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Prof Christopher Hessel Fin 4610 EXAM #1 NAME Fall 2017 ATTENDANCE SHEET # NEXT TO NAME 1. 14 points Look at information below about your company now and where you want to be next year. Be as precise as possible. Explain the planned changes base on the ratios I am looking for at least six (6) observations (2 points each) and wrap up conclusions. (2 points) Operating cycle Cash cycle ROA ROE 75 50 25 20 15% 15% 18% 19.5% 2017 Forecast 2018 2. 14 points Look at the information. A. 7 points Calculate the values for the grey boxes. B. 7 points. What do the three calculations tell you about the plans for next year? Current Assets Fixed Assets 2017 50 250 Total Assets Information Depreciation interest Net income Dividend Retained Earnings 300 2017 20 5 10 3 7 Cash flow Cash from operations NWC Fixed Assets Total Operation's forecast 2018 55 245 300 36 2017 Current Liab 35 Lt Debt 100 Equity 165 300 forecast 2018 20 5 11 3 8 forecast 2018 40 90 300 Interest Lt debt total paid to debt holders -5 Dividend Common stock Paid to stockholders Total paid to debt and equity -3 1 Prof Christopher Hessel Fin 4610 EXAM #1 Fall 2017 3. 14 Points Describe with examples the three (3) primary reasons companies have cash shortages. 4. Current assets = $70 and Current liabilities = $45. a. Use the above information to describe net working capital. b. Explain the difference between permanent and temporary working capital c. Describe 2 ways permanent net working capital can be finance. 5. What are the differences between a novated forward agreement and a basic forward agreement? ( do not give me the characteristic of each and leave me to figure out the differences) 6. You buy a call option with strike price $21 and pay the write $1.20. At settlement the stock price is $23. a. Is the call option in the money? How do you know? b. Have you earned a profit? Explain. c. Did the writer make any money? Explain. 7. A recent news article said \" The forward price in current contracts on Face Book stock is less than the current market price. So we expect the stock price of Face Book will fall.\" a. Is this statement true? b. If not why not? c. How can the forward price be above or below the current market price? 2