C09E Principles of Finance
Directions: Be sure to save an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English, spelling and grammar. Sources must be cited in APA format. Your response should be four (4) double-spaced pages; refer to the “Assignment Format” page located on the Course Home page for specific format requirements.
Part A
Consider the information below from a firm’s balance sheet for 2011 and 2012.
Current Assets 2012 2011 Change
Cash and Equivalents $1,561 $1,800 -$ 239
Short-Term Investments $1,052 $3,010 -$1,958
Accounts Receivable $3,616 $3,129 $ 487
Inventories $1,816 $1,543 $ 273
Other Current Assets $ 707 $ 601 $ 106
Total Current Assets $8,752 $10,083 -$1,331
Current Liabilities
Accounts Payable $5,173 $5,111 $ 62
Short-Term Debt $ 288 $ 277 $ 11
Other Current Liabilities $1,401 $1,098 $ 303
Total Current Liabilities $6,862 $6,486 $ 376
1. What is the Net Working Capital for 2012?
2. What is it for 2011?
3. What is the Change in Net Working Capital (NWC)?
4. Assuming the Operating Cash Flows (OCF) are $7,155 and the Net Capital Spending (NCS) is $2,372, what is the Cash Flow from Assets?
Part B
Assume that you are 23 years old and that you place $3,000 year-end deposits each year into a stock index fund that earns an average of 9.5% per year for the next 17 years.
1. How much money will be in the account at the end of 17 years?
2. How much money will you have in the account 15 years later at age 55 if the account continues to earn 9.5% per year but you discontinued making new contributions?
3. How much money would you have at the end of 17 years if you had made the same number of deposits but at the beginning of the year instead of at the end of the year?
4. How much money will you have in the account 15 years later at age 55 if the account continues to earn 9.5% per year but you discontinued making new contributions?
Part C
1. a. What is the possible range for a correlation coefficient?
b. For purposes of diversification, what type of correlation coefficient among asset returns is preferred by investors? Provide a brief explanation.
2. a. Describe the two (2) investment rules identified in the text.
b. Explain the validity of the following statement and provide one (1) supporting fact to justify your reasoning. “Investors do not like risk and will always choose the investment with the least risk.”
Grading Rubric
Please refer to the rubric on the next page for the grading criteria for this assignment.
CATEGORYExemplarySatisfactoryUnsatisfactoryUnacceptable
20 points 15 points 10 points 5 points
Student provides correct
calculations for all 4 items.
Student provides correct
calculations for 3 items.
Student provides correct
calculations for 2 items.
Student provides correct
calculations for 1 item.
20 points 15 points 10 points 5 points
Student provides correct
calculations for all 4 items.
Student provides correct
calculations for 3 items.
Student provides correct
calculations for 2 items.
Student provides correct
calculations for 1 item.
10 points N/AN/AN/A
Student provides the correct
range for the correlation
coefficient.
N/AN/AN/A
10 points 8 points5 points2 points
Student provides a clear,
logical explanation of type of
correlation coefficient
among asset returns is
preferred by investors for
the purposes of
diversification.
Student provides a mostly
clear, logical explanation of
type of correlation
coefficient among asset
returns is preferred by
investors for the purposes of
diversification.
Student provides a weak or
unclear explanation of type
of correlation coefficient
among asset returns is
preferred by investors for
the purposes of
diversification.
Student provides a poor
explanation of type of
correlation coefficient
among asset returns is
preferred by investors for
the purposes of
diversification.
10 points N/A5 pointsN/A
Student provides a clear,
logical description of the 2
investment rules.
N/AStudent provides a clear,
logical description of 1 of
the investment rules.
N/A
10 points 8 points5 points2 points
Student provides a clear,
logical explanation of the
statement: “Investors do not
like risk and will always
choose the investment with
the least risk.” with at least 1
clear, logical supporting fact.
Student provides a mostly
clear, logical explanation of
the statement: “Investors do
not like risk and will always
choose the investment with
the least risk.” with at least 1
mostly clear, logical
supporting fact.
Student provides a weak or
unclear explanation of the
statement: “Investors do
not like risk and will always
choose the investment with
the least risk.” with at least
1 weak or unclear
supporting fact.
Student provides a poor
explanation of the
statement: “Investors do
not like risk and will
always choose the
investment with the least
risk.” with 0-1 poor
supporting facts.
15 points12 points8 points5 points
Student makes no errors in
grammar or spelling that
distract the reader from the
content.
Student makes 1-2 errors in
grammar or spelling that
distract the reader from the
content.
Student makes 3-4 errors in
grammar or spelling that
distract the reader from the
content.
Student makes more than
4 errors in grammar or
spelling that distract the
reader from the content.
5 points 4 points 3 points 1 point
The paper is written in
proper format. All sources
used for quotes and facts are
credible and cited correctly.
The paper is written in
proper format with only 1-2
errors. All sources used for
quotes and facts are credible
and most are cited correctly.
The paper is written in
proper format with only 3-5
errors. Most sources used
for quotes and facts are
credible and cited correctly.
The paper is not written in
proper format. Many
sources used for quotes
and facts are less than
credible (suspect) and/or
are not cited correctly.
Format (5 Points)
Part C:
Diversification (10
points)
Part C: Investment
rules (10 points)
Part C: Validity of
statement (10
points)
Part A: Balance
sheet calculations
(20 points)
Part B: Stock index
calculations (20
points)
Part C: Correlation
coefficient range
(10 points)
Mechanics (15
Points)
