exam 2 spring 2012
TRANSCRIPT
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IMPORTANT: SAVE THIS SPREADSHEET TO THE DESKTOP OF THE
COMPUTER YOU ARE USING WITH YOUR NAME IN THE FILENAME.
RESAVE IT OFTEN WHILE YOU ARE WORKING ON IT.
NOTHING SHOULD BE USED OR ACCESSED BY YOU DURING THIS
TEST EXCEPT THE COMPUTER YOU ARE USING AND THIS FILE, ANDBLACKBOARD WHEN YOU SUBMIT YOUR COMPLETED EXAM.
YOU MAY NOT ACCESS THE INTERNET WHILE COMPLETING THIS EXAM.
YOU MAY NOT ACCESS ANY PROGRAM ON YOUR COMPUTER OTHER THAN EXC
WHILE TAKING THIS EXAM. YOU MAY ACCESS EXCEL'S INTERNAL HELP SYSTEM.
There are 7 tabbed pages in this exam spreadsheet including this one.
Points are shown on each tab. Partial credit will be given where possible.
The last tab contains multiple choice and true/false questions that count for20 points of the 100 point total for the exam.
SAVE THIS FILE BACK TO YOUR DESKTOP WITH YOUR NAME IN THE FILENAME.
RESAVE IT OFTEN WHILE YOU ARE COMPLETING IT.
When you have completed this exam spreadsheet:
Save it one last time to the desktop of your computer.
Close Excel
Tell your proctor that you have finished.
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L
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INPUTS:
Amount of Loan: $350,000 Total Interest Paid
Term of loan in years 3 over life of loan
Annual Interest Rate on Loan: 5.00%
Balloon Payment $100,000 Effective Annual
Payment Frequency Interest Rate
Payment
NumberPayment Interest Principal Balance
0
1
2
3
4
56
7
8
9
10
11
12
13
INSTRUCTIONS:
Use the space beginning in Row 30 to create an amoritzation table model that will work for ANY A
changeable inputs are in red. Create restrictions on the input cells that prevent users from enterin
The amount of the loan must be a positive number.
The balloon payment must be a positive number or zero and must be less than the amount of the
The term of the loan can be 1, 2, 3, 4, or 5 years.The interest rate can be between 0% and 15%.
The payment frequency can be annual, quarterly, or monthly. Use a drop-down list in Cell F25 wit
the choices. Use the results from that cell to set the payment frequency for computation in the ta
Each row in your table should show the monthly payment, the interest portion of that payment, t
the balance immediately following that payment for all payments within the term of the loan. Ro
the loan should show nothing (be blank) except for the payment number. All values in the table sh
In cell H22, create a formula that computes the total dollar amount of interest that will be paid ov
In cell H25, create a formula that computes the effective annual interest rate for the loan given th
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LLOWABLE values of the inputs. User-
g values that are not allowed.
loan.
"Annual", "Quarterly" and "Monthly" as
le.
e principal portion of that payment, and
s in the table that are beyond the term of
ould be positive numbers or zero.
er the life of the loan. given the inputs.
e inputs.
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1
2
3
5
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Loan Amount 150,000$ Required regular pTerm in Years 5 not including the s
Annual Interest Rate 6.5%
Supplemental Monthly Payment 1,000$ Number of paymeoff the loan with
supplemental pa
Difference betwee
amount of intere
of the loan with t
and the dollar am
will be paid over t
the regular and s
are made every m
Instructions:
The inputs below represent a loan with monthly payments. The loan will have a re
monthly payment, but the borrower can pay more than the required payment. Th
for the supplemental monthly payment is the additional amount that will be paid
month that the loan is in effect.
Create a formula that computes the number of payments that will be needed to p
the loan if the supplemental monthly payment is made throughout the life of the l
Also create whatever formulas are necessary to compute the difference between
dollar amount of interest that would have been paid on the loan if only the requir
payments were made and the total dollar amount of interest that will be paid if th
supplemental monthly payment is made every month.
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ayment on the loanpplemental payment
ts needed to payhe regular and
ments made every month
n the total dollar
t paid over this life
e regular payment
ount of interest that
he life of the loan if
pplemental payments
onth.
quired
e input
each
ay off
loan.
the total
ed
e
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You are planning for your retirement. Your goal is to accumulate enough money in
your retirement account to pay out $250,000 per year for 25 years starting on January 1, 2052.
The account will have a zero balance after the 25 withdrawals.
Your first deposit into the account will be on January 1, 2013, in the amount of $25,000.
You will then make equal annual deposits into the account on January 1 of every year until 2047
(34 additional deposits). The average annual interest rate you expect to earn on the account is
given in the green input cell below. In the space provided, create whatever formulas are needed
to compute the dollar amount of the equal annual deposits that will be needed to meet your goal.
Ignore taxes. Lable your computation steps to enable partial credit. Your formulas should work
for any positive value of the input interest rate.
Average annual interest rate earned on the account: 6.50%
Computations
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Points as marked for each question.
1. Consider the following annual cash flows, each to be received at the ends of
years, that represent an investment opportunity. The investment will pay nothing
for the first five years, but then will pay an equal amount each year for 9 years, and then
some other amount in the final year.
Time Payment
1 -$
2 -$
3 -$
4 -$
5 -$
6 4,250$
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Nominal Annual Interest Rate (Input) 9.50%
Compounding
Effective
Annual
Rate
Quarterly
Monthly
Daily
Continuous
3. Consider the following cash flow timeline:
The total present value of all 11 cash flows, including the four missing ones, is $5,000
if the discount rate is 10% per year compounded annually. The four missing cash flows,
represented by $X in the timeline, are all identical amounts. In the space below,
create whatever formulas are needed to find the value of $X. There are no inputs so you can
hard-code the numbers in the formulas but the formulas must be shown. [ 5 Points ]
4. Consider the following cash flow timeline:
You will make the annual deposits shown above into an account that earns a 10% annual return on aver
You will not make any deposits after t=7, but the accumulated funds will continue to earn 10% per year.
Create whatever formulas are necessary to compute how much will be in the account 10 years from no
There are no inputs so you can hard-code the numbers in the formulas but the formulas must be shown.
Time: 0 1 2 3 4 5 6 7 8 9
$500 $500 $500 $X $X $500 $500$500$X$X
Time: 0 1 2 3 4 5 6 7 8
$500 $500 $500 $500 $500 $0 $0$500$500$500
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5. In the yellow cell below, create ONE formula that will return
the CGS from the table at the right for the year Year
given in the input cell. [ 3 Points ] 12
Input Cell for Year 5 3
4
CGS 5
6
7
8
9
10
6. In the green cell below, create a formala that extrapolates the linear trend from the
5 previous years of sales and uses it to estimate 2012 sales. [3 Points]
Year Sales
2007 2,415,000$
2008 2,134,560$
2009 1,955,000$
2010 2,010,500$
2011 1,870,000$
2012
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age.
.
. [ 5 Points ]
$400
10
?
10
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Sales CGS EBIT Net Income
2500 1800 300 1253000 2200 315 150
3250 2400 325 162
4000 3100 400 200
4500 3300 430 225
5200 3900 450 260
5900 4400 500 295
6500 4800 550 325
8000 6000 590 400
9250 6900 700 475
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Percent Change in Sales from 2011 8.000%
Interest Rate on Short Term Notes Payable 4.500%
Interest Rate on Long Term Debt 6.500%Tax Rate for 2012 35.0%
Common Stock Dividend for 2012 $40,000
Expected addition to Plant and Equipment in 2012 $65,000
Additional depreciation on new Plant/Equip in 2012 $12,500
2010 2011 2012
Sales 3,514,000 3,795,120
Cost of Goods Sold 2,284,100 2,656,584Gross Profit 1,229,900 1,138,536
Selling and G&A Expenses 350,000 325,000
Fixed Expenses 120,000 125,000 120,000
Depreciation Expense 30,000 32,500
EBIT 729,900 656,036
Interest Expense 56,000 62,900
Earnings Before Taxes 673,900 593,136
Income Statement
INPUTS
You need forecast the 2012 pro forma income statement and balance sheet for the firm whose 2010 a
income statements and balance sheets are given here. Inputs are provided for most items in the Input
below.
The cost of goods sold in 2012 is expected to change with sales by 110% of the two-year arithmetic av
the proportion of this item in relation to sales for 2010 and 2011. Selling and G&A Expenses, Accounts
receivable, Inventory, and Accounts Payable are expected to change with sales at 100% of the two-ye
arithmetic average of their percentage of sales for 2009 and 2010. The firm has planned an investmen
$65,000 in new equipment in 2012. This equipment will be depreciated at $12,500 per year. Deprecia
existing Plant/Equipment will be the same as it was in 2011.
Interest expense for 2012 is computed on the 2011 ending balances in Short Term Notes Payable and
Term Debt. Inputs for those interest rates are provided in the Inputs section.
Complete the pro-forma income statement and balance sheet for 2012 using the information above, t
inputs below, and the values that are given in the statements. The 2012 projected statements should
accurately adjust for any changes in the inputs.
Compute the excess or deficit of financing for 2012 in the yellow box at the bottom of the Balance Shenumber should be positive if the firm will have more financing than is needed, and it should be negati
firm has less financing than is needed.
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Taxes 235,800 207,600
Net Income 438,100 385,536
Assets 2010 2011 2012
Cash and Equivalents 52,000 98,036 98,036
Accounts Receivable 406,000 520,000Inventory 854,000 875,000
Total Current Assets 1,312,000 1,493,036
Plant & Equipment 429,000 580,000
Accumulated Depreciation 126,000 158,500
Net Fixed Assets 303,000 421,500
Total Assets 1,615,000 1,914,536
Liabilities and Owner's Equity
Accounts Payable 130,000 180,000
Short-term Notes Payable 179,000 210,000 210,000
Other Current Liabilities 118,000 85,000 62,500Total Current Liabilities 427,000 475,000
Long-term Debt 614,000 500,000 450,000
Total Liabilities 1,041,000 975,000
Common Stock 395,000 395,000 395,000
Retained Earnings 179,000 544,536
Total Shareholder's Equity 574,000 939,536
Total Liabilities and Owner's Equity 1,615,000 1,914,536
Excess/(Deficit) Financing for 2012
Balance Sheet
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nd 2011
s section
erage of
r
t of
ion on
ong
he
et. Thise if the
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1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
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A.
B.
C.
D.E.
1 0
2 0
3 0
4 0
5 0
6 0
7 0
8 0
9 0
10 0
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Objective Section - 20 Points Possible-2 Points for each incorrect answer.
For True/False questions, enter TRUE or FALSE in the yellow cell.
For multiple choice questions, enter the letter of the best reponse in the yellow cell.
The beta coefficient is a measure of a stock's total risk when it is held in isolation. (True orfalse?)
The "real" rate of interest is the minimum rate of return that the average investor would
have to expect in order to want to buy the investment in world with no inflation and no
risk. (True or false?)
If two stocks have a correlation with each other of 0 (zero), then both could have high
variability but there is no relationship between the variability of the two stocks. That is,
the move totally independently of each other. (True or false?)
It is not possible to for a beta coefficient to be greater than +1 or less than -1. (True or
false?)
When projecting pro-forma income statements and balance sheets using the percent of
The "nonimal" or "stated" rate on a loan or investment is always larger than the effective
rate except in the case of annual compounding when the nominal and effective rates are
equal. (True or False?)
The future value of a given investment increase as the frequency of compounding for the
interest rate increases, other things equal. (True or False?)
The present value of a future cash flow decreases as investors level of risk aversion
decreases, other things equal. (True or False?)
According to financial theory, investors choose to take more risk because they know that
taking higher risk investments will result in higher average returns over time. (True or
false?)
According to the security market line, an increase in the expected rate of inflation will
increase the required return on all investments by the same amount, other things equal.
(True or false?)
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Accounts receivable
Account payable
Inventory
Cost of Goods SoldAll of the above would typically maintain the same percentage relationship to sales.
DO NOT CHANGE ANYTHING BELOW THIS LINE
sales method, which of the following are typically not assumed to maintain the same
percentage ralationship to sales over time?
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