Problem Set 1-2
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Stevens Institute Of Technology *
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Course
CORPORATE
Subject
Finance
Date
Feb 20, 2024
Type
Pages
5
Uploaded by ElderWillpower13265
Problem Set I
Fin 638: Corporate Finance
Due Friday, February 11
Please submit neatly handwritten or typed answers.
Create a single pdf file and submit
electronically through Canvas or in class. Show your steps or reasoning. Do not just write
numbers. For example, avoid answers like 100
×
1
.
05
2
. A better answer would be PV = 100,
r = 5%, n = 2 =
⇒
FV
= 100
×
1
.
05
2
.
1
Corporation, Financial Markets
Problem 1.1.
See the Economist article about short selling from
https://www.economist.
com/finance-and-economics/2023/11/30/short-sellers-are-endangered-that-is-bad-
news-for-markets
or through library
https://stevens.idm.oclc.org/login?url=https:
//www.proquest.com/magazines/short-sellers-are-endangered-that-is-bad-news/docview/
2895218054/se-2
.
(a) According to the article, what were the effects of a short-sales ban in six European
countries?
(b) What do you think? Should short-selling be banned or suppressed?
Problem 1.2.
See the Wall Street Journal article about selling of shareholder voting rights
from
https://www.wsj.com/finance/stocks/buy-my-vote-a-startup-is-letting-shareholders-
sell-their-proxies-122f0eb9
or through library
https://stevens.idm.oclc.org/login?
url=https://www.proquest.com/newspapers/votes-sale-startup-is-letting-shareholders-
sell/docview/2916896574/se-2
. The buyer and the seller in a transaction obviously are
trading because they think it is in their interest. But we are interested in exploring whether
such trading good for companies and markets.
(a) According to the article, “creating a market for proxy votes would enhance share-
holder democracy and ultimately make companies better-run”.
What do you think
that means?
(b) In the next sentence, the article mentions a risk of such trading. Again, discuss how
such trading can be harmful to companies or markets.
2
Financial Statements
Use the financial statements of Duck Corporation to answer the following questions.
1
Duck Corporation
Consolidated Balance Sheet
Year ended December 31 (in
millions)
Liabilities and
Assets
2022
2021
Stockholders’ equity
2022
2021
Current Assets
Current Liabilities
Cash
127.2
117.0
Accounts payable
175.2
147.0
Accounts receivable
111.0
79.2
Notes payable
21.0
19.2
Inventories
91.8
85.8
Current maturities of long-term debt
79.8
73.8
Other current assets
12.0
6.0
Other current liabilities
12.0
24.0
Total current assets
342.0
288.0
Total current liabilities
288.0
264.0
Long-term assets
Long-term Liabilities
Land
133.2
124.2
Long-term debt
479.4
337.8
Buildings
219.0
183.0
Capital lease obligations
Equipment
238.2
199.2
Total Debt
479.4
337.8
Less accumulated depreciation
(112.2)
(105.0)
Deferred taxes
45.6
44.4
Net property, plant, and
equipment
478.2
401.4
Other long-term liabilities
Goodwill
120.0
Total long-term liabilities
525.0
382.2
Other long-term assets
126.0
84.0
Total liabilities
813.0
646.2
Total long-term assets
724.2
485.4
Stockholders’ equity
253.2
127.2
Total liabilities and
Total Assets
1066.2
773.4
Stockholders’ equity
1066.2
773.4
Duck Corporation
Consolidated Income Statement
Year ended December 31 (in
millions)
2022
2021
Revenue
1220.2
1156.6
Cost of sales
(1000.4)
(963.8)
Gross profit
219.8
192.8
Selling, general, and
administrative expenses
(81.0)
(78.0)
Research and development
(49.2)
(45.6)
Depreciation and amortization
(7.2)
(6.6)
Operating income
82.4
62.6
Other income
Earnings before interest and taxes (EBIT)
82.4
62.6
Interest income (expense)
(50.2)
(31.6)
Pre-tax income
32.2
31.0
Taxes
(11.0)
(10.6)
Net income
21.2
20.4
Dividends paid
10.2
10.0
Price per share
32
30
Shares outstanding (millions)
12.0
8.0
Problem 2.1.
What is Duck’s net working capital at year-end 2022?
2
Problem 2.2.
What is Duck’s market-to-book ratio at year-end 2022?
Problem 2.3.
What is Duck’s operating margin in 2022?
Problem 2.4.
What is Duck’s accounts payable days in 2022? Assume there are 365 days
in a year and use accounts payable at year-end.
3
Financial Decision Making
Problem 3.1.
See the following images for prices of a pack of 6 notebooks and a pack of
3 notebooks from an online retailer. Is there an arbitrage opportunity here? Why or why
not? Recall that there is an arbitrage strategy if there is a strategy to profit without taking
any risk.
3
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exercise for finance acc.pdf
O File | C:/Users/User/Desktop/FIN%20ACC/exercise%20for%20finance%20acc.pdf
D Page view
A Read aloud
T Add text
V Draw
E Highlight
O Erase
of 4
EXERCISES
For questions number 1 to 7, given the accounting transaction, indicate
whether the asset, liability or owner's equity has increase or decrease or
has no effect by circling the appropriate answer.
1 The owner invests personal cash in the business. (Example)
Asset
Increase
Decrease
No Effect
Liability
Increase
Decrease
No Effect
Owner's Equity
Increase
Decrease
No Effect
2 The owner withdraws cash from the business for personal use.
Asset
Increase
Decrease
No Effect
Liability
Increase
Decrease
No Effect
Owner's Equity
Increase
Decrease
No Effect
3 The company receives cash from a bank loan
Asset
Increase
Decrease
No Effect
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SOUTH EAST-ASIA INSTITUTE OF TRADE AND TECHNOL0GY
LL
LEARNING MODULE FOR 1
SEMESTER
GRADE 12
BUSINESS FINANCE
STUDENT'S NAME:
STRAND & SECTION:
PART 4: ACTIVITY/APPLICATION
Suppose: The following income Statements and Cash Flow Statements of company A, B and C were presented to you.
Which do you think is a more attractive company? Why?
O STAED
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11:18 A A %
Chapter The English
SaveArabic
3/6
Ex 3.
What are the three majör functions of the financial management? How
are they related?
4/6
Ex 4.
Compare and contrast the roles that a firm's treasurer and controller
have in the operation of the firm.
5/6
II
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Question 13 of 20
Select the best answer for the question.
13. Which of the following transactions would not affect a company's net income?
O A. The payment of employees's salaries
OB. Services provided for clients on account
OC. Interest earned on invested money
OD. A cash withdrawal by the owner
O Mark for review (Will be highlighted on the review page)
Previous Question
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Princip X
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"strayer.sophia.org/spcc/principles-of-finance-practice-milestone-1-1/5
3
4
5, 6
8
9
10
11
12 13
14 15
16 17 18
19 20 21 22 23 24
O This is a practice Milestone and does not count towards your score.
Question
Unit 1 Tutorials
A If you need help
Question 5
O Mark this question
What principle of corporate governance requires companies to operate in ways that respect the
social and legal relationships they have with employees and creditors, among others?
O Integrity and ethical behavior
O Disclosure and transparency
O Interests of other stakeholders
O Integrity and ethical behavior
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Information needed to assess fundamental value
stock prices of other bank stocks
P/E ratios
Answer Bank
Information not needed to assess fundamental value
sum of discounted future profits
for JPM
total number of shares outstanding for JPM
A
27
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Editing
QUESTION TWO
Voice
Sensitivity
Editor
Rem
Selamat Islamic Bank Berhad (SIBB) just announced its financial report for the year ended
2016. Table below is a summary of CIBB's financial report.
(a)
Items
RM (000)
Income Statement
Operating Revenue
Net Income
Expenses
Profit after tax and zakat
3,662,444
1,540,333
700,343
543,443
Statement of Financial Position
Current Asset
Current Liability- Demand deposit
Total Debt
Total Assets
4,332,300
10,635,054
42,091,092
45,620,442
3,729,590
Total Equity Capital
Evaluate SIBB's performance based on the following financial ratios and explain what each
ratio means.
i.
The capability of management in converting assets into net earnings.
i.
The effectiveness of management to control cost, expenses and service price
O Focus
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(United Kingdom)
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exercise for finance acc.pdf
O File | C:/Users/User/Desktop/FIN%20ACC/exercise%20for%20finance%20acc.pdf
(D Page view
A Read aloud
T Add text
V Draw
E Highlight
2 Erase
of 4
++
5 The companu purchases office equipment by cash.
Asset
Increase
Decrease
No Effect
Liability
Increase
Decrease
No Effect
Owner's Equity
Increase
Decrease
No Effect
6 The owner contributes his personal truck to the business.
Decrease
No Effect
Asset
Increase
Decrease
No Effect
Liability
Increase
Decrease
No Effect
Owner's Equity
Increase
5:29 PM
O Type here to search
IMI
26/10/2021
ENG
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in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working!!!!!!!
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