Financial Management Thursday 9 June 2011 Time allowed Reading and planning: Writing: 15 minutes 3 hours ALL FOUR questions are compulsory and MUST be attempted. Formulae Sheet‚ Present Value and Annuity Tables are on pages 7‚ 8 and 9. Do NOT open this paper until instructed by the supervisor. During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor. This question paper must not be removed
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for services‚ including fees‚ commissions‚ and similar items: 2. Gross income derived from business 3. Gains derived from dealing in property 4. Interest 5. Rents 6. Royalties 7. Dividends 8. Alimony and separate maintenance payments 9. Annuities 10. Income from life insurance and endowment contracts 11. Pensions 12. Income from discharge of indebtedness 13. Distributive share of partnership gross income 14. Income in respect of a decedent and Income from an interest in an estate or
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first monthly payment. Question 4 4 out of 4 points Which of the following statements is CORRECT? Answer Selected Answer: The cash flows for an annuity must all be equal‚ and they must occur at regular intervals‚ such as once a year or once a month. Correct Answer: The cash flows for an annuity must all be equal‚ and they must occur at regular intervals‚ such as once a year or once a month. Question 5 4 out of 4 points A U.S. Treasury bond will pay
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undertaken if the required rate of return is 18 percent? The investment should not be undertaken because the internal rate of return of 15% is less than the required rate of 18%. Initial outlay $100‚000 Annuity amount 20‚000 Outlay ÷ annuity amount = PV of annuity factor 5.00 Internal rate of return 15% EXERCISE 9-11. Depreciation Tax Shield [LO 4] Strauss Corporation is making a $60‚000 investment in equipment with a five-year life.The company uses the straight-line
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(1/1.15)(.04)] = .0599‚ or 5.99% The total amount we need to raise to fund the new equipment will be: Amount raised cost = $50‚000‚000/(1 – .0599) Amount raised = $53‚186‚023 Since the cash flows go to perpetuity‚ we can calculate the present value using the equation for the PV of a perpetuity. The NPV is: NPV = –$53‚186‚023 + ($6‚200‚000/.1039) NPV =
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Present Value (APV) approach assuming the firm raises $750 thousand of debt to fund the project and keeps the level of debt constant in perpetuity. NPV of Levered Firm = $1‚528‚485 3. Value the project using the Weighted Average Cost of Capital (WACC) approach assuming the firm maintains a constant 25% debt-to-market value ratio in perpetuity. NPV of Levered Firm = $1‚469‚972 4. How do the values from the APV and WACC approaches compare? How do the assumptions
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NOVA SOUTHEASTERN UNIVERSITY H. Wayne Huizenga School of Business and Entrepreneurship Masters Programs FIN 5080 – APPLYING MANGERIAL FINANCE APPENDIX A– WEEKEND FORMAT INTRODUCTORY REMARKS: This syllabus comprises of two parts: 1) the MAIN Syllabus; and 2) the appendix that pertains to the format of your class (Appendix A = Weekend format; Appendix B = Day format; Appendix C = Online; and Appendix D = Week Night). Each class‚ regardless of format‚ will have a Course Website‚ which
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1. Income statement Molteni Motors Inc. recently reported $3.25 million of net income. Its EBIT was $7.75 million‚ and its tax rate was 35%. What was its interest expense? Round your answer to the nearest dollar. Enter your answer in dollars. For example‚ an answer of $1.2 million should be entered as 1‚200‚000. $ 2. Corporate Tax Liability To complete the assignments listed below‚ refer to the Table 2-1. The Talley Corporation had a taxable income of $300‚000 from operations after all operating
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Week 13 Solutions Chapter 19 14. WACC – Table 19.4 shows a simplified balance sheet for Rensselaer Felt. Calculate this company’s weighted-average cost of capital. The debt has just been refinanced at an interest rate of 6% (short term) and 8% (long term). The expected rate of return on the company’s shares is 15%. There are 7.46 million shares outstanding‚ and the shares are trading at $46. The tax rate is 35%. We make three adjustments to the balance sheet: Ignore deferred taxes; this is an
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Contributing Team members (with ID #) Executive Summary Name of Case: Gibson Insurance Company Problem definition: State the central issue in the case‚ as well as related minor issues. The central issue is the inefficiency in allocating cost for each product. This is because the existing support cost allocation method does not reflect its relative claim on the resources and thus‚ leads to insurance products being priced inaccurately in the company. Some of the minor issues include inefficiency
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