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CIS3380 Fall, 2011 (Jetton)
Acme Products Shipping Plan
Step 1: Type in the solver specifications (using excel cell addresses) for the optimization problem into the table below FIRST!
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Chapter 12
Cost of Capital Basics
Cost of Equity
The cost to a firm for capital funding =
the return to the providers of those funds
The cost of equity is the return required by
equity investors given the risk of the
cash flows from the firm
Three majo
Chapter 10
Dollar & Percent Returns
Total dollar return = the return on an
investment measured in dollars
$ Return = Dividends + Capital Gains
Capital Gains = Price received Price paid
Total percent return = the return on an
investment measured as a p
Question 25 in Chapter 9
Preliminary detail: change the depreciation assumption to straight-line over 8 years to $0
instead of MACRS for seven.
What is the question and what do you need to know to answer it? To get the NPV and IRR you
need the discount ra
Chapter 9
10/3/2011
Incremental Cash Flows
The incremental cash flows for project evaluation
consist of any and all changes in the firms future
cash flows that are a direct consequence of taking
the project.
Incremental cash flows are what are discounte
1
Net Present Value
2
Net Present Value
Example
Q: Suppose we can invest $50 today & receive $60
later today. What is our increase in value?
Net Present Value - Present value of cash
flows minus initial investments.
A: Profit = - $50 + $60
= $10
Opportuni
Chapter 7
Corporate Equity Holdings
Stock Markets
Stock exchanges provide liquidity: the
ability for owners of common stock to
convert their shares into cash at any time
This liquidity, allowing buyers and sellers
the means to transact with each other,
Day 06: Chapter 6
We hear a lot about the stock market in
the popular press, but not much about the
bond market
It may surprise you to learn that the U.S.
bond market is over twice the size of the
U.S. stock market
Total outstanding debt in 2007: $29.2
Annuities and the Financial
Calculator
In the previous chapter, the level
payment button PMT was always set to
zero
Now, for annuities, we can use the
PMT key to input the annuity payment
Example: suppose that $100 deposits
are made at the end of each yea
Basic Definitions
Present Value
The current value of future cash flows
discounted at the appropriate discount rate
Value at t=0 on a time line
Future Value
(PV)
(FV)
The amount an investment is worth after one
or more periods.
Later money on a time line
4
Sorry.
You cannot use the book for this
section!
Textbook
Financial Reporting
Cash flow from
assets
Operating cash
flow
Capital spending
No comparable
term
Includes changes
in net working
capital and interest
expenses are
included with other
expenses.
Cas
Marginal and Average
Temperature
Grades
Sports
Did you know that
over the past 25
years that no MLB
batter who is hitting
.299 on the last
day of the season
has walked?
I see randomness.
All the time. Its
e
Day 04: Chapter 02 verywhere.
1
Taxes
Marginal
A
The Balance Sheet Introduction
Dated at a particular time
Assets: economic resources, positive economic value
Liabilities: obligation, impending settlement of a
previous event
Current and Fixed
Current and Long-Term
Equity: residual claims to owners
Treas
Money
Commodity Money
Representative
Money
Currency
Piece of
Eight
Fiat Money
Medium of Exchange
Store of Value
Unit of
Day 02: Chapter 01
1
Financial Markets
Primary and
Secondary takes
A transaction
Dealer and Auction
The purpose of an
auction market is
Corporate Finance
Capital Budgeting: The process of
planning and managing a firms long-term
investments.
Capital Structure: The mixture of debt and
equity maintained by a firm.
Working Capital Management: A firms
short-term assets and liabilities.
Day 01:
Quick Quiz 3 Solution
Quick Quiz: Part 2
Investment choices:
What is the relationship between present
value and future value?
Suppose you need $15,000 in 3 years. If you
can earn 6% annually, how much do you
need to invest today?
If you could invest th
Common Size Statements
Balance Sheet
Divide everything by the
Total Assets
This should be the largest
number on the page
I express everything in
percentage terms
Income Statement
Divide everything by the
Total Revenue
This should be the largest
numbe
Student Information
First Name
Last Name
Student ID
Textbook Questions
Questions
Question 4 - What is your best estimate of the company's
1 cost of equity capital using the geometric growth rate?
2 Question 10, What is the company's WACC?
Question 12, b -
Student Information
First Name
Last Name
Student ID
Textbook Questions
Questions
1 Question 2 - What is the expected return on the portfolio?
2 Question 6 - Calculate the expected return.
Question 10, a - What is the expected return of the
3
portfolio?
4
Student Information
First Name
Last Name
Student ID
Textbook Questions
Questions
Question 2 - What is the amount to use as the annual sales
1 fugure when evaluating this project? In other words, what is
the incremental sales revenue?
2 Question 4 - Calcul
Student Information
First Name
Last Name
Student ID
Textbook Questions
Questions
Question 2 - What is the project payback period if the initial
1 cost is$3,400?
Question 8 - What is the IRR of the following set of cash
2 flows?
Question 10, b - If the req
Student Information
First Name
Last Name
Student ID
Textbook Questions
Questions
1 Question 2 - What is the required return?
Question 4 - How much will you pay for the company's stock
2 today?
3 Question 8 - What is the required return?
4 Question 14 - Ho
Student Information
First Name
Last Name
Student ID
141512
Textbook Questions
Questions
Number
Question 8 - What must the coupon
1 rate be on the bonds?
Question 10 - What rate would you
2 expect to see on a Treasury bill?
Question 26 - What is the quoted
Student Information
First Name
Last Name
Student ID
1234
Textbook Questions
Questions
Number
Question 10 - How much will you pay
1 for the policy?
Question 14 - What is the effective
2 annual rate of First United Bank's
business loan?
Question 20 - What w
Student Information
First Name
Last Name
Student ID
78900
Textbook Questions
Questions
Number
Question 10 - What is the present
1 value of this liability?
Question 12 - How much will your
2 collection be worth when you retire in
2062?
Question 16 - What r
Student Information
First Name
Last Name
Student ID
12345678
Textbook Questions
Questions
Number
Question 22 - What was the total
1 asset turnover?
Question 24 - What are earnings per
2 share (EPS)?
Question 34 - What is the current
3 ratio?
Question 36 -
Student Information
First Name
Last Name
Student ID, just the number!
12345678
Textbook Questions
Questions
Number
Question 2 - What is the net income
1 for this firm?
Question 18,a - What is the tax bill for
2 Corporation Income?
Question 18,b - How much
Student Information
First Name
Last Name
Student ID
12345678
Textbook Questions
Questions
Number
1 What page does section 1.1 start on?
On page 14, what was the last trade
2 for Sirius?
On page 14, what is the market
3 capitalization for Sirius?
What page
2010
2010
Revenue
1386
Net Income
Cash Costs
1109
Depreciation
119
Depreciation
change in AP
10
EBIT
change in AR
2
Interest
change in Inv
-1
EBT
Operations (OCF)
Taxes
Net Income
Dividends
Additions to
RE
40
Capital Purchases
ch CS
ch Debt
Financing (FCF