Chapter 07 1 At any interest rate above zero, the future value of an investment will always

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UNIVERSITY AT ALBANY

Rockefeller College of Public Affairs and Policy

PAD-501: Financial Management

Midterm Examination

Spring 2008

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.

2) You may use, but not share a calculator. Remember to clear your calculator

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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SECTION ONE – SHORT ANSWERS

(9 points) 1. Select from the following to answer questions A to D. Note: some questions may

have multiple answers and answers may be used more than once.

i. Zero-Based

ii. Formula

iii. Cash

iv. Operating

v. Capital

vi. Flexible

(6 points) 2. The total value of all of the properties in the Village of Westerlo is $200,000,000

and the approved budget is $3,500,000. Properties are assessed at their full value.

Based on historical results, the Village manager expects not to collect $200,000 in

taxes and $10,000,000 worth of Village properties are exempt from taxation. How

much does the Village have to charge per $1,000 of assessed valuation to raise the

needed $3.5 million? Show your calculations.

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Tax rate rounded to the nearest penny.

(2 points) 3. If the organizations that owned the properties that were exempt from taxation

agreed to pay Westerlo Village $100,000 in lieu of taxed, the village tax rate would:

(choose one)

(17 points) 6. Answer the following questions about the time value of money.

(1) a. At any interest rate above zero, the future value of an investment will always be

(4) b. How much would you have at the end of five years if interest on a $100 deposit

was compounded daily at 3.65%?

FV = ? = $120.02 (rounded to nearest penny)

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(4) d. If an auto dealer offers to sell you a car and finance it for 60 months with monthly

car payments of $399 and the market rate for auto loans is 6.6%, how much is the

dealer charging you for the car?

(6) e. If the UAlbany Foundation purchased a $1,000,000 par-value bond with an 8%

annual coupon-rate paying interest twice each year with exactly five years left to

maturity and a current market interest rate of 6.4%, how much would the UAlbany

Foundation have to pay for that bond? You may round the bond’s value to the

nearest penny.

(8 points) 7. The Albany Youth Center (AYC) has an after-school contract with the city. Under the

contract, MYC earns $3 per day for each child who uses the program. AYC served

the number of children shown below. The city pays one-third of the amount AYC

earns one quarter after the services are delivered, one-third two quarters after and

one- third three quarters after.

a. How much can MYC expect to earn from the city during the fourth quarter?

b. How much can MYC expect to collect from the city during the fourth quarter?

3. Answer the following questions about break-even analysis:

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(2 points) A. In a break-even analysis, an increase in variable cost per unit: (circle the

correct answer)

(2 points) B. If a soup kitchen has marginal revenues of $3.00 per meal delivered, marginal

expenses of $4.00 per meal, $50,000 of annual fixed costs and annual donations

of $150,000, it will (circle the correct answer)