Chapter 18
Question 4
Input Area:
All-equity beta
Target debt-equity
Market expected return
Risk-free rate
Current date
Bond maturity date
Coupon rate
Bond price
Coupons per year
Tax rate
$
1.10
0.40
Input Area:
13-8:
Rwacc = .726 x 17% + .274 x 10% x .65 = 14.12%
Debt-to-equity ratio
Cost of equity
Cost of debt
Tax rate
45%
17%
10%
35%
Output Area:
WACC
14.12%
13-12:
a.
b.
Input Area:
Debt-to-equ
17-2:
Input Area:
EBIT (40 hour week)
EBIT (50 hour week)
Current company value
New capital
Interest rate on debt
$400,000
$500,000
$2,500,000
$1,200,000
8%
Output Area:
a.
Debt issue:
40 hour week
50
The purchase method of accounting is one of the two primary methods that potentials
mergers and acquisitions are valued. The purchase method of accounting uses the sum of
the assets and liabilities th
In fulfillment of a requirement for FIN 620, Long-term Financial Management.
University of Maryland.
When will the project break-even on a simple cash basis?
Initial Cost - $1million
Reduce costs by $
As per the Walters Approach, in the long run share price reflects only the present value of
expected dividends. Market price is dependent upon two factors firstly the quantum of
dividend and secondly
Submitted to:
In fulfillment of a requirement for FIN 620, Long-term Financial Management.
University of Maryland.
Required Rate Of Return:
The required rate of return is the minimum annual percentage
Number of shares repurchased
$ 5,000,000/25 = 200,000 shares
Number of Shares will be outstanding after the stock repurchase is completed
= 15,000,000 200,000 = 14,800,000 shares
Pros of repurchases1.
1. Compute the P/E ratio and market capitalization for everyone.
2. Compute the MVA and EVA for everyone.
3. Compare and contrast the ratios; what do the ratios convey to the investing public?
The pri
Step 2
Submitted to:
In fulfillment of a requirement for FIN 620, Long-term Financial Management.
University of Maryland.
Calculate WACC
WACC is the firms overall cost of capital. It helps by comparin
In fulfillment of a requirement for FIN 620, Long-term Financial Management.
University of Maryland.
=After tax cash flow purchasing After tax cash flow leasing
=(-$10,000*(1-.30) ($70,650/9)*(.30) =
Submitted to:
In fulfillment of a requirement for FIN 620, Long-term Financial Management.
University of Maryland.
Compute Using Scenario 1:
Scenario #1: Use 10% cost of capital in computations and co
16-4:
Input Area:
Plan I:
Shares outstanding
a.
b.
240,000
Plan II:
Shares outstanding
Debt outstanding
Interest rate
160,000
$3,100,000
10%
EBIT
EBIT
Plan I
Plan II
EBIT
$750,000.00 $750,000.00
Inter
15-8:
Input area:
Call price
One year interest rates
$1,250
11.00%
Face value: $1,000
P= .60 * $1,250 + .40 * $1,000 = $1,150
P= 1,000 + 1,000/0.13 = $8,692.30
Probability of rate in one year
Rate in
Chapter 20
Question 14
Input Area:
Stock price
Shares outstanding
Amount raised
$
$
a. Old shares to new shares
b. Old shares to new shares
27
1,000,000
2,000,000
2
4
Output Area:
a. New shares
Price
Chapter 10
Problems 4, 6, 10, 18 ,19
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
Chapter 13
Problems 2, 5, 7, 11, 14
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
t
Chapter 15
Problems 6, 9
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 "Analysi
Chapter 16
Problems 2, 6, 12, 16
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
Chapter 17
Problems 1, 2, 3, 6, 10
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
th
Michael L. Robinson
Dr. Michael G. McMillan
FIN 620 Midterm Exam
Due: 3/4/2012
Answer sheet
1. Average return = 6.59%; Variance = 3.35%
2. Discount rate = .1564 or 15.64%
3. Asset beta = .48
4. Expect
Shares Outstanding
Par Value
Sell price
1,000
$0.10
$10.00
Capital Surplus (CS)= Shares outstanding x (Sell Price - Par Value)
(CS) = 1,000 x ($10.00 - $0.10)
Capital Surplus = $9,900.00
Returns:
0.08
UNIVERSITY OF MARYLAND UNIVERSITY COLLEGE
FINC 620 LONG TERM FINANCIAL MANAGEMENT
Task 3
To illustrate and further support our strategic financial planning systems we
need to show the CFO and manageme