FSA 3321 – Summer (2007)
Exam 3 – Version 1
Moore
Third Examination – Finance 3321
Summer 2007 (Moore) – Version 1
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Student’s Signature:
______________________________
Where indicated, use the financial statements for Dell Computers contained on the last three
pages of this exam booklet.
Use the attached financial statements for Dell to answer questions 1-10
1. Compute Dell’s current ratio for the year ended 2002.
2. Compute Dell’s Day’s Sales Outstanding 2001.
3. Compute Dell’s Inventory Turnover for the year ended 2001.
4. Compute Dell’s length of the Cash to Cash Cycle (money merry go-round) for 2001.
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FSA 3321 – Summer (2007)
Exam 3 – Version 1
5. Compute Dell’s IGR for 2002.
6. Compute Dell’s ROE for 2002.
7. Compute Dell’s Debt-to-Equity Ratio for 2001.
8. Compute Dell’s Gross Profit Margin for 2002
9. Compute Dell’s Operating Profit Margin for 2002.
10 Compute Dell’s Net Profit Margin for 2002.
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Moore
FSA 3321 – Summer (2007)
Exam 3 – Version 1
Moore
11 Within the context of forecasting, which of the following ratios best links the income
statement to the balance sheet?
a. Net profit margin
b. Current Ratio
c. Return on Equity
d. Asset Turnover
e. Day’s Sales outstanding
12. Within the context of forecasting, which foundation of the forecast financial statements?
a. Sales forecast.
b. Net profit margin
c. Cash to cash cycle
d. Current ratio
e. Asset Turnover
13. In terms of confidence and degree of accuracy, which financial statement is the most
difficult to forecast?
a. Income Statement.
b. Balance Sheet.
c. Statement of Cash Flows
d. Cash flow from operating activities
e. Cash flow from financing activities
14. In
a.
b.
c.
d.
e.
terms of sequence of forecasting financial statements, which is the first to be done?
Income Statement.
Balance Sheet.
Statement of Cash Flows
Cash flow from operating activities
Cash flow from financing activities
15. You have just computed the Beta of a stock to be 1.25 and the estimate of the relevant
risk-free rate is 4%. The expected market return next period is 8% and your estimate of
Ke is 16%. What is the appropriate long-run market risk premium?
a. 4.0%
b. 7.0%
c. 7.5%
d. 8.0%
e. 9.6%
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FSA 3321 – Summer (2007)
Exam 3 – Version 1
Moore
Consider the following information for Questions 16 through 18:
You have just estimated β for XYZ Corp. using the Capital Asset Pricing Model. Your
regression results follow. In addition, you also have performed research on the 10-K to get
the balance sheet information below. Your goal is to estimate the relevant costs of capital
for XYZ Corp. Assume that last year’s market return was 4% and the 5-year Treasury had a
yield of 3.5%. Also, you found the market risk premium over the last 3-years to be 3.5%
and that interest rates are not expected to change in the next 4 years. The Market Cap is
$80 million.
Balance Sheet (Millions)
Estimation
R
2
Period
β
5-Year
2.00
5.25%
3-Year
2-Year
1.50
1.30
28.45%
68.55%
Published β
1.90
2004
Average
Interest
Rate
Total Assets
120
Current Liabilities
Long Term Liabilities
Long-term Debt
Pension Liabilities
10
2.00%
30
40
8.00%
12.00%
Book Value of Equity
40
16. Based on your analysis, what is the appropriate estimate of the cost of equity?
a. 5.25%
b. 10.00%
c. 11.00%
d. 13.00%
e. 13.50%
17. Which statistic measures the percent variation of the dependent variable that is explained
by the variation in the independent variable?
a. Beta
b. Published Beta
c. The estimation period
d. R-squared
e. Correlation coefficient
18. Which of the following stock return series has the least of amount of noise and is best
suited to beta estimation when using a sample size of 60 observations?
a. Daily returns
b. Weekly returns
c. Monthly returns
d. Annual returns
e. Decade returns
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FSA 3321 – Summer (2007)
Exam 3 – Version 1
Moore
19. You are valuing a company that has a December 31 financial year end. It is now June
2007. Assuming your company publishes its 10-Q within 2 weeks of the end of the
quarter, how many quarters of activity must you forecast when estimating the end of
2007 net income?
a. 1
b. 2
c. 3
d. 4
e. 5
20. On an asset base of $200 million, your company had asset turnover of 1.5 and working
capital turnover of 20 times. Assume that sales will grow by 12% in the upcoming year
and that turnover ratios will remain constant. Compute the relevant investment in
working capital for the forecast year.
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FSA 3321 – Summer (2007)
Exam 3 – Version 1
Moore
Balance Sheet – Dell Computers
Fiscal Year Ended
_______________________
February 1,
2002
-------------
February 2,
2001
-------------
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Other
$
Total current assets
Property, plant and equipment,
net
Investments
Other non-current assets
3,641
273
2,269
278
1,416
-----7,877
826
4,373
459
-----Total assets
$ 13,535
-----LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable
Accrued and other
$
Total current liabilities
Long-term debt
Other
Commitments and contingent
liabilities (Note 7)
Total liabilities
Stockholders equity:
Preferred stock and capital in
excess of $.01 par value;
shares issued and outstanding:
none
Common stock and capital in
excess of $.01 par value;
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5,075
2,444
-----7,519
520
802
-
$
4,910
525
2,424
400
1,467
-----9,726
996
2,418
530
-----$ 13,670
------
$
4,286
2,492
-----6,778
509
761
-
-----8,841
------
-----8,048
------
-
-
5,605
4,795
FSA 3321 – Summer (2007)
Exam 3 – Version 1
Moore
Income Statement – Dell Computers
Fiscal Year Ended
Net revenue
Cost of revenue
Gross margin
------------------------------------------February 1,
February 2,
January 28,
2002
2001
2000
----------------------------------$ 31,168
$ 31,888
$ 25,265
25,661
25,445
20,047
---------------5,507
6,443
5,218
----------------
Operating expenses:
Selling, general and
administrative
Research, development and
engineering
Special charges
Total operating expenses
Operating income
Investment and other income
(loss), net
Income before income taxes and
cumulative effect of change in
accounting principle
Provision for income taxes
Income before cumulative
effect of change in accounting
principle
Cumulative effect of change in
accounting principle, net
Net income
$
2,784
3,193
2,387
452
482
374
482
-----3,718
-----1,789
(58)
105
-----3,780
-----2,663
531
194
-----2,955
-----2,263
188
-----1,731
-----3,194
-----2,451
485
-----1,246
958
-----2,236
785
-----1,666
-
59
-
-----1,246
------
-7-
$
-----2,177
------
$
-----1,666
------
FSA 3321 – Summer (2007)
Exam 3 – Version 1
Moore
Statement of Cash Flows – Dell Computers
Fiscal Year Ended
------------------------------------------February 1,
February 2,
January 28,
2002
2001
2000
----------------------------------Cash flows from operating
activities:
Net income
$ 1,246
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization
239
Tax benefits of employee
487
stock
plans
Special charges
742
(Gains)/losses on investments
17
Other
178
Changes in operating working capital:
Accounts receivable, net
222
Inventories
111
Accounts payable
826
Accrued and other liabilities
(210)
Other, net
(123)
Non-current assets and
62
liabilities
-----Net cash provided by
3,797
operating activities
-----Cash flows from investing
activities:
Investments:
Purchases
(5,382)
Maturities and sales
3,425
Capital expenditures
(303)
-----Net cash used in investing
(2,260)
activities
------
$
2,177
240
929
$
1,666
156
1,040
105
(307)
135
194
(80)
56
(531)
(11)
780
404
274
(394)
(123)
988
416
(75)
82
-----4,195
-----3,926
------
------
(2,606)
2,331
(482)
-----(757)
(3,101)
2,319
(401)
-----(1,183)
------
------
Supplemental Statement
Of Cash Flows Information:
Interest paid
Investment income, primarily
interest
31
314
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49
305
34
158
FSA 3321 – Summer (2007)
Exam 3 – Version 1
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Moore