Fin200

FIN200 Financial Management At AUE Fall 2012/13 Dr. Cecil W. Lui Quiz 1 – Version B Instructions:  For those who have signed up for Version B in class only  No marks would be recorded if you are not supposed to work on this version – Consult Dr. Cecil for any uncertainties  Total Marks: 20  Date due: 20 Oct 2012  Submission by either a hardcopy (in class) or a softcopy (via portal) on or before the due date  Submission in hardcopies would be marked in handwritten form and the marks would be recorded in the portal  Submission in softcopies would have the marks recorded in the portal  It is OK to consult with your classmates, but plagiarism is strictly prohibited  For any copies which are suspected by the instructor to be i) plagiarizing from another student’s work or other sources and ii) being plagiarized by another student, marks would be discounted by 50 – 100% (at the discretion of the instructor) for both students  For late submission (depending on the reason for the late submission, at the discretion of the instructor), marks would be capped at 15  Answer all questions  All questions worth 2 marks  Show your working 1. Suppose you own 100 shares of Company A’s stock which you intend to sell today. Since you will sell it in the secondary market, Company A will receive no direct cash flows as a consequence of your sale. Why, then, should Company A’s management care about the price you get for your shares? 2. Discuss the differences in the interests of shareholders and managers. How to align the interests of shareholders and managers? 3. Why do investors prefer receiving cash sooner rather than later, according to finance theory? 4. Provide examples of direct and indirect finance and an explanation the difference between the two. 5. Show the time line for a $300 cash outlay today, a $483.15 inflow in year five, and a 10 percent interest rate. Verify the figures by the step-by-step formula method. 6. Explain why, with an example, if financial