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UNIVERSITY AT ALBANY
Rockefeller College of Public Affairs and Policy
PAD-501: Financial Management
Midterm Examination
Spring 2009
Your Name: ________________________________________________
Turn off all cell phones and pagers during the exam
Directions:
1) You may use one page of notes. Place all other materials on the floor.
4) Show all your work. I can only give you partial credit if you show how you
approached the problem! For the time value of money computations show what
5) The points for each question are indicated in parentheses next to the question.
6) Look through the exam before you begin.
Good Luck
SOLUTIONS
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(8 points) 1. Select from the following to answer questions A to C. Note: some questions may
have multiple answers.
i. Zero-Based
ii. Formula
iii. Cash
iv. Operating
v. Capital
vi. Flexible
vii. Master
(2 points) 2. If the amount of uncollectable taxes increases, the mill rate that citizens must pay
on their school taxes will ___________. Select from the following:
(2 points) 3. A master budget includes all of the following elements except:
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(12 points) 5. The fixed costs of running a fund-raising gala for the Albany Symphony are
$10,000 and the variable costs are $75 per attendee. The facility where the event is
being held can accommodate 400 people. Answer the following question about the
event:
(6) a. What is the minimum amount the Albany Symphony can charge for a ticket and
still break even?
(4) b. Assuming 400 people attend the gala, how much does the Albany Symphony have
to charge for each ticket to earn $20,000?
(2) c. If the Albany Symphony got a donation of $2,000, its break-even ticket price for
the gala would? (select from the following choices)
(16 points) 6. Answer the following questions about the time value of money.
(2) a. You have $100 today and invest it at 6% interest. How much would you have at
the end of five years if you earned simple interest?
(2) b. How much would you have at the end of five years if interest on the $100 deposit
was compounded monthly at 6%?
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(6) e. If the UAlbany Endowment purchased a $10,000 par-value bond with a 5% annual
coupon-rate paying interest twice each year with exactly seven and a half years left
to maturity and a current market interest rate of 6.4%, how much would the UAlbany
Endowment have to pay for that bond? You may round the bond’s value to the
(6 points) 7. It costs Menands Meals for the Homebound (MMH) $4.50 in food and packaging
costs to produce and deliver a meal. That is their only variable cost. They are
currently producing as many meals as they can with their current staff but want to
expand. If they hire one more cook at a cost of $20,000 per year, they can expand
their capacity by 24,000 meals per year. What will MMH’s marginal cost be for
producing 24,000 additional meals?
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(8 points) 8. The State University Research Foundation (SURF) expects to have the revenue and
expenses shown in the operating budget below. The state research contract pays
SURF two quarters after it is billed and the Foundation pays SURF one quarter after
it is billed. Salaries are paid in the quarter the expense is incurred and supplies are
paid for one quarter after they are used. Assuming SURF starts the 3rd quarter with
$500, prepare a properly-formatted cash budget for the 3rd Quarter of the year.
Operating Budget Q1 Q2 Q3 Q4 Full Year
Revenue
State Contract $5,000 $7,500 $10,000 $5,000 $27,500
Foundation Grant $15,000 $15,000
Total revenue $5,000 $22,500 $10,000 $5,000 $42,500
Expenses
Staff $3,000 $12,500 $5,000 $3,000 $23,500
Supplies $2,000 $9,000 $4,000 $1,000 $16,000
Total Expenses $5,000 $21,500 $9,000 $4,000 $39,500
Profit/(Loss) $0 $1,000 $1,000 $1,000 $3,000
(16 points) 9. We–Save-Um Animal Rescue’s (WSU) executive director has asked you to
prepare an annual operating budget for the fiscal year as well as a flexible budget
based on a 10% increase in the number of dogs taken into WSU’s shelter during the
year. She has given you the following guidelines.
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(14 points) 10. The Berne-Knox-Westerlo Consolidated School District (BNW) expected to have
600 students enrolled during the 2006 academic year, to be in session for 175 days
and to receive $40 per day per student from the state. At the end of the school year,
BNW found they had 580 students enrolled and were open for 175 days. As a result,
they received $3,981,120 in total reimbursements from the state. Calculate the
following variances for the state reimbursement program and indicate whether they
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were favorable or unfavorable. Be sure to add up the flexible (partial) variances and
check to make sure that sum equals the total variance.
(7 points) 11. The Hole-in-the-Wall Camp is trying to decide whether it should lease a new
handicapped transport van or buy one.
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(7 points) 12. Oneida hospital estimates that the cash flows from the acquisition of a new heart
pump will be as follows:
Year Purchase Outflows Inflows PV
0 ($500,000) (500,000)
1 $150,000 131,579
2 (25,000) 150,000 96,183
3 (25,000) 175,000 101,246
4 (50,000) 200,000 88,812
5 (50,000) 225,000 90,889
NPV 8,709.68
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