Fin221

FIN350 midterm 1 Version B

EVA = After-tax __ After-tax

Operating Income Capital costs

= NOPAT – After-tax Cost of Capital

MVA = Market value __ Equity capital

of equity supplied (book value)

NOWC = Current assets - Non-interest bearing current liability

FCFs for all investors = OCF-Gross Investment in Operating Capital

= (OCF-Dep)-(Gross Investment in Operating Capital-Dep)

= NOPAT-Net Investment in Operating Capital

= NOPAT- Change in Total Operating Capital

Value of Equity= Present Value of Future FCFs for Common Stock Investors

FCFs for Common Stock Investors = NCF-Gross Investment in Operating Capital

= (NCF-Dep)-(Gross Investment in Operating Capital-Dep)

= NI-Net Investment in Operating Capital

= NI- Change in Total Operating Capital

Total Operating Capital = Net Operating Working Capital (NOWC) + Net Fixed Assets

= Current Assets-Non-interest Bearing Current Liabilities

+Net Fixed Assets

Change in Total Operating Capital = Total Operating Capital in Year t+1

- Total Operating Capital in Year t

NOPAT = EBIT*(1-Tax Rate)=EBIT-Tax Expense

If tax rate is available, you should use: NOPAT = EBIT*(1-Tax Rate)

To toggle between END and BEGIN model, press 2nd, BGN, 2nd, ENTER

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1. Which of the following could explain why a business might choose to organize as a corporation rather than as a sole proprietorship or a