Chapter 8 Notes
Portfolio - A collection or group of assets.
Risk - A measure of the uncertainty
surrounding the return that an
investment will earn or, more
formally, the variability of
returns associated with a given
asset.
Total rate of return - The to
Week 8 Chapter 10 Notes
capital budgeting - The process of evaluating and selecting long-term investments that are consistent with
the
firms goal of maximizing owners wealth.
capital expenditure - An outlay of funds by the firm that is expected to produce
Chapter 9 Notes
cost of capital - Represents the firms cost of
financing and is the
minimum rate of return that
a project must earn to
increase firm value.
Example 9.1 (411)
A firm is currently considering two investment opportunities. Two financial analy
1.The financial leverage =
net profits before tax
net profits before tax
Therefore financial leverage of the firm =
2. Debt ratio =
total liabilities
total assets
3,000,000
2,000,000
=1.5
total liabilities do not contain shareholders equity and retained
e
Future value calculation Without referring to the preprogrammed function on your
financial calculator, use the basic formula for future value along with the given interest
rate, r, and the number of periods, n, to calculate the future value of $1 in
each
On December 31, 2015, Cathy Chen, a self-employed
certified public accountant (CPA), completed her first full year in business. During
the year, she billed $360,000 for her accounting services. She had two employees, a
bookkeeper and a clerical assistant.
Classifying inflows and outflows of cash Classify each of the following items as an
inflow (I) or an outflow (O) of cash, or as neither (N).
Item
Cash
Accounts Payable
Notes Payable
Long-term debt
Inventory
Fixed assets
Change ($) (I), (O), (N)
+100
O
-10
Running head: Nike Inc
1
Nike, Inc
Grand Canyon University
May 15, 2017
2
Running head: Nike Inc
Thesis
There are many different athletic gear companies globally but Nike continually
outperforms them in every sector. With Nike's technical and artistic inn
Template for
Chapter 3, Problem 25
INCOME STATEMENT
Sales
COGS
Gross Pft
Sales Exp
G&A
Lease Exp
EBITDA
DA
EBIT
Int Exp
EBT
tax rate
Taxes
EAT
pfd shs out
pfd div/sh
pfd div pd
Earnings CS
CS shs out
EPS common
RATIO ANALYSIS
Liquidity
Curr Ratio
Quick Ra
Chapter 4, Problem P4-9
Grenoble Enterprises
March
Sales
Cash sales
relevant
20%
60%
lag 1 mo
20%
lag 2 mo
2,000
other income $
Total Cash In
$
50,000 $
$ 10,000 $
$ 2,000 $
$
400 $
$
80 $
$ 12,480 $
April
May
60,000 $
12,000
42,000
16,000
2,000
72,000
$
Chapter 1-example from slide 26
Benefits of new
Less: ben of old
Marg benefit
$
$
$
10,000
3,000
7,000
Costs of new
Proceeds from old
Marg costs
Net bene (costs)
$
$
$
$
8,000
2,000
6,000
1,000
Chapter 1-Example from Slide 31
Item
Net pay received
Interes
Template for
Chapter 3, Problem 25
INCOME STATEMENT
Sales
COGS
Gross Pft
Sales Exp
G&A
Lease Exp
EBITDA
DA
EBIT
Int Exp
EBT
tax rate
Taxes
EAT
pfd shs out
pfd div/sh
pfd div pd
Earnings CS
CS shs out
EPS common
RATIO ANALYSIS
Liquidity
Curr Ratio
Quick Ra
P4-5
Classifying inflows and outflows of cash Classify each of the following items as an
inflow (I) or an outflow (O) of cash, or as neither (N).
Item
Cash
Accounts Payable
Notes payable
Long-term debt
Inventory
Fixed assets
Change $ I/O/N
100 O
-1,000 O
Chapter 1 P-2
Accrual income versus cash flow for a period Thomas Book Sales, Inc., supplies
textbooks to college and university bookstores.
The books are shipped with a proviso
that they must be paid for within 30 days but can be returned for a full refu
Problem 8-9
Rate of return,
Average Return Ratio,
standard deviation,
and coefficient of variation
Year
Solution C)
Beginning
End
Return
2012 $
14.36 $
21.55 $
7.19
2013 $
21.55 $
64.78 $
43.23
2014 $
64.78 $
72.38 $
7.60
2015 $
72.38 $
91.80 $
19.42
B) A
Problem 10-4
Bill Williams Flows and Payback Periods
Project A
Project B
Project A
Project B
Initial investment
$ (9,000.00) $ (9,000.00)
# $
(9,000.00)
Year
Operating cash inflows
Cummulative cash flows
1 $
2,200 $
1,500 $
(6,800) $
(7,500.00)
2 $
2,500
Payback Period: The payback period is defined as the total amount of time required to recover the original investment of a pr
When unequal cash flows are there, the payback period can be computed using the following equation:
Payback Period=
(Number of Ye
(A) Calculate nominal rate of interest:
The nominal rate of interest depicts the actual rate of interest paid.
The inflation factor and risk premium are not adjusted in the case of nominal rate of interest.
The nominal rate of interest can be expressed as
a) Calulate the rate of return for each year, 2009 through 2012 for "H" Incorporation:
The total rate of return is the total gain or loss experienced on an investment over a given period. Total rate of return or expe
return on an investment over a given p
Slater Lam
a) Annual dollar dividend:
Annual dollar dividend is the amount of dividend calculated
as annual dividend multiplied by the par value of share.
Par value is $80
Annual dividend 11%
Annual dollar dividend is calculated by:
Annual dollar dividend
Classification of items in cash inflows or outflows or neither:
Items
Cash
Accounts Payable
Notes Payable
Long Term Debt
Inventory
Fixed Assets
Accounts Recievable
Net Profit
Depreciation
Repurchase of Stock
Cash Dividends
Sale of Stock
Change ($)
100
-1,