Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30,
and takes discounts.
a. What is the average amount of accounts payable net of discounts? (Assume that the
$3.65 million of purchases is net of discountsthat is, gross pu
15-1
QBE = F/(P V) = $500,000/($75 - $50) = 20,000.
15-2
If wd = 0.2, then wce = 1 0.2 = 0.8. So D/S = wd/we = 0.2/0.8.
bU = b/[1 + (1-T)(D/S)]
= 1.15/[1 + (1-0.40)(0.2/0.8)] = 1.0.
15-3
If the company had no debt, its required return would be:
rs,U = rRF
ANSWERS 21.1 21.5
25-1 FCF1 = 2.00(1.05) = $2.1 million; g = 5%; b = 1.4; rRF = 5%; RPM = 6%; wd = 30%; T =
40%; rd = 8% Vops = ? P0 = ?
The value of operations is the present value of the cash flows. The cash flows are disdcounted at
WACC to get the pres
12-1
Baxter Video Productss sales are expected
to increase by 20% from $5 million in
2010 to $6 million in 2011. Its assets totaled
$3 million at the end of 2010. Baxter
is already at full capacity, so its assets must
grow at the same rate as projected sa
The Raattama Corporation had sales of $3.5 million last year, and it earned a 5% return
(after taxes) on sales. Recently, the company has fallen behind in its accounts payable.
Although its terms of purchase are net 30 days, its accounts payable represent
India's Current Account
Use the following India balance of payments data from the IMF (all items are for the current account) to answer questions 10 through 14.
4.10
4.11
4.12
4.13
4.14
What is India's balance on goods?
What is India's balance on services
What is the nominal and effective cost of
trade credit under the credit terms of3/15,
net 30?
16-1
Williams & Sons last year reported sales of
$10 million and an inventory turnover ratio
of 2. The company is now adopting a new
inventory system. If the new
14-1
Axel Telecommunications has a target capital structure that consists of70% debt and
30% equity. The company anticipates that its capital budget for the upcoming year
will be $3 million. If Axel reports net income of $2 million and follows a residual
Problem 7.1 Starbucks in Croatia
Starbucks opened its first store in Zagreb, Croatia in October 2010. The price of a tall vanilla latte
in Zagreb is 25.70kn. In New York City, the price of a tall vanilla latte is $2.65. The exchange
rate bewteen Croatian
(ST-1) the Calgary company is attempting to establish a current assets policy. Fixed
assets are $600,00, and the firm plans to maintain a 50 percent dept-to-assets ration.
Calgary has no operating current liabilities. The interest rate is 10% on all dept.
*13*
12-1 AFN Equation
Baxter Video Product's sales are expected to increase by 20% from 5 million in 2010 to 6 million
in 2011. Its assets totaled $3 million at the end of 2010. Baxter is already at full capacity, so its
assets must grow at the same rate
Problem 6.1 Paris to St. Petersburg
On your post-graduation celebratory trip you are leaving Paris for St. Petersburg,
Russia. You leave Paris with 10,000 euros in your money pouch. Wanting to
exchange all of these for Russian rubles, you obtain the follo
Problem 7.1 Starbucks in Croatia
Starbucks opened its first store in Zagreb, Croatia in October 2010. The price of a tall vanilla latte
in Zagreb is 25.70kn. In New York City, the price of a tall vanilla latte is $2.65. The exchange
rate bewteen Croatian
Macedonia's Balance of Payments
Macedonia. Use the following Macedonia balance of payments data to answer questions 1 through 4. Note that the data presented in the text is insufficient to answer the question
asked.
Assumptions (millions of US dollars)
19
EMC Corporation has never paid a dividend. Its current free cash flow of $400,000 is
expected to grow at a constant rate of 5%. The weighted average cost of capital is WACC
= 12%. Calculate EMCs value of operation.
Value of operations = Vo = PV of expecte
Callie E Bonzo
Kaplan University
Graduate School of Business and Management
GB550-03 - Financial Management: Theory and Practice
Unit 6 Problems
Professor: Dr. Ana Machuca, PhD, CPA, CFE
November 23, 2010
Bonzo
GB550-03
Unit Six Problems
2
Chapter 13 Ques
Problem 21-6
a. Calculate RsL
Risk free rate + (Market risk premium * beta)
Example:
5%
7%
Problem 21-6
Merger Valuation with Change in Capital Structure
Analysis When There Is a Permanent Change in Capital Structure
1.10
12.70%
Calculate RsU:
VolWorld Co
If you want the formulas and any calculations, select the corresponding cell and press F2(Function Key on key board),
It will show all calculations and formulas Automatically
Question:
Hastings Corporation is interested in acquiring Vandell Corporation. V
Schoof Co
Market
Value(in
millions) Percentage
10.00
11.14%
19.78
22.03%
60.00
66.83%
89.78
Short term Debt
Long tern Debt (see below)
Equity
Market Value
Value of Long term Bond would be the PV of the interest of every period and the principal of $1000 a
A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the
companys dividend will grow at a rate of 20% per year for the next 2 years, then at a constant
rate of 7% thereafter. The companys stock has a beta of 1.2, the risk-fr
The Cost of Capital (Chapter 15)
OVU-ADVANCE
Managerial Finance
D.B. Hamm, rev. Jan 2006
Cost of Capital?
When we say a firm has a cost of capital of,
for example, 12%, we are saying:
The firm can only have a positive NPV on a
project if return exceeds 1