making these estimates. 4. Compare the liabilities patterns feasible under the alternative production plans. What implications do their differences have for the risk assumed by the various parties? Hampton Machine Tool 1. Why can’t a profitable firm like Hampton repay its loan on time and why does it need more bank financing? What major developments between November 1978 and August 1979 contributed to this situation? 2. Based on the information in the case‚ prepare a projected cash budget
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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 about financial policy differ across the two approaches? • The level
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National Cranberry Cooperative 2. The resource with least capacity determines the maximum long-term achievable throughput rate. Because wet and dry berries follow different routes at RP#1 there will be a maximum achievable throughput for each. The capacity of the dryers is the bottleneck for the wet berries. The maximum throughput for wet berries is 600 bbls/hr. For dry berries the separation process is the bottleneck. The maximum throughput for dry berries is 1200 bbls/hr. The percentage
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hurdle rate for both their Telecommunications Services and Products and Services divisions. The hurdle rate is the cost of capital based on an estimate of the corporation’s WACC. 2. Please estimate the segment WACCs for Teletech (see the worksheet in case Exhibit 1). As you do this‚ carefully note the points of judgment in the calculation. Corporate Telecommunications Products & Systems MV asset weights 100% 75% 25% Bond rating A-/BBB+ A BB Pretax cost of debt 5.88% 5.74% 7.47% Tax rate 40%
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Table of Contents 1.0 ABOUT THE CASE 1 2.0 SIGNIFICANCE OF THE CASE 1 3.0 CASE SOLUTIONS & ANALYSIS 1 1.0 ABOUT THE CASE 2.0 ISSUES OF THE CASE 3.0 CASE SOLUTIONS & ANALYSIS 1) What are the strengths and weakness of the system that Mr. Sponza developed for the control repair facility? Strengths a) By changing eight department they called shops as a “Profit Center” change the work attitudes of the workers. Since they’re now profit oriented‚ their productivity increase thus
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Chapter 9 Cost of Capital 1. What is the WACC? a. Weighted Average Cost of Capital- most firms employ different types of capital‚ and because of their differences in risk‚ the difference securities have different required rates of return. Typically=debt‚ preferred stock and common equity. 2. What precautions must we take when measuring the WACC to use for capital budgeting decisions (future investment)? b. The company’s current and recent past book and market value structures
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generators‚ is in this situation: EBIT _ $4 million; tax rate (T) is 35%; debt outstanding (D) $2 million; kd 10%; ke 15%; shares of stock outstanding (N0) 600‚000; and book value per share $10. Since Gentry’s product market is stable and the company expects no growth‚ all earnings are paid out as dividends. The debt consists of perpetual bonds. a. What are Gentry’s earnings per share (EPS) and its price per share (P0)? b. What is Gentry’s weighted average cost of capital (WACC)? c. Gentry can
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Case 4: Massengill’s Department Store Massengill’s Department Store had been a fixture in small and mid-sized cities across the Southeast for 75 years. But for the past couple of decades‚ the Atlanta-based chain had been slowly going downhill. Once a cutting-edge retailer‚ Massengill’s had come to be known primarily for its dilapidated stores and dowdy-looking clothes. Everyone knew the chain was on the verge of bankruptcy. But that was before Marv Heimler. Heimler had been lured away from his job
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score: 44.17% Total Time spent: 22 hours‚ 55 minutes‚ 48 seconds Score for selected take: 44.17% (11.04/25) View printable version Question: hpca21h/2Problem 13-06A 2Problem 13-06A partiallyCorrect 1. 5.21 partiallyCorrect 2. 5.83 incorrect 3. 0.00 incorrect 4. 0.00 Wrong "Check My Work" Clicked: 3 Times Hint(s) Check My Work eBookeBook Problem 13-6A Specific Identification‚ FIFO‚ LIFO‚ and Weighted-Average Swing Company’s beginning inventory and purchases during the
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to the firm. 3. Why are market-based weights important? 4. Why is the coupon rate of existing debt irrelevant for finding the cost of debt capital? 5. Under what assumptions can the WACC be used to value a project? 6. How should you value a project in a line of business with risk that is different than the average risk of your firm’s projects? 7. Maltese Falcone‚ has not checked its weighted average cost of capital for four years. Firm management claims that since Maltese
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