1. If a portfolio has a positive weight for each asset, can the expected return on the portfolio be greater than the return on the asset in the portfolio that has the highest return? Can the expected return on the portfolio be less that the return on the asset in the portfolio with the lowest return? Explain. (7)
2. Sara bought a $15,000 the automobile with 20 percent down and financed the rest
with a four-year loan at 8 percent stated annual interest rate, compounded monthly. What
is his monthly payment if he starts the payment one month after the purchase? (8)
3. What is financial planning model? What are the important components/ingredients of it? Describe each of them in detail. (5)
4 a. The Sony Corporation has operating income (EBIT) of $500,000. The company’s
depreciation expense is $200,000. Klaven is 100 percent equity financed, and it faces
a 30 percent tax rate. What is the company’s net income? What is its net cash flow?(5)
b.. Ritter Corporation’s accountants prepared the following financial statements for year-end 20X2. Determine operating cash flow of the company and provide an analysis of the current financial condition of the company.(5)
RITTER CORPORATION
Income Statement
19X2
Revenue $400
Expenses 250
Depreciation 50
Net Income $100
Dividends $50
RITTER CORPORATION
Balance Sheets
December 31
20X2 20X1
Assets
Current Assets $150 $100