FNCE 370v9: Assignment 1

FNCE 370v9: Assignment 1 2019-07-06T08:07:14+00:00

Assignment 1 is worth 5% of your final mark. Complete and submit Assignment 1 after you complete Lesson 1.

Save this assignment file and use it to record your responses to all three parts of this assignment. Answer all three parts in one file. Follow the instructions on the Assignment 1 page of the course website for submitting your completed assignment file.

This assignment consists of three parts.

  1. Financial calculator exercises. You will become familiar with some basic corporate finance concepts and your calculator to develop calculation techniques that will help you complete future assignments with fewer errors and better understanding. In some cases, you will be finding answers without completely understanding all the terms (e.g., PV, PMT, FV, IRR). You will study these terms later in the course. For now, concentrate on the keystrokes and the sequences.
  2. Preparing a statement of comprehensive income and a statement of financial position. You will use the information given to prepare these common financial statements.
  3. Calculating common financial ratios. You will use the information given to calculate common financial ratios. It is assumed you are already familiar with financial statements and financial ratios through your prerequisite courses.

If you have any questions about this assignment and how to complete it, contact the Student Support Centre.

Please ask the Student Support Centre todirect correspondence  to: TONY WONG if you have any questions regarding the assignment. (tonyw@athabascau.ca)

For subsequent Assignments-

From the Administration: markers mark assignments by awarding marks based on work shown rather than on correct final answers. If the student only show the final answer or partial answers, please feel free to take off up to 95% of the marks.

Usually, commentsmay be provided upon adequate work done on questions.  Sometimes check figure solutions are provided but not all steps.  This approach prevents students from handing in blank responses or very brief answers, expecting the solution in detail. However, subsequent communication could convince me to assist even after the marking.

ERRORS-RE-DO, CONTACT ME FOR FURTHER FEEDBACK BUT MARKS CANNOT BE RAISED

Assignment 1: Grading Summary

PartMarks availableMarks obtained
1337
2358
3320
Total10015

Part 1: Financial Calculator Exercises (33 marks)

The table on the next pages contains practice examples and the questions for Assignment 1: Part 1. (For a detailed description of each column in this table, see “How do I Read the Table?” below.)

  1. Work through each example in Column B on your financial calculator.
  2. Check your answer with the one provided (Column C).
  3. Look to the right side of the yellow column-divider, and work through the corresponding assignment question (Column E). Each numbered practice example corresponds to the same numbered assignment question (e.g., practice example 1: “Chain calculations – to the power of” with the calculation of (8 x 2)2 corresponds to assignment question 1 where you calculate (1+0.25)8). If you can do the practice example, you should be able to do the corresponding assignment question.
  4. Pay careful attention when reading questions that include multiple sets of brackets (e.g., assignment question 6). These can be confusing, so work through them carefully.
  5. To record your solutions, put your answer in Column F, on the same row as the assignment question. See example for Question 1: (1+0.25)8).

Don’t be alarmed by the number of questions! You will likely be able to complete the work more quickly than you think.

There are 33 questions in Part 1. Each question is worth 1% of the total marks for Assignment 1.

How Do I Read the Table?

Start from the far left-hand column and read across each row. We’ll refer to Example #10 in our descriptions below.

  • Column A: number of the task (e.g., 10)
  • Column B: title of the task (e.g., Calculating basic loan interest). Below this title is the description and data for the practice example. (In Example 10; N = 20 years, monthly payments (P/Y=12); Interest rate comp. monthly (C/Y=12); …)
    As in Example 10, many of the practice examples and assignment questions take up several rows.
  • Column C: check answer to the practice example. (In Example 10: 7.172951345.)
  • Column D: numbering of the assignment questions (e.g., 18).
  • Column E: description and data for the tasks in the assignment question. (In Question 10: Find annual interest rate; N = 30 years, quarterly payments; Interest rate compounded quarterly; …)
  • Column F: write down your answer in this column. (See example provided for Question 1.)
ABCDEF
ExamplesCheck AnswerQAnswer the questions in this column 1 mark each for correct answer, zero for error.  No partial marksWrite down your answer in this column
PRELIMINARIES
SCIENTIFIC FUNCTIONS
1Chain calculations - to the power of2561(1+0.05)253.3864
(8 x 2)2Round to 4 decimal places
2Calculating natural logs2.995732272ln(1 + 0.05)0.0489
Ln(20)Round to 4 decimal places
Round to 8 decimal places
3To the power of50.11872331.57.319.2959
10 1.7Round to 4 decimal places
Round to 6 decimal places
4e to the power of20.0855369241 - e(-0.11)0.1041
e 3Round to 4 decimal places
Round to 8 decimal places
5Reciprocals0.0250377925(1/1.06) + (1/1.062) + (1/1.063)2.6730
(1/63) + (1/72)Round to 8 decimal places
Round to 9 decimal places
6Combinations, to the power of-2024.98446-1000000+[200000(1-0.35)(1-(1/(1.06)10))/0.06]
8-2 -34 x 52Round to 2 decimal places856,851.22X
Round to 4 decimal places
7Combinations, to the power of6.4474195917{[(1+(0.06/2))2](1/12)} - 1-0.956190000X
(123)1/4Round to 9 decimal places
Round to 9 decimal places
8Combinations, roots0.0551361958square root[(0.7x(0.15-0.1)2)+(0.3x(0.06-0.1)2)]
square root[(0.3x(0.15-0.07)2)+(0.7x(0.11-0.07)2)]Round to 8 decimal places0.87796900X
Round to 9 decimal places
FINANCIAL FUNCTIONS
9Memory calculations4613.849Sum of following 4 partsX
Sum of the following 3 parts:1000(1.06)/1.09972.47
500 x (1 + 0.1)21000(1.06^2)/1.09^2945.71
700 x (1 + 0.1)2 x (1 + 0.12)31000(1.06^3)/1.09^3919.68
900 x (1 + 0.1)2 x (1 + 0.12)3 x (1 + 0.13)5(1000(1.06^3)(1.03)/(0.09-0.03))/(1.09^3)905.14
Round to 2 decimal placesRound to 2 decimal places
10Calculating basic loan interest7.173010Find interest rate
N = 20 years, monthly payments (P/Y=12)N = 30 years, quarterly payments
Interest rate compounded monthly (C/Y=12)Interest rate compounded quarterly
PV = 56000PV = 1,500,0006.0881X
PMT = -440PMT = -110,000
FV = 0FV = 0
Compute annual interest rateCompute annual interest rate
Round to 4 decimal placesRound to 4 decimal places
11Calculating basic loan payments-1255.8611Find payment
N = 20 years, quarterly payments (P/Y=4)N = 30 years, monthly payments
Interest rate = 6.5% compounded quarterly (C/Y=4)Interest rate = 6%, compounded monthly108,973.37X
PV = 56000PV = 1,500,000
FV = 0FV = 0
Compute PMTCompute PMT
Round to 2 decimal placesRound to 2 decimal places
12Calculating future value7922.1912Find future value
N = 3 years, monthly payments (P/Y=12)N = 30 years, monthly payments
Interest rate = 6.5%, compounded quarterly (C/Y=4)Interest rate = 6%, compounded semi-annually
PV = 0PV = 0197,645.47X
PMT = -200PMT = -2500
Compute FVCompute FV
Round to 2 decimal placesRound to 2 decimal places
13Calculating present value3768.8913Find present value
N = 20 year, annual payments (P/Y=1)N = 30 year, monthly payments
Interest rate = 5%,  compounded annually (C/Y=1)Interest rate = 6%, compounded monthly
PMT = 0PMT = 01,898,000.23X
FV = -10000FV = -2,000,000
Compute PVCompute PV
Round to 2 decimal placesRound to 2 decimal places
14Ordinary annuity-16245.7014Find payment
N = 1.5 years, monthly payments (P/Y=12)N = 30 years, semiannual payments
Interest rate = 3.6%, compounded monthly (C/Y=12)Interest rate = 6%, compounded semi-annually
PV = 0PV = 026,059.56X
FV = 300000FV = -2,000,000
Compute PMTCompute PMT
Round to 2 decimal placesRound to 2 decimal places
15Annuity due7.079815Find interest rate in Annuity Due
N = 2 years, monthly payments, at beginning of month (P/Y=12)N = 10 years, monthly payments, BGN
Interest rate compounded monthly (P/Y=12)Interest rate compounded monthly
PV = 2995PV = 350,0006.0899X
PMT = -145PMT = -5000
FV = 299.5FV = -50000
Compute I/YCompute annual interest rate
Round to 4 decimal placesRound to 4 decimal places
16Calculating PV (annuity due)16Find present value in annuity due
N = 34 months, monthly payments (P/Y=12)6279.95N = 10 years, monthly payments
Interest rate = 18%, compounded monthly (C/Y=12)Interest rate = 6%, compounded monthly
PMT = -200PMT = -1000(6%/12)945.25X
FV = -1500FV = -1000
Compute PVCompute PV
Round to 2 decimal placesRound to 2 decimal places
17Calculating PV (ordinary annuity)146558.9217Find present value in ordinary annuity
N = 25 years, monthly payments, at end of month (P/Y=12)N = 30 years, monthly payments
Interest rate = 5.5%, compounded monthly (C/Y=12)Interest rate = 6%, compounded monthly
PMT = -900PMT = 15001300.22X
FV = 0FV = 0
Compute PVCompute PV
Round to 2 decimal placesRound to 2 decimal places
Examples 18-27 use the same dataQuestions 18-27 use the same data 
18Calculating mortgage payments and-616.5618Mortgage - find payment
generating an amortization scheduleN = 20 years, monthly payments, starts at end of January
N = 20 years, monthly payments, starts at end of August (P/Y=12)Interest rate = 5%, compounded monthly
Interest rate = 5.45%, compounded monthly (C/Y=12)PV = 500,000
PV = 90000FV = 0158.25X
FV = 0Compute payment PMT
Compute PMTRound to 2 decimal places
Round to 2 decimal places
Amortization schedule - first five months (August - December)P1 = 1
P1 = 1, P2 = 5P2 = 12
19Balance at end of December88951.4719Balance at end of December in first year500,000X
20Total principal repayment first 5 months-1048.5320Total principal repayment at end of first year5000X
21Total interest payments in first 5 months-2034.2721Total interest payments at end of first year6.25X
Round to 2 decimal placesRound to 2 decimal places
Amortization schedule - second year
P1 = 6P1 = 49
P2 = 17P2 = 60
22Balance at end of December in 2nd year86335.9222Balance at end of December in 5th year210,000X
23Total principal repayment in 2nd year-2615.5523Total principal repayment in 5th year150,000X
24Total interest payments in 2nd year-4783.1624Total interest payments in 5th year5.892X
Round to 2 decimal placesRound to 2 decimal places
Amortization schedule - third year
25Balance at end of December in 3rd year83574.2025Balance at end of December in 19th year450,000X
26Total principal repayment in 3rd year-2761.7226Total Principal Repayment in 19th year120,000X
27Total interest payments in 3rd year-4637.0027Total Interest payments in 19th year5.99X
Round to 2 decimal placesRound to 2 decimal places
Examples 28-31 use the same dataQuestions 28 - 31 use the same data
28Calculating payments, interest, and loan-3844.5728Find Mortgage payment
balance after a specified paymentN = 30 years, monthly payment, annuity due
N = 30 years, monthly payment (P/Y=12)Interest rate = 3.9%, compounded monthly
Interest rate = 8.5%, compounded monthly (C/Y=12)PV = 35000020,4885.22 X
PV = 500000FV = 0
FV = 0Compute PMT
Compute PMTRound to 2 decimal places
Round to 2 decimal places
Amortization schedule - first to 48th paymentAmortization schedule after 10 years - Same data as Q28
P1 = 1P1 = 1
P2 = 48P2 = 120
29Balance after 48th payment482755.4129Balance after 10 years of payments350,156.88 X
30Total principal repayment after 48 payments-17244.5930Tot. principal repayment after 10 yrs of payments550,000.45 X
31Total interest payments after 48 payments-167294.6431Tot. interest payments after 10 yrs of payments650,000.55 X
Round to 2 decimal placesRound to 2 decimal places
32Calculating IRR17.500632Compute IRR using following data:20.2077ü
CF0 = -5000CF0=-100000
CF1 = 2000CF1=50000
CF2 = 2000CF2=40000
CF3 = 3000CF3=30000
Round to 4 decimal placesCF4=20000
CF5=10000
Round to 4 decimal places
33Calculating NPV223.9733Compute NPV
CF0 = -5000Same cash flows as Q3218554.82
CF1 = 2000Interest rate = 11%
CF2 = 2000Round to 2 decimal places
CF3 = 3000
Interest rate = 15%
Round to 2 decimal places

Part 2: Financial Statements Review (35 marks)

  1. Build the statement of comprehensive income and statement of financial position for CanDo Inc. based on the information given below, as of December 31, 2016. Round all numbers to the nearest integer.
Accounts payable $172,000
Accounts receivable $195,000
Cash and cash equivalents $106,000
CoGS $251,300
Common stock $1,231,000
Depreciation $42,000
Dividend payout ratio 40%
Interest paid $66,600
Inventory $121,000
Long-term debt $1,332,000
Net fixed assets $2,889,000
Sales $468,000
Short-term debt $377,000
Tax rate 31%
Number of shares 1,000,000
Price per share $0.50

Obtain the following values from the statement of comprehensive income and statement of financial position:

  1. Total current assets (422,000)………
  2. Total current liabilities (172,000)X
  3. Retained earnings 671,77X
  4. Total owners’ equity (500,000)X
  5. Total assets 33,11,000ü3311,000……
  6. Earnings before depreciation, interest, and taxes (EBDIT) 25,177X
  7. Earnings before interest and taxes (EBIT) 671,177X
  8. Dividends 26,870X
  9. Addition to retained earnings 100,000X

Part 3: Financial Ratios Review (32 marks)

The following table presents the data for CanDo Inc. in as of December 31, 2015:
Accounts payable $205,000
Accounts receivable $108,000
Cash and cash equivalents $133,000
CoGS $219,200
Common stock $1,231,000
Depreciation $42,000
Dividend payout ratio 40%
Interest paid $66,600
Inventory $151,000
Long-term debt $1,332,000
Net fixed assets $2,931,000
Sales $406,000
Short-term debt $400,753
Tax rate 31%
  1. Calculate the following financial ratios for CanDo Inc. in the fiscal year of 2016:
  2. Current ratio 70X
  3. Quick ratio 69 X
  4. Cash ratio 67X
  5. Net working capital ratio 55X
  6. Interval measure 52X
  7. Total debt ratio 25X
  8. Debt-equity ratio 22X
  9. Equity multiplier 25X
  10. Long-term debt ratio 65%X
  11. Times interest earned 25X
  12. Cash coverage ratio 11X
  13. Inventory turnover (using average inventory from 2015 and 2016) 2.25X
  14. Days’ sales in inventory 25.69X
  15. Receivables turnover (using average accounts receivable from 2015 and 2016) 35.25X
  16. Days’ sales in receivables 33.25X
  17. Payables turnover (using average accounts payable from 2015 and 2016) 34.25X
  18. Days’ sales in payables 28.28X
  19. NWC turnover 25X
  20. Fixed assets turnover 68X
  21. Total asset turnover 45X
  22. Profit margin 25%X
  23. Return on assets (ROA) 25%X
  24. Return on equity (ROE) 25%X