Forecast | | | | 2.2 | Methods and Assumptions | | 3.0 | Capital Expenditure Budget | | | | 4.0 | Investment Analysis | | | | | | 4.1 | Cash flows | | | | 4.2 | NPV Analysis | | | | 4.3 | Rate of Return Calculations | | | | 4.4 | Payback Period Calculations | | 5.0 | Pro Forma Financial Statements | | | | | | 5.1 | Pro Forma Income Statement | | | | 5.2 | Pro-Forma Cash flow Statement | | | | 5.3 | Pro-Forma Balance Sheets | | 6.0 | Works Cited
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As with any other merger analysis‚ we need to examine the present value of the incremental cashflows. The cash flow today from the acquisition is the acquisition costs plus the dividends paidtoday‚ or:Acquisition of Hybrid–$550‚000‚000Dividends from Hybrid$150‚000‚000Total–$400‚000‚000Using the information provided‚ we can determine the cash flows to Birdie Golf from acquiringHybrid Golf. All earnings not retained are paid as dividends‚ so the cash flows for the next five yearswill be: Year 1Year
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that inflow are reinvested at 80 percent of the internal rate of return This is a correct answer It is the difference in the reinvestment assumptions that can be significant in determining when to use the present value or internal rate of return methods. Under the net present value method‚ cash flows are assumed to be reinvested at the firm ’s weighted average cost of capital Points earned on this question: 1 Question 2 (Worth 1 points) A project has initial costs of $3‚000 and subsequent
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recession‚ and as a result interest rates and money costs generally are relatively low. The WACC for two mutually exclusive projects that are being considered is 8%. Project S has an IRR of 20% while Project L ’s IRR is 15%. The projects have the same NPV at the 8% current WACC. However‚ you believe that the economy is about to recover‚ and money costs and thus your WACC will also increase. You also think that the projects will not be funded until the WACC has increased‚ and their cash flows will not
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role in managing financial governance? Do you think businesses became more ethical after Sarbanes-Oxley was passed? Provide examples to support your answer. • What ratios measure a corporation’s liquidity? What are some problems associated with using such ratios? How would the DuPont analysis overcome these problems? Week Two Discussion Questions • How do you define strategic planning? What are some differences between strategic and financial planning? What financial problems might an
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Chapter 6 | Capacity Planning | | TRUE/FALSE 1. Capacity is the maximum rate of output of a process. Answer: True Reference: Introduction Difficulty: Easy Keywords: capacity‚ maximum output rate 2. Capacity decisions should be made separate from strategic decisions. Answer: False Reference: Introduction Difficulty: Moderate Keywords: capacity decision‚ strategic decisions 3. Capacity can be expressed by output or input measures
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Corporate Financial Management Practice Mid-Semester Examination (Answers at back) Disclaimer: This practice exam covers a selection of the types of questions that may be asked in the mid-semester exam‚ however it should not be taken as being exhaustive as to the topics that could be included in the exam. Students should therefore not be surprised if other types of questions appear in the exam. 1. $200 invested today and earning 8 per cent per annum compounded semi-annually will grow
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(p60) (p8) Question 16 Answer = 3 Net profit is the difference between the total costs and the total income over the life of the project. ((-155 000) + (-5 000) + 40 000 + 50 000 + 50 000 + 50 000 + 30 000) = R60 000 Question 17 Answer = 4 Net profit is the difference between the total costs and the total income over the life of the project. ((-140 000) + 15 000 + 5 000 + 20 000 + 30 000 + 60 000 + 70 000) = R60 000 Additional information about net profit: advantage as method for comparing
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Time Value of Money Exercise 1. If you invest $1000 today at an interest rate of 10% per year‚ how much will you have 20 years from now‚ assuming no withdrawals in interim? 2. a. If you invest $100 every year from the next 20 years starting one year from today and you earn interest of 10% per year‚ how much will you have at the end of the 20 years? b. How much must you invest each year if you want to have $50000 at the end of the 20 years? 3. What is the present value of the following
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scholarship. What is the value of this scholarship if the payment wil be made of $50‚000 per year for the next 2 years‚ followed by payments of $25‚000 per year for the next two years. The appropriate interest rate is 8% per year 3. A level-coupon bond has par value of $1‚000 that pays $120 per year and has 10 years to maturity. If the yield for similar bonds is currently 14%‚ what is the bond’s value? 4. You are thinking about investing in a $2‚000 face value bond which will mature in
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