Build a Model Answer
Here are the balance sheets as given in the problem:
Cumberland Industries December 31 Balance Sheets
(in thousands of dollars)
2004
2003
Assets
Cash and cash equivalents
Short-term investments
Accounts Receivable
Inventories
Total cu
Chapter 9. Valuing Stocks
Data Case
A new analyst for a large brokerage firm, you are anxious to demonstrate the skills you learned
in your MBA program and prove that you are worth your attractive salary. Your first assignment
is to analyze the stock of t
Problems
Problem 14-5
Problem 14-9
Problem 14-20
Problem 14-5
Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of $5000 on which it pays interest of 10% each year. Both companies have
identical projects that generate free cash flows
The data given is
Equipment Cost
Useful life
Salvage Value of Equipment
SuperTread price/unit - OEM market (year 1)
SuperTread price/unit - Replacement market (year 1)
SuperTread variable cost/unit (year 1)
Marketing and Gen. Admin costs (year 1)
Annual i
Chapter 6: Goodweek Tires, Inc.
Input area:
Research and development
Test marketing cost
Initial equipment cost
Equipment salvage value
Year 1 depreciation
Year 2 depreciation
Year 3 depreciation
Year 4 depreciation
$10,000,000
$5,000,000
$140,000,000
$54
Chapter 7: Bunyan Lumber, LLC
Input area:
Total acreage
Years since original planting
1P pond value
2P pond value
3P pond value
Cash flow/acre from thinning
Years from today for harvest
to begin
20
25
30
35
5,000
20
$660
$630
$620
$1,000
Harvest (MBF)
per
CASE STUDY ON GOODWEEK TIRES, INC.
1.0 INTRODUCTION
Capital budgeting is the process of identification of opportunities, estimation of cash flow to
be generated by the project, evaluating and selecting from among the alternative courses of
actions and imp
Problems
Problem 4-9
Problem 4-10
Problem 4-11
Problem 4-12
Problem 4-19
Problem 4-20
Problem 4-23
Problem 4-24
Problem 4-25
Problem 4-27
Problem 4-29
Problem 4-30
Problem 4-31
Problem 4-38
Problem 4-39
Problem 4-9
You have just received a windfall from a
Problems
Problem 9-18
Problem 9-20
Problem 9-21
Problem 9-23
Problem 9-24
Problem 9-25
Problem 9-26
Table 9-1
Problem 9-18
Heavy Metal Corporation is expected to generate the following free cash flows over the next
five years:
Year
FCF ($ million)
1
53
2
CorporateFinance:TheCore(Berk/DeMarzo)
Chapter5-InterestRates
5.1InterestRateQuotesandAdjustments
2)
Whichof thefollowingequationsisincorrect?
A)
1=APR
k 1 + EAR B)
Equivalentn-
PeriodDiscountRate=(1+r)n-1
C)
1+EAR=
k
APR
1 + k
D)
InterestRate
per
Comp
This document includes the solutions for questions related to the material covered in class
for Chapter 14. Thus, you are not required to return this last problem set either.
During the last week of classes we will go over questions on the final exam.
Ple
Chapter 5
Problems 1-28
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
NOTE: Some functions used in these spreadsheets may require that
the "Analysis ToolPak" or "Solver Add-in" be installed in Excel.
To
Chapter 7
Question 22
Input area:
Gold left in mine (ounces)
Ounces mined per year
Required return
Opening costs
Contract price today
Probability of price increase
Price increase
Probability of price decrease
Price decrease
60,000
7,500
12%
$14,000,000
$4
Chapter 8
Question 28
Input area:
Annual fee
Current customer base
Increase in annual fee
Increase in membership
Annual expenses
Increase in expenses
Cost of boat in 5 years
Years for withdrawals
Return earned
$500
500
6%
3%
$75,000
2%
$500,000
25
9%
Outp
Chapter 9
Question 10
Input area:
Dividend paid
Dividend growth rate
Initial required return
Second required return
Final required return
Initial # of years
Second # of years
$2.75
6.0%
16%
14%
11%
3
3
Output area:
Present value at beginning of final peri
Build a Model
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
Alternative to section e
NPV
NPV
Proj A
Proj b
-375
-575
-265
168
-156
148
-69
131
366
116
324
10
Chapter 26
Question 4
Input Area:
Increase
Decrease
No change
I
D
N
Output Area:
a.
b.
c.
d.
e.
f.
Cash Cycle
I
I
D
N
N
I
Operating Cycle
I
N
D
N
N
I
Chapter 26
Question 8
Input Area:
Purchases (% of next quarter's
forecast sales)
Payables period
Wages, t
Chapter 9
Question 10
Input area:
Current dividend
Growth rate in dividends
Required return for first 3 years
Required return for next 3 years
Required return thereafter
$2.75
6.0%
16.0%
14.0%
11.0%
Output area:
Price of stock in Year 6
Price of stock in
Inflation and Nominal Returns
Real Rate - r
2.50%
Inflation Rate - h
4.70%
Rate on the treasury bill - R
= [(1 + r) x (1 + h)] - 1
R=
7.317%
Interest Rate Risk
Laurel, Inc.
Coupon rate
Yield to maturity
Settlement date
Maturity date
Face Value
# of coupon
FIN 610 Homework
Session 2
4-8
4-12
4-32
PV = $150,000
Pmt = $13,000
Discount Rate = ?
At 8.67% discount rate, Barrett Pharmaceuticals will be indifferent about accepting or rejecting
the project
5-4
At 0% discount rate, discounted payback period is a lit