SEAT NUMBER: ……….… ROOM: .………………. FAMILY NAME.………….....…………………………. This question paper must be returned. Candidates are not permitted to remove any part of it from the examination room. OTHER NAMES…………….…………………..…….. STUDENT NUMBER………….………..…………….. SESSION 2 EXAMINATIONS NOVEMBER 2012 Unit Code and Name: AFIN252‚ Applied Financial Analysis and Management Time Allowed: 3 hours plus 10 minutes reading time. Total Number of Questions: 50 Multiple Choice Questions plus 8 full response questions.
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Principles (GAAP). By using these concepts as the foundation‚ readers of financial statements and other accounting information do not need to make assumptions about what the numbers mean. For instance‚ the difference between reading that a truck has a value of $9000 on the balance sheet and understanding what that $9000 represents is huge. Can you turn around and sell the truck for $9000? If you had to buy the truck today‚ would you pay $9000? Or‚ perhaps the original purchase price of the truck was
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Table of Contents 1.1 Introduction 1.2 NET PRESENT VALUE (NPV) 1.3 ADVANTAGES OF NPV 1.4 DISADVANTAGES OF NPV 1.5 PAYBACK 1.6 Arguments in favour of payback 1.7 Debt vs Equity 1.8 Equity equals Ownership (Share Profits and Control) 1.9 Debt: Money You Owe 2.0 ADVANTAGES OF DEBT COMPARED TO EQUITY 2.1 DISADVANTAGES OF DEBT COMPARED TO EQUITY 2.2 Managerial Ownership and Agency Costs 2.3 Concentrated Ownership and Agency Costs 2.4 Debt and Agency Costs 2.5 PECKING ORDER THEORY OVERVIEW
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promptly recover its cost? b Will an investment generate an acceptable rate of return? c Will an investment have a positive net present value? d Will an investment have an adverse effect on the environment? 3 Which of the following is not considered when using the payback period to evaluate an investment? a The profitability of the investment over its entire life. b The annual net cash flow of the investment. c The cost of the investment. d The expected life of the investment. Use the following data
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GROUP ASSIGNMENT CASE 23: DANFORTH & DONNALLEY LAUNDRY PRODUCTS COMPANY Purpose of Meeting: To make capital budgeting decision with respect to the introduction and production of a new product‚ a liquid detergent called Blast. Need to consider what types and which cash flows should be included in capital budgeting analysis. D&D was producing and marketing two major product lines: 1. Lift-Off: Low –suds‚ concentrated powder. 2. Wave: Traditional powder detergent. Questions &
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Substantive Issue Ocean Carriers is a shipping company evaluating a proposed lease of a ship for a three-year period to a customer‚ beginning in 2003. The proposed leasing contract offers very attractive terms‚ but no ship in Ocean Carrier’s current fleet meets the customer’s requirements. The firm must decide if future expected cash flows warrant the considerable investment in a new ship. Objective of Case Assignment To provide your team an opportunity to make a capital budgeting decision
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“Ocean Carriers” case Assume that Ocean Carriers uses a 9% discount rate. 1) Do you expect daily spot hire rates to increase or decrease next year? (5 points) 2) What factors drive daily hire rates? (5 points) 3) How would you characterize the long-term prospects of the capesize dry bulk industry? (10 points) 4) Should Ms Linn purchase the $39M capsize? Make 2 different assumptions. First‚ assume that Ocean Carriers is a US firm subject to 35% taxation. Second‚ assume that
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on NPV Analysis. 4 Table 3: Estimation of Resale value of Carrier @15th year 7 1. Introduction 1.1 Executive Summary Ocean Carriers Inc. (OCI) is an International provider of Marine transportation services mainly focussing on Dry Bulk commodities mainly iron ore and coal. OCI has offices located in New York and Hongkong. One of OCI’s customer’s is keen in committing for a 3 year lease starting from 2003 for a large dry bulk Capesize carrier of capacity 180‚000 DWT in order to fulfil its own
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OCEAN CARRIERS CASE 1) Should Ls Linn purchase the $39M capsize? Make two different assumptions. First‚ assume that Ocean Carriers is a U.S. firm subject to a 35% statutory (and effective) marginal tax rate. Second‚ assume that Ocean Carriers is domiciled in Hong Kong for tax purposes‚ where ship owners are not required to pay any tax on profits made overseas and are also exempted from paying any tax on profit made on cargo uplifted from Hong Kong‚ i.e.‚ assume a zero tax rate. The
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Ocean Carriers HW#7 PRINCIPLES OF MORDERN FINANCE (FALL 2012) JINGYE HAN “Ocean Carriers” case 1) Do you expect daily spot hire rates to increase or decrease next year? I expect daily spot hire rates to decrease next year. Based on Exhibit 3‚ order book in 2002 for dry bulk capsizes decreased‚ indicating a decrease in demand. Meanwhile‚ Based on Exhibit 2‚ the majority of capsize fleets in December 2000 are in the age within 15 years‚ among them‚ the largest portion is of those under
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