answered: FINE 332 | Jan ’22 | All rights are reserved. The material contained here

FINE 332 | Jan ’22 |
All rights are reserved. The material contained herein is the copyright property of Embry-Riddle Aeronautical
University, Daytona Beach, Florida, 32114. No part of this material may be reproduced, stored in a retrieval
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prior written consent of the University.

FINE 332
Corporate Finance I

Module 9 Final Exam
1. JTM is considering purchasing a 3D printer. The price is $945,000. The dealer is offering a

payment plan in which JTM pays 20% down and finances the rest over 24 months at
$34,450/month. What is the implicit financing rate? If JTM’s WACC is 7%, should it accept the
financing offer?

2. ABC FBO is looking to buy another FBO. It is being offered an established FBO whose owner
wants to sell. ABC’s CFO gave you the numbers and asked you to calculate its price. The CFO
asks that you use a 7.5% discount rate and a 2.75% growth rate for year 5 and on. What
should ABC consider paying? The data you need is in the template provided!

3. JTM’s treasury office is looking at buying a bond to earn some money on its cash balances. It
has a number of options. All the prices are given to you in the template provided. Please
calculate the prices for bonds A-D and the yields for bonds E-H.

4. JTM
a. JTM pays its C-suite officers with stock options. Treasury asked you to price them. JTM’s

stock trades at $22.50/share; U.S. Treasurys, aka the risk-free rate, yield 1.50% and
stock’s volatility is 22%. The details of the stock option offers are below. What are the
prices of the options?


Exercise Price 20.00 18.00 17.00

Maturity (yrs.) 14.0 10.0 9.0

b. JTM’s treasury unit bought jet fuel futures to hedge its expenses. It uses 39feM

gallon/yr. Each contract runs 42,000 gallons. The contract price locked JTM at
$2.6111/gal. At maturity, JTM found that the spot price was $2.6050/gal. In effect, had
they not taken the futures, they’d have paid less. What was the loss on the contract?

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