Finance II: Mock Exam
1) In 2017, Apple had 12 million shares outstanding, trading at a market price of $ 25,5 per
share. Its equity was valued at $ 140 million and had $ 155 million in total debt. Apple had
also $ 30 million in cash.
Compute the market capitalization of Apple.
Mkt Cap = nb share * price per share = 12M * 25.5 = 306M
Compute Apple’s market-to-book ratio.
MtB = Mkt Cap/Book Value = 306/140 = 2.19
2)
Sales
Primark
Uniqlo
Inventory
302 000
245 302
23 023
15 021
Accounts
Receivable
2 938
6 455
Cost of Goods
Sold
201 392
123 240
Compute the inventory turnover for both firms.
Inventory turnover = Cost of Goods Sold / Inventory
Primark = 201 393/ 23 023 = 8.75
Uniqlo = 123 240/ 15 021 = 8.20
3) Your firm has a unique investment opportunity. The investment would cost upfront 100 000$
and 23 000$ in two years. Thanks to the investment, your firm would permanently get 4
500$. Consider a cost of capital of 6.5%. Compute the NPV of the investment.
NPV = PV profit – PV cost = 4500/6.5% - (100k + 23k/(1+6.5%)^2) = - 51 047. 39$
4) You are planning to invest in a new building. The new building is assumed to generate during
the first 10 years, 45 000$ per year, with a discount rate of 4.5%. In the following 20 years,
the building will start to lose progressively value with a decreasing rate of 4% per year.
Compute the value of the building today.
First, value the initial 10 years:
PV = 45000 / 4.5% * (1 - (1+4.5%)^(-10)) = 356 072.32 $
Then, value the decreasing stream of cash-flow for the following 20 years:
PV(in 10 years) = 45000 / (4.5% - (-4%)) * (1- ((1-4%)/(1+4.5%))^(20)) = 432 384.80$
Discount the decreasing cash flows to today and add them to the initial part:
Value of the building : 356 072.32 $ + 432 384.80$/(1+4.5%)^10 = 634 496.9$
5) A bond has the following specifics:
- Face value: 1 000$
- Coupon rate: 7.4%
- Frequency of coupons: Quarterly
-
Maturity: 3 years
Yield-to-Maturity: 9.21% (APR),
compounded quarterly
Compute the price of the bond
Coupon = 7.4% * 1 000 / 4 = 18.5$
Price = 18.5 /(9.21%/4) * ( 1- (1+9.21%/4)^(-3*4)) + 1000/(1+9.21%/4)^(3*4) = 953.02 $
Is the bond trading at a premium, discount, or on par?
The price is less than the face value. The bond is traded at a discount.
6) Meta has a current stock price of 190$. The firm plans to pay a dividend of 4$ at the end of
the year. Analysts predict the stock price to be 193$ right after the dividend pavement.
Compute the dividend yield, capital gain, and cost of capital of Meta.
Dividend yield = 4/190 = 2.11%
Capital gain = (193-190)/190 = 1.58%
Cost of capital = dividend yield + capital gain = 3.69%
7) Using the cost of capital from question 6). If Meta is currently paying dividends of 4$, which
are expected to grow at a steady rate of 1.5% per year for as long as we can forecast.
Compute the stock price of Meta today.
Growing perpetuity = 4/(3.69% - 1.5%) = 182.64$