street Store’s Net Sales in 2010 were $1,000,000 and it’s Net Income in 201

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