questions‚ 1 points each‚ 10 points total) 1) According to M&M Theorem in the absence of corporate taxes‚ an increase in leverage (i.e.‚ an increase in D/E ratio) will lead to a) Higher cost of equity b) Low cost of equity c) No change in cost of equity d) The information provided is not sufficient to chose any of the above questions Ans: A 2) According to M&M Theorem in the absence of corporate taxes‚ an increase in leverage (i.e.‚ an increase in D/E ratio) will lead to a) Higher
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= $100 4.279 = $427.90 b. PV = $100 4.580 = $458.00 c. We can think of cash flows in this problem as being the difference between two separate streams of cash flows. The first stream is $100 per year received in years 1 through 12; the second is $100 per year paid in years 1 through 2. The PV of $100 received in years 1 to 12 is: PV = $100 [Annuity factor‚ 12 time periods‚ 9%] PV = $100 [7.161] = $716.10 The PV of $100 paid in years 1 to 2 is: PV = $100 [Annuity factor
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CORPORATE FINANCE 307 LITERATURE REVIEW Student Name / ID: Chay Yu Xi 15907811 Jacqueline Teo Hui Yun 15805054 Ting Heng Huat 14973837 Tutor: Leo Kee Chye Tutorial Day / Time: Monday / 2pm Table of Contents Abstract The Tech Bubble Introduction Lowering of Interest Rates Adjustable Rate Mortgage Securitization Mortgage Backed Securities Collateralized Debt Obligation Credit Default Swap Government Reaction and Policies Emergency TARP Repercussions
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Corporate Finance – Chapter 2 – Long Quiz 1 1) Marvelous Entertainment Group‚ Inc. had net income of $32.7 million in 2005. The firm paid no dividends. If there were no further changes to the stockholders ’ equity accounts‚ then _____ by $32.7 million. [ ] common stock must have increased √ [ ] retained earnings must have increased [ ] total stockholders ’ equity must have decreased [ ] capital surplus must have decreased [ ] the market value of the firm ’s stock must have
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* PV(CF) = CF/(1+r)t AKA PV = FV/(1+r)t * NPV = PV(CFs) – Investment = -C0 +C1/(1+r)+C2/(1+r)2+C3/(1+r)3+… = ∑(Expected CFt)/(1+r)t – Investment * Perpetuity – pays a fixed amount C per period forever * P(C‚r) = C/r requires cash flow to begin NEXT period. If begin now‚ then PV = C + C/r * Annuity – fixed stream of cash flows that has a final period t * A(C‚r‚t) = C/r [1-1/(1+r)t] * Growing Perpetuity – G(C‚r‚g) = C/(r-g) C is initial cash flow‚ r is discount rate
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Chapter 025 Mergers and Acquisitions Multiple Choice Questions 1. The complete absorption of one company by another‚ wherein the acquiring firm retains its identity and the acquired firm ceases to exist as a separate entity‚ is called a: A. merger. b. consolidation. c. tender offer. d. spinoff. e. divestiture. SECTION: 25.1 TOPIC: MERGER TYPE: DEFINITIONS 2. A merger in which an entirely new firm is created and both the acquired and acquiring firms cease to exist is called a: a
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MAF302 Corporate Finance Study Guide Important Instruction This study guide provides you of an overview for each of the topic taught in this unit. These overviews however are not sufficient to learn all the materials in each of the topic. I therefore would suggest you to follow the materials in lecture notes and workshops. It is also essential to read and consult the corresponding text book chapters to develop your concept and knowledge in this unit. You will also find some references
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Question 1 (1 mark) The methods that a firm can use to evaluate a potential investment: 1) ‘Discounting’ Methods: Net Present Value (NPV): the present value of the future after-tax cash flow minus the investment outlay made initially. The decision rule for the NPV as follows: invest if NPV> 0‚ do not invest if NPV< 0 Internal Rate of Return (IRR): calculates the interest rate that equates the present value of the future after-tax cash flows equal that investment outlay;
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1. Calculate TRUST’s company after-tax WACC. The risk-free rate was 4.21%‚ the market risk premium was 6% and the company tax rate was 30%. The WACC should be rounded to four decimal places. After-tax WACC = rD (1-Tc) D/V + rE E/V rE = rf + βequity(rm – rf) rE = 0.0421 + 0.81(0.06) rE = 0.0907 E = number of outstanding shares x current share price E = 60 million x $3.43 E = $205.8 million D = $44 million bank loans + $1.2 million short-term hire purchase commitments D = $45.2 million
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AFIN858 Financial Management and Policy Week 1 S1 2014 “INTRODUCTION TO CORPORATE FINANCE” “Where is This Slide From”? • Most of the slides we use in this unit are provided by the Publisher of the required text “…as down-loaded from Connect…” • Sometimes we modify slides by adding or removing content. Other times we use slides from other sources. Occasionally we ‘make’ slides. • Note that lecture slides are not numbered sequentially. • Slides are identified in the lower RHS corner
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