1. What is the primary factory that determines the price of securities? Cn you think of another factor that might significantly affect how investors value the first factor?
2. Discuss the differences, similarities, and ties between finance and accounting.
3. Discuss the relationship between finance and economics
4. How does the activity of investors in financial market affects the decisions of executives within the firm?
5. What are the significant financial advantages and disadvantages of the sole proprietorship/partnership form in comparison with the corporate form?
6. Is limited liability a meaningful concept? Why or why not? And if so, for whom?
7. What conflict(s) of interest can you imagine arising between members of the community which a company operates and some other stakeholders
8. Is the agency problem an ethical issue or an economic issue?
9. Compare and contrast the terms stockholder and stakeholder.

Cash Budgeting

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently run out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.

Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,300 per month, and the rent is $2,400 per month. In addition, she must make a tax payment of $10,000 in December. The current cash on hand (on December 1) is $300, but Koehl has agreed to maintain an average bank balance of $7,000 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)

The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $150,000.

1. Prepare a cash budget for December, January, and February.

   I. Collections and Purchases:
   	December	January	February
   Sales	$	$	$
   Purchases	$	$	$
   Payments for purchases	$	$	$
   Salaries	$	$	$
   Rent	$	$	$
   Taxes	$	---	---
   Total payments	$	$	$
   Cash at start of forecast	$	---	---
   Net cash flow	$	$	$
   Cumulative NCF	$	$	$
   Target cash balance	$	$	$
   Surplus cash or loans needed	$	$	$

   
   
2. Suppose Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.)

Hands Insurance Company issued a $90 million, 1-year, zero-coupon note at 8 percent add-on annual interest (paying one coupon at the end of the year). The proceeds were used to fund a $100 million, 2-year commercial loan at 10 percent annual interest. Immediately after these transactions were simultaneously closed, all market interest rates increased 1.5 percent (150 basis points).

a. What is the true market value of the loan investment and the liability after the change in interest rates? (with the method of solution)

Give a general description of agency theory and provide at least 3 examples of the types of costs firms incur to ensure good corporate governance.

Describe the three forms of the efficient market hypothesis and give an example of observations that support each.

Write a paragraph describing, with one or two examples, a real option associated with a capital investment decision.

Describe why an efficient capital market is essential to the growth and development of an economy.

Discuss the benefits and the cost of increased risk retention?

Minion, Inc., has no debt outstanding and a total market value of $211,875. Earnings before interest and taxes, EBIT, are projected to be $14,300 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is a recession, then EBIT will be 35 percent lower. The company is considering a $33,900 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,500 shares outstanding. Assume the company has a market-to-book ratio of 1.0 and the stock price remains constant

. a-1. Calculate return on equity, ROE, under each of the three economic scenarios before any debt is issued, assuming no taxes. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

a-2. Calculate the percentage changes in ROE for economic expansion or recession, assuming no taxes. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to the nearest whole number, e.g., 32.)

b-1. Calculate return on equity, ROE, under each of the three economic scenarios after the recapitalization. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

b-2. Calculate the percentage changes in ROE for economic expansion and recession after the recapitalization. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Assume the firm has a tax rate of 21 percent.

c-1. Calculate return on equity, ROE, under each of the three economic scenarios before any debt is issued. Also, calculate the percentage changes in ROE for economic expansion and recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

c-2. Calculate return on equity, ROE, under each of the three economic scenarios after the recapitalization. Also, calculate the percentage changes in ROE for economic expansion and recession, assuming the firm goes through with the proposed recapitalization. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

1. Unique manifestations of agency problems in global market and how to mitigate the agency issue.

1. International equity markets and Portfolio Management: How to categorize emerging markets; Advantages of cross-listing, how to cross-list, what ADRs are, the types and advantages of ADR. Home bias & reasons for home bias; mutual fund and advantages

6. International banking and money market: Understand reasons for international banking, types of international banking offices and what they are. Especially, Correspondent, representative, & subsidiary banks.

You have decided to invest in a small commercial office building that has one tenant for a price of $200,000. The tenant has a lease that calls for annual rent

payments of $15,000 per year for the next three years. Hint # 1 However, after that leases expires you expect to be able to increase the

rent by 4% per year for the next 7 years. Hint # 2 You plan to sell the building for $325, 000 ten years from now. Hint # 3

1. Complete table 1 showing the projected cash flows for this investment, assuming the next lease payment will be made at the end of year one

B. Assuming that you need to earn 11% on this investment, what is the maximum price you would be willing to pay for the building?

3. If the current price was $250,000 what rate of return would you earn.

The current price of the stock is $160. The put option price for these shares with an exercise price of 150 is $7 and the call option price is also $7 for those shares with the same maturity and exercise price of 180. · put option 1 for a week contract and call option contracts to purchase shares when selling answer the following questions.

1) In the expiry of the option, print out the gains and losses resulting from the above strategy.

2) Calculate the maximum profit and the maximum loss size and determine the range of share prices that occur respectively.

3) Find the stock price of the break-even.

14) In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures from historical book values to market values. KJM Corporation's balance sheet (book values) as of today is as follows: Long-term debt (bonds, at par) $23,500,000 Preferred stock 2,000,000 Common stock ($10 par) 10,000,000 Retained earnings 4,000,000 Total debt and equity $39,500,000 The bonds have a 7.0% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 11%, so the bonds now sell below par. What is the current market value of the firm's debt? A. $ 7,706,000 B. $17,436,237 C. $18,330,403 D. $17,883,320 E. $ 7,898,650