FIN 515 Week 5 Exam One

1.You are a shareholder in a C corporation. The corporation earns $10 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is 35% and the personal tax rate on (both dividend and non-dividend) income is 30%. How much is left for you after all taxes are paid? ( 10 Points)

2.Explain how the type or form of business can impact the ability and types of funding/financing options for the business. Make sure you cover three main forms of a business in your answer. (10 points)

3.Explain what the Agency Issue is for a Corporation and how it can be prevented or the potential impacted reduced. ( 10 Points)

4.Explain in your own words what Profitability Ratios, Liquidity Ratios, and Working Capital Ratios explain about a business. Download the 2013 Google Annual Report from doc sharing and calculate the Gross Margin ratio, Operating Margin Ratio, and Net Profit Ratio for Google for 2011, 2012 and 2013. Comment on how Google is doing profitability wise during this period. Who would be interested in this information? ( 20 points)

5.a.What is the Present Value of $10,000 received 10 years from today with a 10% interest rate?

6.Excel Logistics issued a 20 year, $1000 bond with a 10% coupon rate and semiannual coupon interest payments and is trading for a price of $1034.74. (10 Points)

7.In your own words explain the difference between systematic risk and firm specific risk? Which one can be impacted by diversification? Explain why. (10 Points)

8.Explain the type of risk that beta measures and the type of risk that volatility measures. Why would use as an investor be interested in both beta and volatility? (10 Points)

9.Explain in your own words what is the Term Structure of Interest Rates is and why as a financial manager would you care? What is a Normal or upward sloping yield curve indicate? What does an inverted or downward sloping yield curve indicate? ( 10 Points)