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Q1. What is the cash conversion cycle for a firm with $3 million average inventories, $2 million average accounts payable, a receivables period of 45 days, and an annual cost of goods sold of $20 million? Q2. If a firm’s bonds pay a 6% coupon and mature in 3 years, what is their market value, assuming a 8% yield to maturity? Assume the bond has a $1,000 par value. Q3. What is the WACC for a firm with a Debt of 20% in its capital structure, and a total market value of $150 million. Assume required returns of 8% and 12%, for debt and equity respectively and a tax rate of 35%? Q4. Explain the three strategies for short term financial planning. Q5. Assume that you are acquiring a company. Can you calculate the value of that company with the help of Weighted Average Cost of Capital? Explain it with the help of an example.
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المملكة العربية السعودية
وزارة التعليم
الجامعة السعودية اإللكترونية
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment 3
Corporate Finance (FIN-201)
Due Date: 18/11/2023 @ 23:59
Course Name: Corporate Finance
Student’s Name:
Course Code: FIN-201
Student’s ID Number:
Semester: First
CRN:
Academic Year: 2023/24
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
/Out of 10
Level of Marks: High/Middle/Low
General Instructions – PLEASE READ THEM CAREFULLY
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The Assignment must be submitted on Blackboard (WORD format only) via
allocated folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.
Answer the following questions:
Q1. What is the cash conversion cycle for a firm with $3 million average inventories,
$2 million average accounts payable, a receivables period of 45 days, and an annual
cost of goods sold of $20 million?
(2 marks)
Q2. If a firm’s bonds pay a 6% coupon and mature in 3 years, what is their market
value, assuming a 8% yield to maturity? Assume the bond has a $1,000 par value.
(2 marks)
Q3. What is the WACC for a firm with a Debt of 20% in its capital structure, and a
total market value of $150 million. Assume required returns of 8% and 12%, for debt
and equity respectively and a tax rate of 35%?
(2 marks)
Q4. Explain the three strategies for short term financial planning.
(marks 2)
Q5. Assume that you are acquiring a company. Can you calculate the value of that
company with the help of Weighted Average Cost of Capital? Explain it with the help
of an example.
(marks 2)
Answers:
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