PROBLEM 3-1: Clayton Manufacturing Company
Given
EBITDA (Year 1) Growth Rate in EBITDA Initial investment Depreciation (Straight line) over Estimated salvage value Tax rate Cost of capital $200,000 5% $800,000 5 years $35% 12%
Solution
Years a. EBIT
PROBLEM 3-3ab: Bridgeway Pharmaceuticals
Given
Investment cost (today) Project life Depreciation expense Waste disposal cost savings per year Labor cost savings per year Sale of reclaimed waste Required rate of return Tax rate $(400,000) 5 years $80,
PROBLEM 2-5
Given
Initial Investment in software Technician training cost Hourly Rate Tax Rate Discount Rate Additional Investment per year for software upgrades % Reduction in hours of technician time for installation Total hours of installation per
Problem 22
PROBLEM 2-2
Given
Growth rate for years 1-5 EBIT (1) CAPEX for year 0 CAPEX for years 1-5 Depreciation Expense in year 0 Tax rate Debt Retirements for years 1-5 New borrowing for years 1-5 New working capital for years 1-5 Interest rate o
PROBLEM 3-3c: Bridgeway Pharmaceuticals
Given
Investment cost (today) Project life Depreciation expense Waste disposal cost savings per year Labor cost savings per year Sale of reclaimed waste Required rate of return Tax rate Correlation (Year to yea
PROBLEM 8-2 Given
Capital needed Projected EBITDA in year 5 Exit year EBITDA sales multiple in year 5 Interest bearing debt in year 5 Total debt in year 5 Cash in year 5 $500,000 $1,050,000 5 6.00 times $1,000,000 $1,200,000 $200,000
Solution Legend
PROBLEM 10-1
Given
Available gas (MCF) Price of Gas (today) Gas Price Next Year High Low Forward price for next year Development cost per MCF Debt (on the property) Interest rate on debt Debt maturity Asking price for Equity Risk free rate of interes
Meyerson's Bakery Projected Income Statement for Pie Line Sales Variable Costs Fixed Costs Earnings Before Interest and Taxes Interest Expense Earnings Before Taxes Taxes Net Income Additional Data Estimated Pie Sales in Units Price per Pie Variable
PROBLEM 4-1
Given
Liabilities and Owner's Capital Current liabilities Accounts payable Notes payable Other current liabilities` Total current liabilities Long-term debt (8.5% interest paid semi-annually, due in 2015) Total liabilities Owners' capital
PROBLEM 8-3 Given
EBITDA 2005 Added EBITDA Funding need VC's required rate Rate on convertible debt Term EBITDA multiple EBITDA growth rate $4,000,000 1,000,000 5,800,000 25.0% 8.0% 5 years 5 20.0%
Solution Legend
= Value given in problem = Formula
PROBLEM 10-4
Given
Initial investment Total Ore Quantity % Pure Copper/ton Life of project Ore mined each year Cost/ton for processing Tax rate Risk free rate WACC Growth in copper prices Forward Price Curve 2008 2009 2010 2011 2012 $60,000,000 75,00
Sales Cost of Sales Gross Operating Profit Selling, General & Admin. Expense Depreciation & Amortization EBIT Other Income, Net Interest Expense Pre-tax Income Income Taxes Total Net Income Tax Rate
Proctor & Gamble Income Statement For the Years En
FIN 620
Dr. Allen Shin
Session 10 Answers to HW Problems
2. From Question #1, we calculate cash flows from the lessee's viewpoint. Depreciation tax shield = ($3,000,000/4)(.35) = $262,500 Aftertax lease payment = ($895,000)(1 .35) = $581,750 Total
PROBLEM 4-2
Given
Maturity Terms Face value Coupon rate Offering price 5 years Interest only $1,000 12.00% $800
Solution
a. Promised YTM = 18.46%
b. (Note: the discussion of this analysis is found in the Appendix to the chapter) Bond Rating Caa/CCC
Chapter 5
Question 30 Input area: Revenues Initial outlay for new project Outlay next year for new project Perpetual profit level for new project Shares outstanding Required return $110,000,000 $12,000,000 $7,000,000 $10,000,000 20,000,000 15%
Outpu
Chapter 7
Question 6 Input area:
Initial investment Pretax salvage value Cost savings per year Working capital reduction Tax rate *Depreciation straight-line over life
$925,000 $90,000 $360,000 $(125,000) 35% 5
Output area:
Annual depreciation ch
Chapter 10
Question 4 Input area:
Portfolio value Stock X E(R) Stock Y E(R) Portfolio E(R)
$10,000 14.00% 9.00% 12.20%
Output area:
Weight of Stock X Weight of Stock Y Dollar in Stock X Dollars in Stock Y
= = = =
0.6400 0.3600 $6,400.00 $3,600.
Chapter 14
Question 2 Input Area: Common stock par value Shares outstanding Capital surplus Retained earnings New shares issued Issue price Output Area: a. Common stock Total equity b. Capital surplus on sale Comon stock Capital surplus Retained earn
Chapter 27
Question 14 Input Area:
Cash holding Cash needed per month Interest rate Broker fee
$700,000 $360,000 6.5% $500
Output Area:
Total cash $4,320,000 C* $257,801.35 The company should invest $442,198.65 of its current cash holdings in mar
Sales Collections: Cash First Month Second Month Total Collections Purchases Payments: During Month Month After Total Payments Collections Disbursements: Inventory Payments Short-term Interest Other Payments Total Disbursements Beginning Cash Balance
PROBLEM 11-1
Given
Quantity Price (Year 0) P-high P-low Forward price Extraction costs 1000 $20 $25 $15 $20 $17
Solution L
= Value given in problem = Formula/Calculation/An = Qualitative analysis or = Goal Seek or Solver ce = Crystal Ball Input = C
PROBLEM 11-4: Valuation an American Option
Given
Risk-neutral probability Risk free Interest rate Discount factor = exp(Risk free interest rate) Strike (in $ millions) 0.46 5% 0.95 $23.00
Solution
Today
Text Color Legend Value of Beginning Oil Fiel
PROBLEM 12-1
By waiting to develop, the company retains the option to develop the higher NPV project-under certain scenarios, the high-density hotels will provide greater NPV, under other circumstances, low-density hotels will provide higher NPV. Of