FIN Final Questions

FIN Final Questions - Finance 5013 Final Prototype Answers...

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Finance 5013 Final Prototype Answers Laura Almon 03/14/2011 7 1.) NPV, IRR, and Year-End Free Cash Flow Year 0 1 2 3 4 Dep./Yr. 0.2 0.5 0.15 0.1 Investment -500000 Inventory -50000 AP 10000 Sales 600000 600000 600000 600000 Cost -400000 -400000 -400000 -400000 Dep -100000 -250000 -75000 -50000 EBT 100000 -50000 125000 150000 Tax 0.4 -40000 0 -50000 -60000 NI 60000 -50000 75000 90000 After Tax Salvage 50000 40000 NWC 40000 Dep 100000 250000 75000 50000 CF -540000 160000 200000 150000 220000 WACC 0.1 NPV $33,703.98 are given numbers IRR 12.75% 2.) Lowest Acceptable Bid, NPV, and IRR Year 0 1 2 Straight-Line Depreciation: OCF -1400 419.08 958.47 NWC 200 Salvage 660 How do you get the bid price? Cash Flow -1400 419.08 1818.47 IRR #REF! NPV #REF! Outlay -1,200.00 NWC -200.00 Units Sold 30 50 Bid Revenue Var. Cost/Unit -60 -60 Var. Cost Total (30 & 50 x 60) -1800 -3000 Fixed Costs -900 -900 Profits Dep -600 -600 EBT Tax 0.34 NI OCF IRR 0.3 Cost of Capital 0.15 Outlay of $1200/2 years = $600/year
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Finance 5013 Final Prototype Answers Laura Almon 03/14/2011 7 Weights Stock S $4,500 0.60 Stock T $3,000 0.40 State of Economy Boom 10% 12% 4% Normal 65% 9% 6% Recession 25% 2% 9% E (r) Boom = 0.09 E (r) Normal = 0.08 E (r) Recession = 0.05 E (r) Portfolio = 0.07 Var Portfolio = 0 Standard Deviation = 0.01 1.39% (took square root) 4.) Estimated Net Profit Forecast State Bad Good Probability 60% 40% Profit -3000000 5000000
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FIN Final Questions - Finance 5013 Final Prototype Answers...

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