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Net Working capital is the

difference between current assets and current liabilities

maximize share price

Primary goal of publicly owned firm interested in serving stockholders should be to:

Primary Market

financial market where issues of a security are sold to initial buyers by the borrower

Corporations

Limited Liability is faced by owners of:

Primary Market (funding a new project/first time selling)

IBM has decided to issue stock to fund a new project. When the stock is issued it will be sold on the:

Ann is the principal. Mary is the agent

Ann is interested in purchasing Teds factory. Since Ann is a poor negotiator, she hires Mary to negotiate a purchase price. Identify the principal and the agent.

Best example of an agency problem:

Paying management bonuses based on the number of store locations opened during the year.

Present Value or PV= $12,050.53

What is the present value of $13,950 to be received 3 years from today if the discount rate is 5% ?

Agency costs refer to:

the cost of the conflict between stockholders and management

both sole proprietorship's and general partnerships

Unlimited liability is faced by the owners of:

118+(118 x .05 x 5)= $147.50

Gerald invested $118 in an account that pays 5% simple interest. How much money will he have at the end of 5 years?

capital structure

The mixture of debit and equity used by a firm to finance its operations is called:

Number of years=16.01 years

You are trying to save to buy a new $150,000 Ferrari. You have $59,000 today that can be invested at your bank. The bank pays 6.0% annual interest on its accounts. How many years before you have enough?

Has owned land for 22 years; I/Y=5%; PV=$-15,090; PMT=0; FV=$44,142

Some time ago Julie purchased eleven acres of land costing $15,090. Today the land is valued at $44,142. How long has she owned the land is the price of the land has been increasing at 5% per year?

Present Value=$247,183,170; N=20 years; I/Y= 5.5%; PMT=0; FV=$800,000,000

Imprudential Inc. has a unfunded pension liability of $800 million that must be paid in 20 years. If the relevant discount rate is 5.5%, the present value of the liability is?

8% increase per year; N=112(2007-1895) PV=$-120; PMT=0; FV=$665,000

In 1895 the winner of a competition was paid $120. In 2007 the winners prize was $665,000. What is the interest rate increase per year?

Present value=$389,394,793; N=16 years; I/Y=5%; PMT=0; FV=$850,000,000

Imprudential Inc. has a unfunded pension liability of $850 million that must be paid in 18 years. If the relevant discount is 5%, what is the present value of this liability?

16,252.06; N=25 years; I/Y=10%; PV=$1500; PMT=0; For 7 years $8,339.88; N=18(25-7); I/Y=10%; PV=$1500; PMT=0

You have just made $1500 contribution to your retirement account. Assuming you earn 10% rate of return and make no additional contributions what will your account be worth in 25 years? What if you wait 7 years before contributing?

return of investment

Total amount of cash returned, regardless of initial investment.

net return

Difference between return and initial investment.

rate of return

r - net return expressed as percentage of original investment

dividend

interim payment from a stock

coupon

interim payment from a bond

Rent

Profit you expect to get when you build the plant, assuming it all goes to plan

dividend yield

dividend divided by price

Capital Gain

an increase in the value of an asset

capital yield

difference between purchase price and final price, not counting interim payments, divided by purchase price

basis point

1/100 of a percent

Future Value

value of a present cash amount at some point in the future

r (rate of return)

(FV - PV) / PV

compound interest

(1+r)^t - 1

Present value of annuity in arrears

discounted value today of series of future payments

Present value of annuity due

discounted value today of a series of payments made at beginning of period

PV (annuity, i, n) = A

Converting the time value money factor from ordinary annuity to annuity due

Accounting for notes payable/receivable

short term: record at maturity value

Treatment of direct loan origination fees

defer and recognize over life of loan

Treatment of note exchanged for cash with rights/privilege attached

PV of right/privilege = PV of note - cash

record at PV of cash exchanged

Treatment of note exchange for cash with no rights/privilege attached

record at FMV of good or service exchanged

Treatment of note exchanged for noncash item with fair interest rate

Treatment of note exchanged for noncash item with unfair interest rate and known FMV

record at FMV of goods or FMV or note if FMV of goods unknown

used imputed interest rate to value note

Treatment of note exchanged for noncash item with unfair interest rate and unknown FMV

expense as incurred

Treatment of indirect loan origination fees

Lender's treatment of fees

carrying amount = principal + loan costs - charged fees

Borrower's treatment of fees

carrying amount = principal - charged fees