1. Pre-Midterm Exercise

2. Question 1: 4 mins
List 5 principles of finance. Give one example of each with relevant explanation.

3. Question 2: 3 mins
Foods Corporation's bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 4.75%, based on semiannual compounding. What is the bond’s price?

4. Question 3: 4 mins
You sold a house and accepted a note with the following cash flow stream as your payment. What was the effective price you received for the house assuming an interest rate of 6.0%?
Years:
CFs: $0 $1,000 $2,000 $2,000 $2,000

5. Question 4 and 5: 5 mins
Southwest Cools had a profit margin of 5.25%, a total assets turnover of 1.5, and an equity multiplier of 1.8. What was the firm's ROE?
The company's sales last year were $52,000, and its total assets were $22,000. What was its total assets turnover ratio (TATO)?

6. Question 6: 3 mins
Delphi Corp. has $410,000 of assets, and it uses no debt--it is financed only with common equity. The new CFO wants to employ enough debt to bring the debt/assets ratio to 40%, using the proceeds from the borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio?

7. Question 7: 15 mins