FIN 101 SEU Accounting Principles of Finance Questions

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Assignment 2 FIN101
Course Name: Principles of Finance
Student’s Name:
Course Code: FIN101
Student’s ID Number:
Semester: 2nd
CRN:
Academic Year: 1440/1441 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
/5
Level of Marks: High/Middle/Low
Instructions:
➢
This Assignment must be submitted on Blackboard (WORD format only) via
the allocated folder.
➢
Email submission will not be accepted.
➢
You are advised to make your work clear and well-presented; marks may be
reduced for poor presentation. This includes filling your information on the
cover page.
➢
Assignment will be evaluated through BB Safe Assign tool.
➢
Late submission will result in ZERO marks being awarded.
➢
The work should be your own, copying from students or other resources will
result in ZERO marks.
➢
Use Times New Roman font 12 for all your answers.
Assignment Questions
Q1. Suppose Abdulrahman Plan to borrow a loan of SAR 120,000 now and will repay it in 10
equal annual installments. If the bank charges 10% interest, What will be the amount of the annual
installment?
(1 Mark)
Ans:
Q1. Briefly discuss the Time Value of Money concept?
(1 Mark)
Ans:
Q3. Ahmed has been offered a 10-year bond issued by Homer, Inc., at a price of $800. The bond
has a coupon rate of 7 percent and pays the coupon semiannually. Similar bonds in the market will
yield 10 percent today.
(2 Marks)
a. What should be the price of this bond?
b. Should Ahmed buy the bonds at the offered price?
Ans:
Q4. Suppose a 3 year bond with a 6% coupon rate that was purchased for $760 and had a promised
yield of 8%. Suppose that interest rates increased and the price of the bond declined. Displeased,
you sold the bond for 798.8 after having owned it for 1 year. What should be the realized yield ?
(1 Mark)
Ans:
Assignment 3 FIN101
Course Name: Principles of Finance
Student’s Name:
Course Code: FIN101
Student’s ID Number:
Semester: 2nd
CRN:
Academic Year: 1440/1441 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
/5
Level of Marks: High/Middle/Low
Instructions:
➢
This Assignment must be submitted on Blackboard (WORD format only) via
the allocated folder.
➢
Email submission will not be accepted.
➢
You are advised to make your work clear and well-presented; marks may be
reduced for poor presentation. This includes filling your information on the
cover page.
➢
Assignment will be evaluated through BB Safe Assign tool.
➢
Late submission will result in ZERO marks being awarded.
➢
The work should be your own, copying from students or other resources will
result in ZERO marks.
➢
Use Times New Roman font 12 for all your answers.
Assignment Questions
Q1: Carrefour is expecting its new center to generate the following cash flows:
Years
Initial
Investment
Net operating cashflow
0
1
2
3
4
5
($35,000,000)
$6,000,000 $8,000,000 $16,000,000 $20,000,000 $30,000,000
a. Determine the payback for this new center. (1 mark)
b. Determine the net present value using a cost of capital of 15 percent. Should the project be
accepted? (1 mark)
Answer:
Q2. What is the EAC of two projects: project A, which costs $150 and is expected to last two
years, and project B, which costs $190 and is expected to last three years? The cost of capital
is 12%. (1 mark)
Answer:
Q3. A company pays annual dividends of $10.40 with no possibility of it changing in the
next several years. If the firm’s stock is currently selling at $80, what is the required rate of
return? (1 mark)
Answer:
Q4. Stag corp has a capital structure which is based on 50% common stock, 20% preferred
stock and 30% debt. The cost of common stock is 14%, the cost of preferred stock is 8% and
the pre-tax cost of debt is 10%. The firm’s tax rate is 40%. (1 mark)
a. Calculate the WACC of the firm.
b. The firm is considering a project that is equally as risky as the firm’s current
operations. This project has initial costs of $280,000 and annual cash inflows of
$66,000, $320,000, and $133,000 over the next three years, respectively. What is
the net present value of this project ?
Answer:

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