Financial Management Quiz

Chapter 20
Redan manufacturing is considering a change in its cash only sales policy. The new terms of sale would
be net one month. Based on the following information, determine if Redan should proceed or not.
Describe the buildup of receivables in this case. Cost of capital is 1% and tax rate is 25%.
Current Policy
80,000
45,700
1,130

Price per unit

Cost per unit
Unit Sales per month

New Policy
80,500
46,000
1,195

Chapter 11
Zeon Corporation consider an investment in a project with a value of $100 million. Economic life of the
project has been estimated with a value of 20 years, no salvage value. With this project, company
estimated there will be increasing amount of production and sales. Selling price for the product is $50 per
product, variable cost is $10 per unit and fixed cost is estimated $10.000 per year. What is the accounting
break even quanity, cash break even quantity, operating cash flow if the company sells product equal to
accounting break event quantity, DOL.
Chapter 12&13
As an investor, you invest your money in stock A, B and C. Stock A and B do not pay dividend and C
regularly pay its dividend every year. The tabel below is price of three stocks for the last 3 years.
price ($)
Year

Divide
nd
Stock
C

Stock A

Stock B

Stock
C

2012

50

60

55

2013

60

70

70

2014

65

75

75

10

a. Calculate arithmetic average return and geometric average return

b. The value of your investment are $1000 in stock A, $1500 in Stock B and $2000 in stock C.
Probability of recesion is 15%, Normal is 55% and boom is 30%. Return in recesion is 5% lower
than normal and return in Boom is 5% higher than normal. Calculate expected return and standart
deviation for stock A and B, calculate expected return for portfolio.