be used as the required return when analyzing a potential acquisition of a retail outlet. C. is the return investors require on the total assets of the firm. D. remains constant when the debt-equity ratio changes. E. is unaffected by changes in corporate tax rates. 7. Which one of the following is the
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Solutions Manual Fundamentals of Corporate Finance 9th edition Ross‚ Westerfield‚ and Jordan Updated 09-29-2010 CHAPTER 1 INTRODUCTION TO CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. Capital budgeting (deciding whether to expand a manufacturing plant)‚ capital structure (deciding whether to issue new equity and use the proceeds to retire outstanding debt)‚ and working capital management (modifying the firm’s credit collection policy with its customers)
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Having studied this chapter you will be able to: Evaluate the potential value added to a firm arising from a specified capital investment project or portfolio using the net present value model. Project modelling should include explicit treatment of: (a) Inflation & specific price variation (b) Taxation including capital allowances and tax exhaustion (c) Single & multi-period capital rationing to include the formulation of programming methods and the interpretation of their output (d) Probability
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Assignment 1 NPV: = -PF + FV /(1+r) PV = FV/(1+r) or PV = C1/1-r + C2/(1-r)2 + .. + CT/(1-r)T Rate of return: R=(Vf-Vi)/Vf Rate r compounded m times a year: FV = C(1+r/m)mt 10% semiannually = 10.25% annually‚ Hence 10.25 is said to be the Effective Annual Yield (EAY) 1+EAY = (1+r/m)mt Assignment 2 Perpetuity The value of D received each year‚ forever: PV = D/r Annuity The value of D received each year for T years: PV = (D/r)*[1 – 1/(1+r)T] Growing Perpetuity PV = D/(R-g) R: the
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PV = C / (r – g) PV = $175‚000 / (.10 – .035) PV = $2‚692‚307.69 It is important to recognize that when dealing with annuities or perpetuities‚ the present value equation calculates the present value one period before the first payment. In this case‚ since the first payment is in two years‚ we have calculated the present value one year from now. To find the value today‚ we simply discount this value as a lump sum. Doing so‚ we find the value of
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CAPITAL BUDGETING CASE STUDY: Bridgehampton Shores Inn: Mutually Exclusive Project Comparison Finance 203 – Managerial Finance Dr. Anoop Rai Fall 2012 Capital Budgeting Case Study: Bridgehampton Shores Inn: Mutually Exclusive Spa Projects Introduction Bridgehampton Shores is an Inn located on the Eastern Inn of Long Island. It typically caters to families looking to vacation in the area and take advantage of all the East End has
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In 2000‚ Jonathan Lebed caused havoc in the stock trading industry. This 15 year old boy was accused of pumping and dumping’ stocks over the internet. Jonathan actions proved that the internet can be a very powerful tool for fraud. This incident makes it evident that investors needed to take a closer look at the information they are receiving from the internet because information is being placed there by various persons whom may have bad intentions. There is not much difference between the
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Planning Multiple Choice Questions 1. One key reason a long-term financial plan is developed is because: A. the plan determines your financial policy. B. the plan determines your investment policy. C. there are direct connections between achievable corporate growth and the financial policy. D. there is unlimited growth possible in a well-developed financial plan. E. None of the above. 2. Projected future financial statements are called: A. plug statements. B. pro forma statements. C. reconciled statements
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UNIVERSITY SCHOOL OF BUSINESS DEPARTMENT OF ACCOUNTING‚ ECONOMICS‚ AND FINANCE FIN 318 - PRINCIPLES OF INTERNATIONAL CORPORATE FINANCE COURSE SYLLABUS Term: Spring 2013 Tuesday & Thursday 12:15 – 1:30 Main Campus I. COURSE NUMBER AND TITLE FIN 318-01 – Principles of International Corporate Finance II. INSTRUCTOR Dr. Nicole Grandmont-Gariboldi ngariboldi@stu.edu Office Phone (305) 628-6568 III. TEXTBOOK Fundamentals of Multinational Finance 3rd Ed Moffett ‚ Stonehill &Eiteman‚ Addison-Westley ISBN: 0-321-54164-2
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Solutions to Chapter 10 Introduction to Risk‚ Return‚ and the Opportunity Cost of Capital capital gain + dividend ($44 − $40) + $2 = = 0.15 = 15.0% initial share price $40 1. Rate of return = Dividend yield = dividend/initial share price = $2/$40 = 0.05 = 5% Capital gains yield = capital gain/initial share price = $4/$40 = 0.10 = 10% 2. Dividend yield = $2/$40 = 0.05 = 5% The dividend yield is unaffected; it is based on the initial price‚ not the final price. Capital gain = $36 – $40
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