- Chuck Hill, the CFO of Niserson Corp., has just learned that Niseron’s quarterly net income will fall well short of consensus analyst expectations. Hill decides that he should immediately notify analysts covering Niseron Corp. of this negative development, but he is unsure how to best distribute the news. He feels a certain obligation to call two analysts in particular - these individuals have followed Niseron stock for several years and have from time to time alerted Hill to important developments at competing firms. Failure to notify these analysts might damage Hill’s ability to monitor his competition, to the detriment of his own shareholders. Which of the following statements regarding Hill’s obligations under CFA Institute’s Code and Standards is TRUE? A. Hill should notify anaysts with “Buy” recommendations first, as they are the most likely to need the information. B. Hill should notify no analysts until he is ready to issue the final numbers for the quarter. C. Because their information adds value to Niseron’s shareholders, it is acceptable for Hill to notify the two analysts first, so long as his remarks are general in nature and “off the record.” D. Hill should issue a press release prior to calling analysts. ---------------------------------- 2. Ted King, CFA, manages a staff of ten portfolio managers and 30 analysts. King delegated supervision of the analysts to the portfolio managers who report directly to King. All staff members are expected to follow the compliance manual written by King. King was recently informed by a client that an analyst had been sending basic investment recommendations to the firm’s largest clients first. King confronted The manager to whom the analyst reports, Jim Slade, CFA. Slade told King that prohibitions against giving preferential treatment to any client or group of clients had been covered only in his compliance training sessions. There was no such prohibition included in the written compliance manual, and therefore no violation had occurered. King immediately restricted the duties of the portfolio manager and the analyst while he investigated the matter further. Has King or Slad violated the CFA Institue Standards of Professional Conduct? KING SLADE A. Yes No B. No Yes C. Yes Yes D. No No -------------------------------------------- 3. Jack Smith, CFA, is the chief economist for Gable Investments. He believes that, in general, a recession is the direct result of higher energy prices. Smith has estimated that in his home country the probability of a recession given higher oil prices is 40%. Smith also believes that there is a 70% probability oil prices will fall from current levels. Calculate the probability of observing rising oil prices rising and a recession and state whether the probability of oil prices rising is a conditional or unconditional probability. Oil Pricces/recession Prob of Oil Prices rising A. 12% Conditional probability B. 28% Unconditional probability C. 12% Unconditional probability D. 28% Conditional probability ------------------------------------------------------------------------- 4. Joplin Corp reported the following in its year-end financial statements: -Net Income of $43.7M -Depreciation Exp of $4.2M -Increase in A/R of $1.5M -Decrease in A/P of $2.3M -Increase in Captial Stock of $50M -Sold equipment with a book value of $7M for $15M after-tax -Purhased equipment for $35M Calculate Joplin’s Free Cash Flow A. $1.1M B. $16.1M C. $23.7M D. $66.1M ----------------------------------------------------- I’ll post the answer after 5 responses. Got this directly from the 2008 V2 Schweser Exam. I had a tough time with these and would like to see what you guys think. I don’t think I’d have a good explaination for each question.
D C A D
D C A B
Let me revise the Q3 - answers. Oil Pricces/recession ---------- Prob of Oil Prices rising A. 12% --------------------------- Conditional probability B. 28% --------------------------- Unconditional probability C. 12% --------------------------- Unconditional probability D. 28% --------------------------- Conditional probability
D,C,A,C Your right, definitely hard questions…
I have been solving question 4 now i think it should be B, definitely B
D–for the lack of a better option C–King has taken steps to stop wrongdoing but he has failed to update manual withe correct instructions, also Slade knew about the dsicrepancy and didnt supervise his subordinate accordingly. C–…4 * .3 = 12% P of oil pirce rising is unconditional D–Added/subtracted everything accordingly, dont know if something shud have left out. Will wait for responses
On the last ? The answer is B. The trick is to realize that the gain on the sale of fixed assets (15-7) is included in Net Income so this needs to be backed out Plus NI +43.7 plus dep +4.2 less gain on sale of assets -8 change in a/p -2.3 change in a/r -1.5 asset purchases - 35 asset sales +15 FCFE = 16.1
These are real easy actually compared to the other schweser practices I’ve done D C C B I’m pretty sure just oil rising is unconditional not dependent on anything else.
Answers: 1. D 2. C 3. C 4. B ------------------------------- adee1021 - I got my CFO to be 36.1 and for FCFE I subtracted the 35. So we add 15 for the sales of the asset, that is considered part of the working capital?
alsrs- Yes CFO is 36.1 and net capital expenditure is (-35+15)=-20