FM-BINUS-AA-FPU-78/V2R0
BINUS University
Academic Career: Class Program:
Undergraduate / Master / Doctoral *) International/Regular/Smart Program/Global Class*)
Mid Exam √ Final Exam Term : Odd/Even/Short *)
Short Term Exam Others Exam : _____________
√ Kemanggisan √ Alam Sutera Bekasi Academic Year :
Senayan Bandung Malang 2021 / 2022
Faculty / Dept. : Faculty of Economics and Deadline Day / Date : Wednesday / 16 February
Communication / Accounting, Finance 2022
Time : 17:00:00 WIB
Code - Course : FINC6006020 - Financial Modeling Class : LA53, LB53, LC53,
Laboratory LD53, LE53, LF53,
LG53, LH53, LI53,
LA55, LB55, LC55
Lecturer : Team Exam Type : Online
) Strikethrough the unnecessary items
The penalty for CHEATING is DROP OUT!!!
Learning Outcome:
LO-3 : Calculate Time Value of Money, Common Stock Valuation, Bond Valuation, The Cost of Capital,
Capital Budgeting, Risk and Capital Budgeting
LO-4 : Apply Portfolio Statistics and Diversification
Number 1 (25 marks) – LO3
BTC company has the following forecasts for the next three years:
2023 2024 2025
COGS 500,000 600,000 700,000
Salary Expense 25,000 30,000 45,000
Depreciation 30,000 45,000 55,000
EBIT 250,000 275,000 300,000
Investment in Operating Assets 50,000 30,000 20,000
*some of the information in the table will not be used in your calculation
The firm’s debt has a current market value of $500,000 and it has $30,000 non-operating assets. There
are 100,000 common shares outstanding. The expected tax rate is 40%, and the WACC is estimated to
be 10%.
a. Calculate the free cash flow for each of the next three years. (10 marks)
b. After 2025 free cash flow growth is expected to slow to 5% per year permanently. What is the
value of the stock today? (15 marks)
Verified by,
Kartika Dewi (D4402) and sent to Department/Program on January 20, 2022
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FM-BINUS-AA-FPU-78/V2R0
Number 2 (25 marks) – LO3
The information is provided below:
Bond A Bond B
Settlement Date 2/15/2015 2/15/2015
Maturity Date 2/15/2019 2/15/2025
Coupon Rate 5.00% 7.50%
Price $ 987.00 $ 1,040.00
Face Value $ 1,000.00 $ 1,000.00
Required Return 5.25% 7.00%
Frequency 2 2
a. Calculate the intrinsic value of each bond using the PRICE function, Is either bond currently
undervalued or overvalued? (5 marks)
b. Calculate the current yield of both bonds. (5 marks)
c. Using the YIELD function, calculate the yield to maturity of each bond using the current market
prices. (5 marks)
d. Calculate the duration and modified duration of each bond. (5 marks)
e. Which bond would you rather own if you expect market rates to fall by 2% (5 marks)?
Number 3 (25 marks) – LO3
The Austin Saddle Company Expansion (ASC) is considering expanding its tannery facilities, increasing
its production capacity by 20 percent. The ASC brought in the marketing, production management,
procurement, capital investment, and accounting department to formulate estimates of the initial cost
of the expansion, as well as future cash flow that can be used to evaluate this expansion. The
procurement and capital management teams expect that the expansion will require a cost of $10
million initially, with the first year’s operating cash flow of $2 million, 3 million for the second year and
4 million at the third year, 2 million and 1 million at the 4th and 5th year respectively. Afterwards, the
operating cash flow is expected to grow at 3 percent for foreseeable future.
The ACS has a cost of capital of 8 percent, and the expansion project is expected to have risk similar to
ACS’s typical project.
A. Should ACS expand? Explain your reasoning based on NPV, IRR, Payback period and
Profitability index criteria. (10 marks)
B. If ACS’s cost of capital increased to 9 percent, other variables stay constant, would your
recommendation change? Based on the new NPV, IRR, Payback period and Profitability index
(10 marks)
C. At what cost of capital, if any, would your recommendation change? explain. (5 marks)
Verified by,
Kartika Dewi (D4402) and sent to Department/Program on January 20, 2022
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FM-BINUS-AA-FPU-78/V2R0
Number 4 (25 marks) – LO4
The information provided below
Year Stock A Returns Stock B Returns
2015 12.25% 20.28%
2016 17.01% 8.75%
2017 13.50% 17.80%
2018 8.51% 19.66%
2019 16.85% 4.03%
a. Calculate the average return and standard deviation of returns for each stock over the past
five years. Which stock would you prefer to own? Would everyone make the same choice? (5
marks)
b. Calculate the correlation coefficient between the two stocks. Does it appear that a portfolio
consisting of stock A and B would provide good diversification? (5 marks)
c. Calculate the annual returns that would have been achieved had you owned a portfolio
consisting of 50% in stock A and 50% in stock B over the past five years. (5 marks)
d. Calculate the average return and standard deviation of returns for the portfolio. How does the
portfolio compare with the individual stocks? Would you prefer the portfolio to owning either
of the stocks alone? (5 marks)
e. Create a chart that shows how the standard deviation of the portfolio’s returns changes as the
weight of stock A changes. (2 marks)
f. Using the Solver, what is the minimum standard deviation that could be achieved by
combining these stocks into a portfolio? What are the exact weight (3 marks)
Please Do It by Yourself and Good Luck
Verified by,
Kartika Dewi (D4402) and sent to Department/Program on January 20, 2022
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