Click the button to modify questions and answers. No guarantee of 100% accuracy.Created by Muskie McKay

Random Number 0.486119568

Integer Below Ten 5Integer Below Hundred 24Integer Below Thousand 225Integer Below Ten Thousa 1608

Small Decimal 0.07Medium Decimal 0.21Large Decimal 0.57

Second Small Decimal 0.05Second Medium Decimal 0.16Second Large Decimal 0.47

Between 1-7 6Between 8-12 11Between 13-28 24Between 75-95 94Between 1-96 57

Less Than 250 192Less Than 500 264A Couple Hundred 681Less than 15000 4424

Financial Reporting AnalysisBased on Question 1 in Muskie's problem set

(in millions of US dollars)Cash collections on receivables 1220Cash dividends on common stock paid 61Cash dividends on preferred stock paid 112Cash purchases of inventories 382Cash receipts of dividends 22Depreciation expense 78Interest payments 47Payments of expenses 92Proceeds from issurance of common stock 570Proceeds from bridge financing 610Proceeds from sale of equipment 104Repurchasing of issued shares 220Purchase of land 119Purchase of trading securities 21

Use the following information to calculate the cashflow from operating activities and cashflow from financing activities.

Cash collections on receivables $ 1,220.00 Cash purchase of inventories $ (382.00)Cash receipts of dividends $ 22.00 Interest payments $ (47.00)Payments of expense $ (92.00)Purchase of trading securities $ (21.00)Operating cash flows $ 700.00

Cash dividends on common stock paid $ (61.00)Cash dividends on preferred stock paid $ (112.00)

$ 570.00 Proceeds from bridge financing $ 610.00 Repurchasing of issued shares $ (220.00)Financing Cash flows $ 787.00

Proceeds from the issuance of common stock

Financial Reporting AnalysisBased on question 2 in Muskie's Problem Set

1-Jan Number of shares outstanding 240,0001-Mar Number of shares issued 1600030-Jun 3.5% cash dividend declared

1-Jul Number of shares reacquired 210001-Oct Two-for-one stock split

Calculated the weighted average shares for the year.

1-Jan Beginning balance X 12/12 2400001-Mar New Shares issued 10/12 1333330-Jun 3.5% Cash dividend

1-Jul Reacquired shares: X 6/12 X -1 -105001-Oct 2-for-1 split 242833

Weighted average shares outstanding 485667

Corporate FinanceBased on question 5 from Muskie's Problem Set

Next Year's Dividen $2.61 Retention rate of 0.71ROE 5.49Stock Price $44

Using the following information what is the cost of equity capital for Sears Mining?

g = 3.8979

Cost of Equity r = 9.82

First calculate g which is equal to the dividend retention rate times the ROE.

Next take the dividend in year one over the current stock price and add the growth rate g

Corporate FinanceBased on question 6 in Muskie's Problem Set

Before-tax cost of new debt 8.47 %Corporate Tax Rate 0.31 per dollarTarget debt-to-equity ratio 0.8Current Stock Price $34 Next year's dividend $1.47 Estimated growth rate 7.57 %Estimated Beta 1.16

John Smith, CFA has been assigned the task by his employer Smothers Brothers Brokerage to determine the weighted cost of capital of Zulu Corp. He has been provided the following information:

Cost of Equity = 11.89

Wd = .8 / 1.8 0.44We = 1 -Wd 0.56

WACC = 9.204983

First determine the cost of equity using the dividend discount model. Beta is of no use in this question.

Next use the targe debt-to-equity ratio to work out the weighting for debt and equity.

Finally use the WACC formula and the corporate tax rate and the before tax cost of debt.

Corporate FinaceVariation on Question 9 in Muskie's Problem Set

Months to maturit 1Price $9,887.50Face Value $10,000.00

Calculate the discount yield for a U.S. Treasury bill with the following characteristics:

112.5Then determine the yearly return: 1.13%

14.46%

This is one of many yeild formulas you have to remember. Some use a 360 day year while some use a 365 day year. Discount yield uses 360, it is less accurate than bond equivalent yield.

First calculate the dollar return by subtracting the price from the face value:

Finally work out the return for only the days you hold the bond

Equity InvestmentBased on question 21 in Muskie's Problem Set

Yakamichi Corp paid $1.57 annual dividend last yearand distributed 51 percent of its earnings toshareholders. The firm's ROE is 16.07 percent.If investors require 15 percent rate of returnon this stock, the estimated value of Yakamichi's stock is:

Dividend Growth Rate:g= ROE * (1 - dividend payout ratio)

g= 7.87%

Stock's Intrinsic Value:P= d0(1+g)/(k-g)

P= $23.77

First you need to calculate the dividend growth rate before solving for the stock's intrinsic value:

Fixed IncomeBased on question 25 of Muskie's Problem Set

What is the value of a 6 year10 percent coupon bond selling at a yield of8 percent assuming the coupon payments are

made semiannually?

N 12PMT 5

I 4.00%FV 100

CPT PV ($109.39)

This is a simple TVM question you have the option of adjusting your calculator to two payments per period or doubling N and halfing the yield and coupon. Some study guide thinks you should do the latter and having failed once that is what I'm now doing, the danger is you'll leave your calculator set on two payments per period in you haste to do the next TVM question.

Financial Reporting AnalysisBased on question 31 from Muskie's question set

Cash flow from operations $681 Purchase of Plant $225 Sale of Land $264 Interest Expense $94 Depreciation and Amortization $81

An analyst gathered the following information about a company:

The company has a tax rate of 35% and prepares its financial statement under U.S. GAAP

The company's free cash flow to the firm is?

Free Cash Flow $720

This was one of many questions I got wrong, this one though I could not remember the correct formula which is:Free Cash Flow = Net Cash Flow from Operating Activities - Dividends - (Purchases of Plant Assets - Sales of Plant Assets)I assumed Cash flow from operations is "Net Cash Flow from Operating Activities"

Financial Reporting AnalysisBased on question 32 in Muskie's Problem set

A company issues $6,000,000 of 6year annual, 7.50% coupon bonds. Upon issurancetheir YTM was 5.00% Based on this information, theinitial balance sheet interest expense and the first year's income statement armortization are?

First you need to calculate the PV.FV -$6,000,000.00

PMT -$450,000.00N 6I 5.0%

PV $6,761,353.81

$338,067.69

$111,932.31

1st Calculate PMT $450,000.002nd Calculate PV $6,761,353.813rd Calculate PV * YTM ie Interest Expense $338,067.694th Calculate PMT - Interestest Expense ie Amortization $111,932.31

Then you calculate the Interest Expense, which is the PV * YTM:Then the Ammortization which is the difference between PMT and Interest Expense

Financial Statement AnalysisBased on question 35 Muskie's Problem set

At the end of its last fiscal year, Vintner's Supply Corp.reported retained earnings of $940,000 This year, Vintner's reported year-end retained earnings of

$1,920,000 paid dividends of $110,000 paid interest expense of$60,000 and had net income of $240,000

Vintner's other comprehensive income for this year is?

$980,000 Next add back net income $1,220,000

$1,110,000

$130,000

First you must subtract the beginning retained earnings from the end retained earning.

You must subtract dividends paid as that is done after net income is calculate.

Now you subtract change in retained earnings to determine the amount of other comprehensive income for the year.

Financial Statement AnalysisBased on question 44 Muskie's Problem Set

On January 1st, 2006 Immobile Company entered into a 11 year capital lease agreement for machinery in exchange

for equal, annual year-end payments of $44,000 and a guaranteed residual value of $11,000 at the end ofthe lease. The capital lease has a present value of $337,820 based on an implicit interest rate of 7% . Assuming thecompany uses the straight-line method of depreciation, the total amount of lease related expenses in 2007 is?

Depreciation expense 29710.91 1Interest expense 2007:

Lease payment 2006 44000.00Interest expense, 2006 23647.40Reduction of lease obligation 2006 20352.60Lease obligation 1/1/2006 balance 337820.00Lease obligation 1/1/2007 balance 317467.40times Interest Rate 22222.72 2

Total lease-related expense 2007 ### 1 + 2

QuantitativeBased on question 49 from Muskie's Problem set

Expected Return of A 7%Expected Return of B 8%

Fund A BA 121 121B 121 576

The standard deviation of the portfolio is?

An investor has a portfolio of two mutual funds, A and B, 25% invested in A. The following table shows the expected return and the covariance matrix for the two mutal funds:

Variance 376.9375Standard Deviation 19.41

We first solve for the portfolio variance using the two asset formula.

The key thing to remember is from the covariance matrix is it is the return multiplied by the standard deviation of the asset squared.

The Covariance is the number that appears twice in the covariance matrix.

Equity InvestmentsBased on question 55 Muskie's problem set

A stock is not expected to pay dividends of $1.57 per shareuntil two years from now. At this time, the dividend distribution is going to be 51% of net income, earnings growth is projected to be 8% , and the return on equity is expected to be

24% If the required rate of return is 10.0%for the first two years and 15% thereafter,what is the approximate value of the stock today?

Dividend Growth Rate

g = ROE * (1 - dividend payout ratio) 0.1176

Dividend Discount ModelP2 = d2 / (k - g) 48.46

Time Value of MoneyFV 48.46N 2I 0.1

PV $40.05

AccountingBased on Question 14 from Muskie's Problem Set

Suppose a company uses trade credit with a 5%discount on the 11 th day and the full amount due 68days after the close of the sale. The effective borrowingcost of skipping the discount on day 11 is?

Discount 5%Difference 95%Days to close 68Discount Period 11Interest Paid Days 57Exponential 6.403508772

Cost 38.88%

1st Determine the difference between discount and full price 95%2nd Determine the how many days of credit usuage 573rd Determine the simple interest rate 5.26%4th One plus simple interest rate raised to 365/days of credit u 1.3888236045th Subtract one 38.88%

Equity ValuationBased on question 22 in Muskie's Problem Set

The market equalibrium rate on the stock of Williams Brothers is11.00% . Its expected return on equity is 14.50%

and its expected earnings per share is $6.16 .If the firm's plowback ratio is 37.00% , its price to earningsratio will be?

Dividend Payout Ratio 0.63Market Equalibrium Rate 11.00%ROE 14.50%Plowback ratio 37.00%

P/E 11.18012

Accounting Inventory AdjustmentBased on Question 74 from Muskie's Question Set

20X8 20X9Raw Materials $240,000 $300,000 Finished Product 225,000 240,000

$465,000 $540,000

$ (36,000) $ (41,000) $ 429,000 $ 499,000

Tax rate is 35%

Theta Corp. uses LIFO inventory accounting. The footnotes to the 20X9 financial statements contain the following information:

Less adjustments to LIFO basis

If FIFO had been used for both years, the 20X9 net income would have changed by?

Change in LIFO Reserve x (1- Tax Rate)Change in LIFO Reserve $ 5,000.00

Net Income Change $3,250.00

Net Income Change=

Portfolio TheoryBased on Question 76 from Muskie's Question Set

Dr. Filly plans to invest $192 with a portion in a risky asset anda portion in a risk-free asset.The risky asset has an expected return of 16%and a standard deviation of 21% while the risk-fre asset has anexpected return of 5%

0.07

What percentages of Dr. Filly's money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of

Risky Risk-Free

21% 0%

w1 1-w1

STD^2 w1^2(std1)^2 w2^2(std2)^2 2w1w2Cov(r1,r2)0.0049 w1^2(std1)^2 0 0

w1^2= 0.0049 divided by (std1)^2std1^2= 0.0441

w1^2= 0.11111111111

w1= 0.3333333333 Riskyw2= 0.6666666667 Risk Free

Standared DeviationWeight in Portfolio

It is easy to see how the second term is zero'ed out, but the final term is also unnecessary because we are using the risk-free asset as one of our portfolio members.

I seem to solve these ones by assuming all the deviation comes from the risky asset and then figuring out what portion of the portfolio I should put into it to get the desired portfolio STD.

Forward Rate Agreement so DerivativesBased on question 78 in Muskie's problem set

Suppose two parties agree to a $24,000,000 1X4 FRA contract

on the LIBOR at a rate of 2.50% In one month's time the

following LIBOR rates are observed:

LIBOR

1 month 2.50% 30

2 months 2.57% 60

3 months 2.64% 90

4 months 2.71% 120

5 months 2.78% 150

6 months 2.85% 180

What is the payment amount due to the FRA buyer?

# of days in Period

DerivativesBased on Question 78 from Muskie's Problem Set

2.64%

0.14%

$24,000,000

The payment due to the FRA buyer before discounting is:Principal * Rate Difference * Number of Days/360 $8,400

$8,345.46

The payment on a 1x4 FRA is based on the three-month LIBOR rate one month from now.The difference between the agreed and realized rate is Future Rate - Contract RateSince the deposite is for 90 days and the notational principal is:

To arrive at the correct payment, this amount must be discounted back from the three-month LIBOR deposit maturity date to expiration on the FRA, using the three-month LIBOR and discounting 90 days.

QuantitativeBased on Question 79 Muskie's Problem Set

2003 $6.00 2004 $6.50 2005 $7.00 2006 $7.50 2007 $8.00

Over the last five years, the earnings per share data for a firm were as follows:

Over this period, the EPS compound annual rate was?

QuantitativeBased on Question 79 from Muskie's Problem Set

Using your financial calculator:

N 4PV -6FV 8

PMT 0

Compute I/Y 7.46%

In order to calculate the compound growth rate, we only need the beginning and the ending EPS values.

Financial Statement AnalysisBased on question 52 from Muskie's Problem Set

Common Stock $0.57 par 1000000 oustanding $570,000

11% $100 par 30000 outstanding $3,000,000 15% convertible bonds ### 1500 $1,500,000

Each ### bond is convertible into 58shares of common stock. In addition, the company had 500,000options outstanding the entire year. Each option allows the holder to acquire one share of common stock at a price of $8 The average market price of the common stock for the year was $24

Net Income for the year was $930,000 and the income tax rate is45% The company paid dividends to common stock of $93,000 for the year.

Noncumulative Preferred Stock

Calculate the basic earnings per share and diluted earnings per share for the year.

Financial Statement AnalysisBased on Question 52 in Muskie's Problem Set

Basic EPS

Basic EPS =

Basic EPS = $0.60Diluted EPS

Options are Dilutive 333333

1.42EPS with options: Net Income - Preferred Shares Dividends 600000

Option Adjusted Shares Issued 1333333Diluted EPS = $0.45

If-Converted MethodConvertible Bond OnlyBasic EPS If-Converted

Net Income $930,000.00 $930,000.00Preferred Dividends 330000 330000

123750Numerator $600,000.00 $723,750.00

1000000 1000000If Converted 0 87000Denominator 1000000 1087000EPS $0.60 $0.67

Bonds are antidilutive when converting them increases EP

Options OnlyBasic EPS If-Converted

Net Income $930,000.00 $930,000.00Preferred Dividends 330000 330000Numerator $600,000.00 $600,000.00

1000000 1000000If Converted 0 333333Denominator 1000000 1333333EPS $0.60 $0.45

(Net Income - (preferred stock dividend rate X par rate X preferred shares issued))/common shares outstanding

Number of Options Issued X (Average Share Price - Exercise Price)/Average Share Price

Per share bond effect:

Borrowed Sum X Interest Rate X (1 - Tax Rate)/(Bonds Issued X Share Conversion Rate)

After-Tax Cost of Interest

Weighted Average Shares Outstanding

Weighted Average Shares Outstanding

QuantitativeBased on Example in Schweiser

Calculate a 95% confidence interval for the mean of a sample of size 34 drawn from a normal distribution with mea 11and standard deviatio 8 .

QuantitativeBased on example in Schweiser

First calculate the standard deviations of the mean for sample size 34

Standard Deviation over square root of sample size 1.372

A 95.00% confidence interval will extend 1.96 standard deviatabove and below the mean, so our confidence interval is:mean + or - 1.96 times the first number we calculated

Confidence Interval Lower Bound 8.311Confidence Interval Upper Bound 13.69

Portfolio ManagementBased on Question in 2009 BSAS Practice Exam

Below are monthly returns for two mutual funds:

Monthly ReturnsFund A Fund B

December 0.07 0.06November 0.21 0.11October 0.57 0.24September -0.05 -0.94August -0.16 -0.57July -0.47 -0.49

Compute the covariance of returns.

Monthly Return Deviation from Mean

Fund A Fund B Fund A Fund BDecember 0.07 0.06 0.0417 0.3244 0.0135November 0.21 0.11 0.1817 0.3744 0.0680October 0.57 0.24 0.5417 0.5044 0.2732September -0.05 -0.94 -0.0783 -0.6756 0.0529August -0.16 -0.57 -0.1883 -0.3056 0.0576July -0.47 -0.49 -0.4983 -0.2218 0.1105Sum 0.17 -1.59 0.5757

0.028 -0.26Covariance =Sum of product of deviations divided by sample size -1 0.1151

0.3516 0.4688

0.6986Covariance 0.1151

This question is annoying because the Data & Stat worksheets on the BA II Plus does not calculate it, so you need to know the formula and compute it with a lot more button pressing and liklihood of misclicks. Below was official solution/explination.

Deviation Fund A X Fund B

Expected Value (mean)

Or you can use the Stat Worksheet and take r the correlation coefficient and multiply it by the product of the standard deviation of Fund A and the standard deviation of Fund B. This is r * Sx * Sy on a BA II Plus using Stat worksheet.

Standard DeviationCorrelation Coefficient

Corporate FinanceBased on Question 12 in Problem Set

Private CompanyPublic CompanyTax Rate 0.21 0.21Debt/Equity 0.57 0.47Equity Beta N.A. 1.5

An analyst gathered the following information about a private company and its publicly-traded competitor:

Using the pure-play method, the estimated equity beta for the private company is?

1.09385255

Next relever to reflect the target debt ratio of the private firm:

1.5864144

First determine the asset beta for the publicly traded company by unlevering it:unlevered beta = Equity Beta/[1 + (1 - Tax Rate) * Debt To Equity Ratio]

levered beta = unlevered beta * [1 + (1 - Private Tax Rate) * Private Debt to Equity Ratio]

Corporate FinanceSlightly simplified version of Question 13 in Problem Set

In MillionsCredit Sales $33,000 Cost of goods sold $22,000 Accounts receivable $6,000 Inventory - Ending balance $3,750 Accounts payable $1,500

The operating cycle for this company is?

Given the following financial statement data, calculate the operating cycle for Harley Davidson.

First determine the number of days of inventoryEnding Inventaory / (COGS / 365) 62.22

Next determine the number of days of receiveablesAccounts Receiveables / (Credit Sales / 365) 66.36

128.58Operating cycle = Days of Inventory Outstanding + Days of Receiveables Outstanding

There is a difference between Operating Cycle and Net Operating Cycle, the difference being subtracting Days Payable Outstanding!

Fixed IncomeBased on Question 23 in Problem Set

The current price is 94

24 basis points,The price will increase to 100

24 basis points,The price will decline to 88

The duration of this bond is closest to?

You've been tasked with estimating the interest rate risk of a bond by calculating it's duration.

An internal proprietary computer valuation model predicts that if interest rates decline by

The same model predicts that if interest rates increase by

0.0024100 basis points equals 1/100th.Duration ###

This is actually an easier bond question, there is a formula similar to weighted average, but I kept getting confused so:

duration = (price if yield declines - price if yield rises) / (2 * initial price * change in yield in decimal)I guess a tricky part is converting basis points, it is divided by 10000 in this example

Fixed IncomeVery evil (time consuming) problem based on #28 in the problem set

The bond has a coupon rate of 6 %Coupon payments are made semi-annually.The quoted price is 106 and 24 / 32The par value is $10,000 Settlement takes place on April 18thThe next coupon will be paid out on July 15t98days after settlement.The number of days between January 15th and July 15th 181

Calculate the dirty price for this bond using the actual days/actual days convention and the following data:

This is the denominator of the actual/actual 181

That is the numerator of the actual/actual 83

106.750Below is the necessary formula to memorize:

Par Value + (Coupon Payment * (Actual/Actual))

$3.00Percentage of Par 108.1257

$10,812.57

Percentage of coupon payment for buyer 45.86%Next coupon payment 300Buyer's share of next coupon payment $137.57Par value over 100 1.0675Multiplied by Face Value $10,675.00

$10,812.57

For a while question 20 was the worst question in this Excel file, now the title probably belongs to this one. Officially you are expected to solve this in under 90 seconds.

The first thing you need to do is decipher the date information. In this year for this bond we are given days between January 15th and July 15th the time of the next coupon payment.

The numerator you have to work out, the coupon is paid on July 15th and Settlement ie the date the bond changes hands is April 8th. Given the number of days in this period, we can calculate the difference. The buyer only gets the interest accumulated for the number of days equal to the difference.

Next I recommend converting the par value to be in decimal.

The coupon rate is halved due to semi-annual payments, so the actual coupon payment is:

You take the percentage of par over 100, multiplied by the par value to get the dirty price.

Another way to look at this problem is the dirty price is part of the next coupon, plus the percentage of par times the par value.

FSABased on Question 61 in Problem Set

Based on the information below calculate CFO, CFI, and C

2007 2006Cash $681 $873 AR 3094 3286Inventory 4557 3195Prepaid Expenses 1124 832Investments 2692 3050

15057 13081-8264 -7870

Total Assets $18,941.00 $16,447.00

Liabilities and Stockholders' EquityAP 3224 2830Accrued Liabilities 594 983

1924 1381Long-term Debt 6024 5030Common Stock 5424 5330Retained Earnings 2192 1537

$19,382.00 $17,090.56

Sales $31,608.00COGS $18,016.56Gross Profit $13,591.44Selling and Administrative Expense $12,591.01Income from Operations $1,000.43Other Revenue and Expenses:

Loss of Sale on Equipment -$24.00Interest Expense -$264.00

Income Before Income Taxes $712.43

Income Tax Expense $114Net Income $598

Balance sheet and income statement for a U.S. firm is as follows:

Equipmentdepreciation

debt

Stockholders' Equity

Income Statement for the year ended December 31, 2007

Operating ActivitiesNet Income $598

Less: Changes in current assets:Decrease in accounts receivable 192Increase in inventory -1362Increase in prepaid expenses -292

Add: Change in current liabilities:Increase in accounts payable 394Decrease in accrued liabilities -389

-1457Add: Depreciation expense 394Add: Loss on sale of long-term investmen 24

Cashflow from operating activiti ($441)

Sale of investments 334Purchase of equipment -1976Cashflow from investing ($1,642.00)

Proceeds from debt 1537Proceeds from stock issue 94Dividends paid -57Cashflow from financing $1,574

One of the most likely questions to be asked is those about cashflows. This question is actually three questions so you have 4.5 minutes, but they are still a lot of work.Note the order the years appear in, sometimes they are in the opposite order.

Fixed IncomeBased on question 9 in problem set

Days until maturity 186Current Price $9,736.00Face Value $10,000.00

Calculate the bond equivalent yield of a US Treasury bill using the following data:

Fixed IncomeBased on question 9 in problem set

Return 264Investment 9736 0.02711586

Days in Year 365Days to ROI 186 1.96236559

Return X Days in Year = 5.32%Investment Days to ROI

Many find fixed income tougher than equity, in part due to all the conventions established years ago, such as how U.S. Treasury Bills are valued.

A 365 day is used as we are comparing it do another investment instrument.

http://www.newyorkfed.org/aboutthefed/fedpoint/fed28.htmlThe forumula is simply the return, over the investment, multiplied by the time it takes to earn the return, which is less than a year, BEYs are yearly, and use a 365 day year.

Alternative Investments - Real EstateBased on question 40 in problem set

Amount financed by mortgage loan $600,000 Interest rate on mortgage loan 11%Term of mortgage loan 24 yearsYear 1 gross potential rental income $150,000 Year 1 estimated vacancy and collection loses 7%Year 1 estimated insurance, taxes, and electricity $29,000 Year 1 estimated repairs and maintenan $18,000 Annual straight line depreciation $35,000 Investor's Tax Rate 21%

$70,424

An investor gathered the following information about a real estate investment:

The mortgage loan requires level end-of-year annual payments of

If the interest on the loan is tax-deductible. The investment's expected after-tax cash flow in year 1 is closest to?

Alternative Investment - Real EstateBased on question 40 in problem set

Net rental income $139,500.00Insurance, taxes and electric 29000.00Repairs and maintenance 18000.00Depreciation 35000.00Interest 66000.00Before Tax Income -8500.00Taxes -1785.00After-tax income -6715.00Add back depreciation 35000.00Subtract principal payment 4424.00After-tax cashflow $23,861.00