FIN 370 Full Course with Discussion Questions
Includes ALL Written Assignments and the following discussion questions:
- Define the difference between forecasting and budgeting. What is the difference between an operating budget and a cash budget?
- Which ratios measure a corporation’s liquidity? What are some of the problems associated with using financial ratios? How would the DuPont analysis overcome some of these problems?
- What is the capital market? How is the primary market different from the secondary market? In your opinion, are these markets efficient? Why or why not?
- Define the difference between strategic planning and financial planning. Describe how the two are related?
- What is the break-even point? What decisions does the break-even point help an organization make? What actions might an underperforming organization take to reach the break-even point?
- How would you define working capital? What could happen if an organization neglected to manage its working capital? What working capital techniques would you recommend for your organization? Why?
- What is meant by capital planning? Why is IRR important to an organization? Why is NPV important to a project? How would you select from multiple projects presented to your organization?What are main elements in calculating the cost of capital? How would an increase in debt affect it? How would you identify an organization’s optimal cost of capital? Is the cost of capital increasing or decreasing for most companies?
- What is meant by Weighted Average Cost of Capital (WACC)? What are the components of WACC? Why is WACC a more appropriate discount rate when doing capital budgeting? What is the impact on WACC when an organization needs to raise long term capital?
- What is an IPO? How does an IPO allow an organization to grow financially? When is a merger or an acquisition, instead of an IPO, more appropriate? Identify the latest 2011 company to go public?
- What is meant by foreign exchange risk? What specific problems does foreign exchange present in an organization? How could an organization that needs Euros in six months protect itself from currency fluctuations?
- What are “Value Added Services”? How does a company measure the overall “value” of such services?
- What is the difference between a traditional IPO and an auction-based IPO? What do the differences mean for companies and investors?
4-6. A cash budget is usually thought of as a means of planning for future financing needs. Why
would a cash budget also be important for a firm that had excess cash on hand?
5-4A. (Present value) What is the present value of the following future amounts?
- $800 to be received 10 years from now discounted back to the present at 10 percent
- $300 to be received 5 years from now discounted back to the present at 5 percent
- $1,000 to be received 8 years from now discounted back to the present at 3 percent
- $1,000 to be received 8 years from now discounted back to the present at 20 percent
5-5A. (Compound annuity) What is the accumulated sum of each of the following streams of
- $500 a year for 10 years compounded annually at 5 percent
- $100 a year for 5 years compounded annually at 10 percent
- $35 a year for 7 years compounded annually at 7 percent
- $25 a year for 3 years compounded annually at 2 percent
5-6A. (Present value of an annuity) What is the present value of the following annuities?
- $2,500 a year for 10 years discounted back to the present at 7 percent
- $70 a year for 3 years discounted back to the present at 3 percent
- $280 a year for 7 years discounted back to the present at 6 percent
- $500 a year for 10 years discounted back to the present at 10 percent
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