Final Exam Page 1 1. (TCO A) Which of the following statements is NOT correct? (Points : 5) | The corporate valuation model can be used both for companies that pay dividends and those that do not pay dividends. The corporate valuation model discounts free cash flows by the required return on equity. The corporate valuation model can be used to find the value of a division. An important step in applying the corporate valuation model is forecasting the firm’s
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Week 7 16-1 Cash Management Williams & Sons last year reported sales of $10 million and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm’s inventory level and increase the firm’s inventory turnover ratio to 5 while maintaining the same level of sales‚ how much cash will be freed up? Inventory = Sales / inventory turnover ratio =10 mil/2 = 5 mil Inventory = Sales / inventory turnover
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$850. What is their yield to maturity? Given: TTM = 12 years Par = $1‚000 Using Finance Functions on 12c: n = 12 PMT = 100 PV = -850 i = 12.4751% C = 10% ($100) Price = $850 YTM = solve PMT = 100 i = solve Yield to Maturity = 12.48% 5-6 Maturity Risk Premium The real risk-free rate is 3%‚ and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 6.3%. What is the maturity risk premium for the 2-year security? r = r* +IP+DRP+LP+MRP 6.2=%3% + 3% + 0
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Question (2-6) In its most recent financial statements‚ Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous retained earnings were $780 million. How much in dividends was paid to shareholders during the year? New Balance retained earning = Previous Balance retained earning + net income + Dividend paid Dividend paid = Previous Balance retained earning + net income - New Balance retained earning Dividend = $780 million + $50 million - $810 million
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Final Exam Page 1 1. (TCO A) Which of the following does NOT always increase a company’s market value? (Points : 5) Increasing the expected growth rate of sales Increasing the expected operating profitability (NOPAT/Sales) Decreasing the capital requirements (Capital/Sales) Decreasing the weighted average cost of capital Increasing the expected rate of return on invested capital | 2. (TCO F) Which of the following statements is correct? (Points : 5) For a project with normal cash flows
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3 After-tax savings $15‚000 $15‚000 $15‚000 Depreciation shield 11‚220 15‚300 5‚100 Net Cash Flow $26‚220 $30‚300 $20‚100 ==================== Notes: 1. The after-tax cost savings is $25‚000(1-T)=$25‚000(.6)=$15‚000. 2. The depreciation expense in each year is the depreciable basis‚ $85‚000 times the MACRS allowance percentage of .33‚ .45‚ and .15 for Years 1‚ 2‚ and 3. Depreciation expense in Years 1‚ 2‚ and 3 is $28‚050‚ $38‚250‚ and $12‚750.
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FI515 Week 2 Homework 3.1 Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20‚000. What is the level of its accounts receivable? Assume there are 365 days in a year. Day Sales Outstanding= Receivables / Average Sales per day AR = 20 X $20000 = $400‚000 3.2 Vigo vacations has an equity multiplier of 2.5.The company’s assets are financed assets with some combination of long-term debt and common equity. What is the company’s debt ratio? Equity Multiplier
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Mini-Case. A. It is important for the decisions taken in the company‚ investment decisions and financing decisions‚ Every decision taken in the company has a financial impact‚ Investment projects‚ how much to invest and what assets to invest‚ To raise the necessary cash‚ To increase the shareholders’ stake in the firm B. Sole Proprietorship: Sole owner of a business. The manager and the owner is the same person. The sole proprietorship has unlimited liability. You pay taxes as owner and for
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modalities‚ read the policies governing your current class modality. Course Materials Schultz‚ K. M. (2012). HIST2‚ volume 2 (2nd ed.). Boston‚ MA: Wadsworth‚ Cengage Learning. All electronic materials are available on the student website. Week One: Reconstruction and the New South Details Due Points Objectives 1.1 Evaluate the outcomes of Reconstruction. 1.2 Summarize the economic‚ political‚ and social characteristics of the New South. 1.3 Explain the populist response to late
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provide a similar yield to maturity. If its marginal tax rate is 35%‚ what is LL’s after-tax cost of debt? rd(1 - T) = 0.08(0.65) = 5.2%. 9-4 Cost of Preferred Stock with Flotation Costs Burnwood Tech plans to issue some $60 par preferred stock with a 6% dividend. A similar stock is selling on the market for $70. Burnwood must pay flotation costs of 5% of the issue price. What is the cost of the preferred stock? Ep = Dividend/ Market
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