Paper F9 Financial Management 1 (a) December 2007 Answers (i) Price/earnings ratio method valuation Earnings per share of Danoca Co = 40c Average sector price/earnings ratio = 10 Implied value of ordinary share of Danoca Co = 40 x 10 = $4·00 Number of ordinary shares = 5 million Value of Danoca Co = 4·00 x 5m = $20 million (ii) Dividend growth model Earnings per share of Danoca Co = 40c Proposed payout ratio = 60% Proposed dividend of Danoca Co is therefore = 40 x 0·6 = 24c
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The reason being the Clark project has a positive NPV. The net present value method offsets the present value of an investment’s cash inflows against the present value of the cash outflows. If the present value of cash inflows exceeds the present value of cash outflows‚ then it clears the minimum cost of capital and is deemed to be a suitable undertaking. On the other hand‚ if the present value of cash inflows is less than the present value of cash outflows‚ the investment opportunity should be rejected
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break-even occupancy level with a percentage 85.92%. This means that the Fowler Building is a lot more risky than Alison Green. Exhibit 5 tells us the expected cash flows for each property‚ and through the expected cash flows we find the Net Present Value and the internal
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a firm’s real assets‚ which in turn generate the cash flows that ultimately determine its profitability‚ value and viability. In principle‚ a firm’s decision to invest in a new project should be made according to whether the project increases the wealth of the firm’s shareholders. For example‚ the Net Present Value (NPV) rule specifies an objective process by which firms can assess the value that new capital investments are expected to create. As Graham and Harvey (2001) document this rule has steadily
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increase the variable costs by $6.00 per unit and that would require a one-time investment of $37‚000 in special molds that would have no salvage value. This special order would have no effect on the company’s other sales. The company has ample spare capacity for producing the special order. | Required: | Determine the effect on the company’s total net operating income of accepting the special order.
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and own the next album of an up-and-coming folk musician‚ or simply license her finished recording. The case presents information sufficient to build cash flow forecasts for either investment alternative. The task for the students is to build a valuation model for the two capital investment alternatives‚ whereby they can evaluate the attractiveness of the investment based on net present value (NPV) and the internal rate of return (IRR) of the discounted cash flows (DCF). Further‚ the student will have
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percent. Project A: Net present value is found by taking the original investment cost‚ $100‚000 (that would be a negative amount since it’s cash out the door)‚ and then adding the present value of the annual cash inflows expected ($32‚000 for 5 years at the required rate of return of 11%). You look up in the present value annuity table the factor for 5 years at 11%‚ which is 3.696‚ and multiply by 32‚000 to get present value of expected cash inflows = $118‚272. Net present value = $118‚272 - $100‚000
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| Both New York Stock Exchange and NASDAQ are examples of secondary markets.Answer | | | | | Selected Answer: | True | Correct Answer: | True | | | | | * Question 2 1 out of 1 points | | | Financial manger can create value for a firm by creating more cash flow for it than it uses. To do so‚ they should make investment decisions so that the firm may buy assets that generate more cash than they cost.Answer | | | | | Selected Answer: | True | Correct Answer: |
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Dallas Project Conrad Biegel ACG6305 24-Sep-14 1 & 2) I allocated the purchase costs in three different ways. I am recommending that the real estate corporation allocate costs using the following method because it maximizes the project’s Net Present Value (and will make Nella Lyrrad look the best when she reports the project’s results to her superiors!): Cost Allocation Based on What the Developers Spent The developers spent $100 million on the land‚ $100 million on the recreation facilities
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400 and a market value of $32‚600. What is the difference between these two values called? A. net present value B. internal return C. payback value D. profitability index E. discounted payback 3. The length of time a firm must wait to recoup the money it has invested in a project is called the: A. internal return period. B. payback period. C. profitability period. D. discounted cash period. E. valuation period. 5. A project’s average net income divided by its average book value is referred to as
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