Corporate Finance: An Introduction (Welch) Chapter 1 Introduction 1.1 The Goal of Finance: Relative Valuation 1) Which of the following statements is true? A) In finance‚ it is important to determine an asset ’s absolute value. B) The relative value of any asset is‚ at best‚ a lucky guess. C) The true value of an asset is unaffected by externalities such as interest rate levels‚ the state of the economy‚ etc. D) Valuation is not an exact science
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Business Studies notes… Topic 1- Nature Of Business The importance of businesses The function of business in creating value/benefit ← A business is an organization that buys and sells goods‚ makes products or provides services. ← Business enterprises undertake many activities to provide the products demanded by customers‚ however‚ the most important activity is production. ← The management of the business‚ organizes all aspects of running the business including choosing a particular product
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Followers of fundamental analysis use the quantitativeinformation gleaned from financial statements to make investment decisions. Before we jump into the specifics of the three most important financial statements - income statements‚ balance sheets and cash flow statements - we will briefly introduce each financial statement’s specific function‚ along with where they can be found. The Major Statements The Balance Sheet The balance sheet represents a record of a company’s assets‚ liabilities and equity
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DATE: March 13‚ 2014 SUBJECT: Should Nucor Adopt the CSP Process? Cash Flow Analysis Cash flow analysis on Exhibit 1 represents net cash flow calculation using the base assumption. According to this calculation‚ Nucor would have net present value of $(11.99) million which is a negative value. This negative value on NPV indicates potential unprofitable consequences after implementing SMS’s compact strip production (CSP); therefore‚ Nucor should not invest in this new technology
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Analysis Introduction This project belongs in the engineering-efficiency category; therefore‚ it has to fit at least 3 of 4 performance hurdles‚ which are 1. Impact on EPS; 2.Payback; 3.Discounted cash flow and 4. Internal rate of return. In this article‚ some of those involved explained and described their opinions; however‚ professional knowledge may have been lacking. Therefore‚ we will expound and clarify below. Management Analysis Capital Expenditure On the surface‚ making sure
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President of Eagle Airlines‚ a simulation analysis is developed in order to evaluate company’s intention to proceed with the purchase of a new aircraft. According to the President’s estimations‚ the uncertain parameters which affect the annual cash flow are the below; 1. Hours flown 2. Charter Price/Hour 3. Ticket Price/Hour 4. Capacity of Scheduled flights 5. Ratio of charter flights 6. Operating Cost/hour The main assumption to work upon the scenarios is that the numbers generated for
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follow Howe Industries recently noted that‚ relative to the previous year‚ the company’s operating net cash flow increased‚ yet cash as reported on the balance sheet decreased. Which of the following factors could explain this situation? Answer The company cut its dividend. The company made a large investment in a profitable new plant. The company sold a division and received cash in return. The company issued new common stock. The company issued new long-term debt.
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Relevant cash flows Answer: d Diff: E . Which of the following statements is most correct? a. The rate of depreciation will often affect operating cash flows‚ even though depreciation is not a cash expense. b. Corporations should fully account for sunk costs when making investment decisions. c. Corporations should fully account for opportunity costs when making investment decisions. d. Statements a and c are correct. e. All of the statements above are correct. Relevant cash flows Answer:
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cookies‚ started business on October 1‚ 2011. The following transactions occurred during the month. 1. The company issued 6‚000 shares of common stock at $15 per share. 2. The company acquired office equipment on October 1 for $30‚000 cash. The equipment was used for administrative tasks. 3. The company purchased $15‚000 of ingredients on account. 4. Rent is $500 a month. On October 1‚ the company paid rent for October‚ November‚ and December. 5. The company sold pizza
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rules will always yield the same decision as long as two conditions are met: the project or investment’s cash flows are conventional and the project or investment is independent. If the initial cash flow is negative and all the subsequent cash flows are positive‚ the cash flows are said to be conventional. If at any point any of the 2nd or later cash flows are negative‚ meaning we have a cash outflow‚ the IRR will provide multiple rates of return which can make the decision of whether or not to choose
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