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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 for 20 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.

HAN EXCEL

INSTRUCTIONS: Use the space beginning in Row 30 to create an amoritzation table model that will work for ANY ALLOWABLE values of th changeable inputs are in red. Create restrictions on the input cells that prevent users from entering values that are not al

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 loan. 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 with "Annual", "Quarterly" the choices. Use the results from that cell to set the payment frequency for computation in the table.

Each row in your table should show the monthly payment, the interest portion of that payment, the principal portion of t the balance immediately following that payment for all payments within the term of the loan. Rows in the table that are the loan should show nothing (be blank) except for the payment number. All values in the table should be positive numb In cell H22, create a formula that computes the total dollar amount of interest that will be paid over the life of the loan. In cell H25, create a formula that computes the effective annual interest rate for the loan given the inputs.

INPUTS: Amount of Loan: Term of loan in years Annual Interest Rate on Loan: Balloon Payment Payment Frequency Payment Number 0 1 2 3 4 5 6 7 8 9 10 11 12 13 Payment Interest

$350,000 Total Interest Paid 3 over life of loan 5.00% $100,000 Effective Annual Interest Rate Principal Balance

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

rk for ANY ALLOWABLE values of the inputs. Userrom entering values that are not allowed.

ount of the loan.

Cell F25 with "Annual", "Quarterly" and "Monthly" as on in the table.

payment, the principal portion of that payment, and he loan. Rows in the table that are beyond the term of the table should be positive numbers or zero.

l be paid over the life of the loan. given the inputs.

oan given the inputs.

2 3 5

Instructions: The inputs below represent a loan with monthly payments. The loan will have a required monthly payment, but the borrower can pay more than the required payment. The input for the supplemental monthly payment is the additional amount that will be paid each month that the loan is in effect.

Create a formula that computes the number of payments that will be needed to pay off the loan if the supplemental monthly payment is made throughout the life of the loan.
Also create whatever formulas are necessary to compute the difference between the total dollar amount of interest that would have been paid on the loan if only the required payments were made and the total dollar amount of interest that will be paid if the supplemental monthly payment is made every month.

Loan Amount Term in Years Annual Interest Rate Supplemental Monthly Payment

150,000 5 6.5% 1,000

Required regular payment on the loan not including the supplemental payment Number of payments needed to pay off the loan with the regular and supplemental payments made every month Difference between the total dollar amount of interest paid over this life of the loan with the regular payment and the dollar amount of interest that will be paid over the life of the loan if the regular and supplemental payments are made every month.

will have a required payment. The input will be paid each

needed to pay off e life of the loan.

ce between the total y the required be paid if the

ed regular payment on the loan luding the supplemental payment

er of payments needed to pay e loan with the regular and emental payments made every month

nce between the total dollar nt of interest paid over this life loan with the regular payment he dollar amount of interest that e paid over the life of the loan if gular and supplemental payments ade every month.

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: Computations 6.50%

Points as marked for each question.

NOTE: There may be and probably are many ways to solve these problems. Any way that produces the correct answer, within any constraints stated with the problem, is acceptable. The sign of the answer does not matter as long as the number value of the answer is correct.

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 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Required Rate of Return Payment 4,250 <-- Input 4,250 4,250 4,250 4,250 4,250 4,250 4,250 4,250 3,000 <-- Input 8.00%

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $

In the yellow cell below, create ONE formula that computes the maximum amount you would be willing to pay for the investment given the inputs. All computations must be done in that one formula. DO NOT use the NPV function. [ 5 Points ] Answer: 2. Create the necessary formulas in the yellow cells to compute the effective annual interest rates for the input nominal annual rate given the listed compounding periods. Your formulas should work for any reasonable value of the input. [5 Points]

Nominal Annual Interest Rate (Input)

9.50% Effective Annual Rate

Compounding Quarterly Monthly Daily Continuous

3.
Time:

Consider the following cash flow timeline:

0 1 2 3 4 5 6 7 8 9 10

$500

$500

$500

$X

$X

$X

$X

$500

$500

$500

$400

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:

0 1 2 3 4 5 6 7 8 9 10

Time:

$500

$500

$500

$500

$500

$500

$500

$500

$0

$0

You will make the annual deposits shown above into an account that earns a 10% annual return on average. 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 now. There are no inputs so you can hard-code the numbers in the formulas but the formulas must be shown. [ 5 Points ]

5.

In the yellow cell below, create ONE formula that will return the CGS from the table at the right for the year given in the input cell. [ 3 Points ] Input Cell for Year CGS 5

Year 1 2 3 4 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 2007 2008 2009 2010 2011 2012 Sales 2,415,000 2,134,560 1,955,000 2,010,500 1,870,000

$ $ $ $ $

10

$500

$400

10

$0

$0

urn on average. 0% per year. ars from now. st be shown. [ 5 Points ]

Sales 2500 3000 3250 4000 4500 5200 5900 6500 8000 9250

CGS 1800 2200 2400 3100 3300 3900 4400 4800 6000 6900

EBIT 300 315 325 400 430 450 500 550 590 700

Net Income 125 150 162 200 225 260 295 325 400 475

You need forecast the 2012 pro forma income statement and balance sheet for the firm whose 2010 and 2011 income statements and balance sheets are given here. Inputs are provided for most items in the Inputs section below.
The cost of goods sold in 2012 is expected to change with sales by 110% of the two-year arithmetic average of 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-year arithmetic average of their percentage of sales for 2009 and 2010. The firm has planned an investment of $65,000 in new equipment in 2012. This equipment will be depreciated at $12,500 per year. Depreciation on 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 Long 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, the 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 Sheet. This number should be positive if the firm will have more financing than is needed, and it should be negative if the firm has less financing than is needed.

INPUTS Percent Change in Sales from 2011 Interest Rate on Short Term Notes Payable Interest Rate on Long Term Debt Tax Rate for 2012 Common Stock Dividend for 2012 Expected addition to Plant and Equipment in 2012 Additional depreciation on new Plant/Equip in 2012 8.000% 4.500% 6.500% 35.0% $40,000 $65,000 $12,500

Income Statement
2010 Sales Cost of Goods Sold Gross Profit Selling and G&A Expenses Fixed Expenses Depreciation Expense EBIT Interest Expense Earnings Before Taxes 3,514,000 2,284,100 1,229,900 350,000 120,000 30,000 729,900 56,000 673,900 2011 3,795,120 2,656,584 1,138,536 325,000 125,000 32,500 656,036 62,900 593,136 2012

120,000

Taxes Net Income

235,800 438,100

207,600 385,536

Balance Sheet
Assets Cash and Equivalents Accounts Receivable Inventory Total Current Assets Plant & Equipment Accumulated Depreciation Net Fixed Assets Total Assets Liabilities and Owner's Equity Accounts Payable Short-term Notes Payable Other Current Liabilities Total Current Liabilities Long-term Debt Total Liabilities Common Stock Retained Earnings Total Shareholder's Equity Total Liabilities and Owner's Equity Excess/(Deficit) Financing for 2012 2010 52,000 406,000 854,000 1,312,000 429,000 126,000 303,000 1,615,000 130,000 179,000 118,000 427,000 614,000 1,041,000 395,000 179,000 574,000 1,615,000 2011 98,036 520,000 875,000 1,493,036 580,000 158,500 421,500 1,914,536 180,000 210,000 85,000 475,000 500,000 975,000 395,000 544,536 939,536 1,914,536 2012 98,036

210,000 62,500 450,000 395,000

hose 2010 and 2011 in the Inputs section

ithmetic average of es, Accounts year n investment of r. Depreciation on

ayable and Long

ion above, the nts should

Balance Sheet. This d be negative if the

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

A. B. C. D. E.

DO NOT CHANGE ANYTHING BELOW THIS LINE 1 2 3 4 5 6 7 8 9 10 0 0 0 0 0 0 0 0 0 0

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 "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?) The beta coefficient is a measure of a stock's total risk when it is held in isolation. (True or false?) 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 sales method, which of the following are typically not assumed to maintain the same percentage ralationship to sales over time?

When projecting pro-forma income statements and balance sheets using the percent of sales method, which of the following are typically not assumed to maintain the same percentage ralationship to sales over time? Accounts receivable Account payable Inventory Cost of Goods Sold All of the above would typically maintain the same percentage relationship to sales.

DO NOT CHANGE ANYTHING BELOW THIS LINE