ISSAM ISMAIL
GAAP CASE
Black Gold Oil Production Company, one of the U.S company that engaged in the production
and marketing of crude oil and natural gas products. BGs financial statements shows a good
performance for the year ended 2014. The company rep

12/7/2012
Chapter:
Problem:
4
35
a. Find the FV of $1,000 invested to earn 10% annually 5 years from now. Answer this question
by using a math formula and also by using the Excel function wizard.
Inputs:
Formula:
Wizard (FV):
PV =
I/YR =
N =
FV = PV(1+I)^

12/7/2012
Chapter:
Problem:
10
23
Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash
flows are as follows:
Time
0
1
2
3
4
5
6
7
Expected Net Cash Flows
Project A Project B
($375)
($575)
($300)
$190
($200)

12/7/2012
Chapter:
Problem:
11
18
Webmasters.com has developed a powerful new server that would be used for corporations Internet activities. It
would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would
r

Issam Ismail
TAX CASE
December 2015, Adam Ismail, a chief financial officer has been working for one of the biggest
firm in the U.S. for almost 15 years. His current salary in the workplace is $300,000 a year which
is above the average annual salary of CF

Assets
Rate of return
earning before tax
Tax rate
rsu
rd
$10,000,000
16%
$1,600,000
0%
11%
6%
a.
Vu=VL=
$14,545,454.55
b.
wd=
At D=0
WACC=rsL=
At d=$6 million
wd=
S=
rsL
WACC=
At d=$10 million
wd=
S=
rsL=
WACC
1.Leverage increases frm value because the co

A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
B
Chapter:
Problem:
C
D
E
F
G
7
22
Hamilton Landscaping's dividend growth rate is expected to be 30% in the next year, drop to 15% from Year 1 to
Year 2, and drop to a constant 5% for Year 2 and all

Chapter:
Problem:
5
24
A 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040.
The bond sells for $1,100. (Assume that the bond has just been issued.)
Basic Input Data:
Years to maturity:
Periods

problem (6-9)
sell one CS with b equal to 0.8 for 5,000
portfolio beta befor the selling is 1.2
purchase new stock with beta equal 1.6
a portfolio beta is the weighted avarege of the betas of the stocks in the portfoilo
so wb1+wb2+wb3+wb14 equal to
after

Chapter:
Problem:
7
23
Selected data for the Derby Corporation are shown below. Use the data to answer the following questions.
INPUTS (In millions)
Year
Current
0
Free cash flow
Marketable Securities
Notes payable
Long-term bonds
Preferred stock
WACC
Num

Chapter:
Problem:
21
14
Kasperov Corporation has an unlevered cost of equity of 12% and is taxed at a 40% rate. The 4-year forecasts of
free cash flow and interest expenses are shown below. Free cash flow and interest expenses are expected to grow
at a 5%

g
8%
n
10 years
D0
$2.60
Net income in 2013
$9.80
expecting earnings 2014
invest in 2014
Target debt ratio
$12.60
$7.30
35%
a. 1)
D1=
2.808 million
2) in 2013 the payout ratio was
0.265306
then in 2014 it expected to distribute
$3.34 million
3) D1=
$7.855

Problem 9-11
EPS (Current)
EPS (for 5 years)
Dividends
stock price
D.
a.
$6.50
$4.42
40%
$36
2.6
$2.08 0.470588
Chaper 9 no imporant
let us assume that EPS old is the present value and when discounted it to the growth rate for 5
Old EPS=Current EPS/(1+g)^