# Fight Finance

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A 180-day Bank Accepted Bill has a face value of $1,000,000. The interest rate is 8% pa and there are 365 days in the year. What is its price now? The 'option strike price' in an option contract, also known as the exercise price, is paid at the start when the option contract is agreed to. or ? You just bought$100,000 worth of inventory from a wholesale supplier. You are given the option of paying within 5 days and receiving a 2% discount, or paying the full price within 60 days.

You actually don't have the cash to pay within 5 days, but you could borrow it from the bank (as an overdraft) at 10% pa, given as an effective annual rate.

In 60 days you will have enough money to pay the full cost without having to borrow from the bank.

What is the implicit interest rate charged by the wholesale supplier, given as an effective annual rate? Also, should you borrow from the bank in 5 days to pay the supplier and receive the discount? Or just pay the full price on the last possible date?

Assume that there are 365 days per year.

A method commonly seen in textbooks for calculating a levered firm's free cash flow (FFCF, or CFFA) is the following:

\begin{aligned} FFCF &= (Rev - COGS - Depr - FC - IntExp)(1-t_c) + \\ &\space\space\space+ Depr - CapEx -\Delta NWC + IntExp(1-t_c) \\ \end{aligned}
Does this annual FFCF or the annual interest tax shield?

In a takeover deal where the offer is 100% scrip (shares), the merged firm's number of shares will be equal to the sum of the acquirer and target firms' original number of shares. or ?

Find the cash flow from assets (CFFA) of the following project.

 Project Data Project life 2 years Initial investment in equipment $6m Depreciation of equipment per year for tax purposes$1m Unit sales per year 4m Sale price per unit $8 Variable cost per unit$3 Fixed costs per year, paid at the end of each year $1.5m Tax rate 30% Note 1: The equipment will have a book value of$4m at the end of the project for tax purposes. However, the equipment is expected to fetch $0.9 million when it is sold at t=2. Note 2: Due to the project, the firm will have to purchase$0.8m of inventory initially, which it will sell at t=1. The firm will buy another $0.8m at t=1 and sell it all again at t=2 with zero inventory left. The project will have no effect on the firm's current liabilities. Find the project's CFFA at time zero, one and two. Answers are given in millions of dollars ($m).

You are owed money. Are you a or a ?

Mr Blue, Miss Red and Mrs Green are people with different utility functions. Which of the statements about the 3 utility functions is NOT correct?

A risk manager has identified that their investment fund’s continuously compounded portfolio returns are normally distributed with a mean of 10% pa and a standard deviation of 40% pa. The fund’s portfolio is currently valued at $1 million. Assume that there is no estimation error in the above figures. To simplify your calculations, all answers below use 2.33 as an approximation for the normal inverse cumulative density function at 99%. All answers are rounded to the nearest dollar. Assume one month is 1/12 of a year. Which of the following statements is NOT correct? Calculate Australia’s GDP over the 2016 calendar year using the below table:  Australian Gross Domestic Product Components A$ billion, 2016 Calendar Year from 1 Jan 2016 to 31 Dec 2016 inclusive Consumption Investment Government spending Exports Imports 971 421 320 328 344

Source: ABS 5206.0 Australian National Accounts: National Income, Expenditure and Product. Table 3. Expenditure on Gross Domestic Product (GDP), Current prices.

Australia’s GDP was: