projected income sheet and the balance sheet can be obtained through calculation so that we get the plug value (notes payable to bank) needed for the profitable business. This amount is so large that it exceeds the maximum amount the company can get from bank. In the third part of this report‚ we provide four suggestions for BLC to solve the problem of cash flow shortage. The credit terms of net 30 days on open account offered to customers can be improved by Customer Credit Ranking System. Besides
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CGA-CANADA ADVANCED CORPORATE FINANCE [FN2] EXAMINATION June 2011 Marks Notes: 1. Questions 1 and 2 are multiple choice. For these questions‚ select the best answer for each of the unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example‚ if the best answer for item (a) is (1)‚ write (a)(1) in your examination booklet. If more than one answer is given for an item‚ that item will not be marked. Incorrect answers will be marked as zero
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References: Ross‚ S.A.‚ R.W. Westerfield and J. Jaffe. 2002. Corporate Finance. 6th edition‚ McGraw- Hill. Damodaran‚ A. 2002. Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. 2nd edition‚ Whiley Finance.
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[pic] [pic] Assignment front sheet |Learner name |Assessor name | |Helen But |Simon Wong | |Date issued |Completion date
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the payback period is that it does not take into account the time value of money which can lead to wrong decisions. It also ignores any benefits that occur after the payback period‚ so it does not accurately measure profitability. The discounted payback period is also used to compute the time it takes to recover the cost of an investment‚ but it works to correct the disadvantage of the payback period by accounting for the time value of money. To calculate the discounted payback period‚ a discounted
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XYZ is considering a project that will require $28‚000 in net working capital and $87‚000 in fixed assets. The project is expected to produce annual sales of $75‚000 with associated costs of $57‚000. The project has a 5-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 30 percent. What is the operating cash flow for this project? OCF = net income + depr (Sales-cost) * (1-T) + depreciation * T OCF = (Sales – Costs)(1 – tC)
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Owing to the uneven capital structures between 2008 and 2012‚ it will be prudent not to deploy WACC to value the target but value the target using APV. Additionally‚ WACC computation might be difficult to use since an adjustment discount rate each year the capital structures change. Assuming that the project will de-lever after 2012‚ WACC valuation will be applied to determine the terminal value. factors the interest tax shields in its calculation and in the case of this acquisition‚ the Interest
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techniques such as • Accounting rate of return • Net present value • Profitability index • Internal rate of return • Modified internal rate of return • Equivalent annuity Here in our case‚ we have used Net Present Value or NPV‚ which is estimating the size and timing of all the incremental cash flows from the project. These future cash flows are then discounted to determine their present value. These present values are then summed‚ to get the NPV. The NPV decision rule
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fixed assets which are not meant for sale such as land‚ building‚ machinery or furniture. The word investment refers to the expenditure which is required to be made in connection with the acquisition and the development of long-term facilities including fixed assets. It refers to process by which management selects those investment proposals which are worthwhile for investing available funds. For this purpose‚ management is to decide whether or not to acquire‚ or add to or replace fixed assets in the
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traded companies can choose whether or not they wish to release periodic financial statements. A) True B) False 7) A company that produces drugs is preparing a balance sheet. Which of the following would be most likely to be considered a long-term asset on this balance sheet? A) a patent for a drug held by the company B) the cash reserves of the company C) commercial paper held by the company D) the inventory of
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