7 – Discounted Cash Flow Techniques page 247 A brief tutorial on Excel financial functions (problems to follow) You may find the following Excel‚ built-in financial functions helpful when analyzing the problems below. (To access these functions‚ select Insert‚ Functions‚ and choose Financial.) =PV(rate‚ nper‚ pmt‚ fv‚ type) returns the present value of a series of cash flows. =FV(rate‚ nper‚ pmt‚ pv‚ type) returns the future value of a series of cash flows. =PMT(rate
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autoparts chain‚ is considering purchasing a smaller chain‚ South Georgia Parts (SGP). Brau’s analysts project that the merger will result in the following incremental free cash flows‚ tax shields‚ and horizon values: Years 1 2 3 4 Free cash flow $1 $3 $3 $7 Unlevered horizon value 75 Tax shield 1 1 2 3 Horizon value of tax shield 32 Assume that all cash flows occur at the end of the year. SGP is currently financed with 30% debt at a rate of 10%. The acquisition
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FINANCIAL STATEMENTS AND CASH FLOW 1. Liquidity measures how quickly and easily an asset can be converted to cash without significant loss in value. It’s desirable for firms to have high liquidity so that they have a large factor of safety in meeting short-term creditor demands. However‚ since liquidity also has an opportunity cost associated with it - namely that higher returns can generally be found by investing the cash into productive assets - low liquidity levels are also desirable to the
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Difference Between Cash Flow and Funds Flow Statement Many people think that both cash and fund are same‚ however they both are different and so is the case with cash flow statement and funds flow statement. Let’s look at some of the differences between cash flow and funds flow statement – 1. While funds flow statement reveals the change in the working capital of a company between two balance sheet dates while cash flow statement reveals the change in the cash position of the company between two
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Chapter 12 Statement of Cash Flows True / False Questions 1. Interest and dividends from investments held by a company are reported as cash inflows from investing activities on the statement of cash flows. True False 2. Under the indirect method‚ changes in current assets are used in determining cash flows from operating activities and changes in current liabilities are used in determining cash flows from financing activities. True False 3. Using the indirect method‚ the increase
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Statement of Cash Flows Solutions to Questions 14-1 The statement of cash flows highlights the major activities that impact cash flows and hence affect the overall cash balance. 14-2 Cash equivalents are short-term‚ highly liquid investments such as Treasury bills‚ commercial paper‚ and money market funds. They are included with cash because investments of this type are made solely for the purpose of generating a return on temporarily idle funds and they can be easily converted to cash. 14-3 (1)
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Writing Assignment Week 1 Question 2.2 – Accounting and Cash Flows: Why is it that the revenue and cost figures shown on a standard income statement may not be representative of the actual cash inflows and outflows that occurred during a period? Financial Statements are prepared according to accrual rule of ‚ according to which cost and revenue are recorded as they occur and not when they are actually received or paid. This is why cash flows during the year may be different from revenue and costs
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Cash is the life blood of a business and it can’t operate without it. Survival of a business depends upon its ability to meet liabilities when they fall and thus requires cash. When considering the overall cash flow of the yacht business we can see that it is suffering from cash flow problems ever since the business started. Although the monthly deficit has been decreasing every month due to the increased sales‚ the overall balance carried forward is gradually going up. It would be advisable
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CORPORATE LIQUIDITY‚ CASH FLOW SENSITIVITY‚ AND INVESTMENT DECISION Written by: Destria Kurnianti 10/309731/PEK/15164 Ratified on 18 Januari 2012 Supervisor Prof. Marwan Asri‚ MBA‚ Ph.D INTRODUCTION Modigliani and Miller (1958)‚ in a perfect market conditions there is no relationship between investment decisions and financing decisions. Although the assumption of perfect markets is eliminated‚ the separation between investment decisions and financing
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the stock market would react? E1-12 This information is for Damon Corporation for the year ended December 31‚ 2010. Cash received from lenders $20‚000 Cash received from customers 60‚000 Cash paid for new equipment 35‚000 Cash dividends paid 8‚000 Cash paid to suppliers 18‚000 Cash balance 1/1/10 12‚000 Hint: Prepare a statement of cash flows. (SO 5) Instructions • Prepare the 2010 statement of cash flows for Damon Corporation. • Suppose you are
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