Chương 2 + 3:

1. Linh Lang Systems has sales of $312,800, cost of goods sold (COGS) of $218,400, inventory of
$46,300, and accounts receivable of $62,700. How many days, on average, does it take the firm
to both sell its inventory and collect payment on the sale?
2. The Flower Shop has accounts receivable of $3,506, inventory of $4,407, sales of $218,640, and
cost of goods sold of $169,290. How many days does it take the firm to sell its inventory and
collect the payment on the sale assuming that all sales are on credit?
3. The ABC Inn has net income for the most recent year of $8,450. The tax rate was 35%. The firm
paid $1,300 in total interest expense and deducted $1,900 in depreciation expense. What was
the cash coverage ratio for the year?
4. Thien Long has a long-term liability of $4,691,891 and current assets of $1,200. Current liabilities
are $800, sales are $4,000, the profit margin is 9.3%, and the return on equity (ROE) is 18.5%.
How much does the firm have in total assets?
5. Over the past year, Dinh Hoang Co. has realized an increase in its current ratio. However, the
company’s quick ratio have remained constant. What happens to the firm’s level of inventory?
6. What are solvency ratios and liquidity ratios? Explain the key differences between these two
ratios?
7. What kind of information from the financial ratio analysis are the primary concern of a firm’s
creditors and investors?
8. Provide the definition of return on assets (ROA) and return on equity (ROE). Explain the
difference between ROA and ROE?

Chương 5 + 6

1. Your local travel agent is advertising a winter vacation package for travel three years from now.
The package requires that you pay $30,000 today, $35,000 one year from today, and a final
payment of $55,000 on the day you depart three years from today. What is the cost of this
vacation worth today if the discount rate is 10%?
2. You are considering two separate investments. Both investments pay 7% interest. Investment A
pays simple interest, and Investment B pays compound interest. Which investment should you
choose to gain more value if you plan on investing for five years? Why?
3. You just received $225,000 from an insurance settlement. You have decided to set this money
aside and invest it for retirement. Currently, your goal is to retire 25 years from today. How much
more will you have in your account on the day you retire if you can earn an average return of
10.5% rather than just 8%?
4. Your older sister deposited $5,000 today at 8.5% interest for 5 years. You would like to have just
as much money at the end of the next 5 years as your sister will have. However, you can only
earn 7% interest. How much more money must you deposit today than your sister did if you are
to have the same amount at the end of the 5 years?

Chương 7 + 8

1. National Home Rentals has a beta of 1.38, a stock price of $19, and recently paid an annual
dividend of $0.94 a share. The dividend growth rate is 4.5%. The market has a 10.6% rate of
return and a risk premium of 7.5%. a. What is the firm's cost of equity using the Capital-asset
pricing model (CAPM)?
 b. What is the firm's cost of equity using the Dividend growth model? model above?

2. Chocolate Co., expects to earn $3.50 per share during the current year, its expected constant
dividend growth rate is 6.0%, and its common stock currently sells for $32.50 per share. New
stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred.
What would be the cost of equity from new common stock?
3. A firm has 30,000 shares of common stock outstanding at a market price of $17.50 a share. The
firm also has a bond issue outstanding with a total face value of $280,000, which is selling for
86% of par. The cost of equity is 16% while the after-tax cost of debt is 6.9%. The firm pays a tax
rate of 30%. What is the weighted average cost of capital?
4. Red River Inc. is expected to pay a $2.5 dividend at the end of the first year (D1), the dividend is
expected to grow at a constant rate of 5.5% a year, and the common stock currently sells for
$52.5 a share. The before-tax cost of debt is 7.5%, and the tax rate is 20%. The target capital
structure consists of 45% debt and 55% common equity

Chương 9 + 10

1. ABC Company has identified the following two mutually exclusive projects

a. If the discount rate is 11 %, what is the NPV for project B? Which project will the company choose
if it applies the NPV decision rule?

b. Calculate the payback period for project B. If the required payback period is 3 years, which project
will the company choose?

2. Company B is considering a project with the following cash flows:

Year Cashflow

0 -17000

1 7000

2 9000

3 8000

a. What is the Net Present Value (NPV) at a discount rate of 10%?

b. Without calculation, what can you tell about the Net Present Value (NPV) of this project if the
discount rate is 5%? or 20%?

3. ABC Corporation has a project with the following cash flows:

Year Cashflow

0 -28000

1 8000

2 -3000

3 6000

a. Is the cash flow of this project normal or non-normal? Why? ‘

b. Calculate the net present value of this project given a discount rate of 11%. Should ABC
Corporation accept this project?

4. XYZ Company has identified the following two mutually exclusive projects:

a. Given the IRR of project A is 18.56%. Let’s test if 17.42% is the IRR of project B?

b. Using the IRR decision rule, which project should the company accept? What are two main
conditions for the two methods NPV and IRR yielding the similar decision?

5. What are the concepts of internal rate of return (IRR) and Net Present Value (NPV)? What is the
relationship between these two investment criteria? Name one situations in which you might
prefer IRR over NPV?
6. Discuss the reasons why firms often use the method of net present value instead of discounted
payback period?
7. What are independent and mutually exclusive projects? Explain the differences between
independent and mutually exclusive projects in terms of acceptance of the project.
8. What is the Payback Period? Describe the reasons that make a project with a longer payback
period riskier than one with a shorter payback period?