c. After repaying the debt, what will Baruk’s share price be? 81 − 36 = $4.5 / share 10 a. ©2011 Pearson Education, Inc. Publishing as Prentice Hall Berk/DeMarzo • Corporate Finance, Second Edition 203 b. c. 16-3. 36 = 8 million shares 4.5 81 = $4.5 / share 18 When a firm defaults on its debt, debt holders
The carrying value is $1,100 whci is greater than the claue in use which is $900. The fair market value less costs to sell is $800. The impairment is found by subtracting the carrying amount by the value in use which comes out to $200,000, which should be recognized as an impairment under the IFRS. 2. In GAAP is mandatory if a building’s book value is gretater than the undiscounted sum of assets future cash flow.
August 14, 2011 Week 6 Project 2 International Reporting Case A.) 1.) Return on Assets $58,333 (net income) / $1,404,726 (total assets) = 4.15% 2.) Return on stockholder’s equity $58,333 (net income) / $176,413 (stockholder’s equity) = 33.07% 3.) Debt to assets ratio $1,202,134 (total debt) / $1,404,726 (total assets) = 87.4% B.)
Overhead decreased as a result of outsourcing but not as substantially as direct costs, thus causing the overhead allocation rate to increase significantly between 1988 and 1989. Question 2: Consider two products in the same product line: Expected Selling Price $62 $54 Standard Material Cost 16 27 Standard Labor Cost 6 3 Calculate the expected gross margins as a percentage of selling price on each product based on the 1988 and 1990 model year budgets, assuming selling price and material and labor cost do not change from standard. Product 1 1988: Gross margin = 62 - 16 - 6 – (6 * 434%) = 13.96 13.96 / 62 = 22.5% Product 2 1988: Gross margin = 54 - 27 - 3 – (3 * 434%) = 10.98 10.98 / 54 = 20.3% Product 1 1990: Gross margin = 62 - 16 - 6 – (6 * 563%) = 6.22 6.22 / 62 = 10.0% Product 2 1990: Gross margin = 54 - 27 - 3 – (3 * 563%)
Analysis-Beta Corporation 1. Sources of cash-Amount received from customers, Issuance of common stock(1991) Uses of cash-Amount paid to suppliers, Investments in capital(1991) 2. Difference between net income and cash-Difference between account receivables and payables ,high value of depreciation 3. Cash flow from operations- | 1991 | 1990 | 1989 | Cash flow from operations | 3919 | 7000 | 3670 | Capital expenditures | 6031 | 4600 | 3650 | | No | Yes | Yes | 4. No dividend payments | 1991 | 1990 | 1989 | Cash flow from operations | 3919 | 7000 | 3670 | Capital expenditures | 6031 | 4600 | 3650 | | No | Yes | Yes | 5.
Assume that the bond is a zero coupon bond (i.e., the only payment is the one at maturity) and that company Z has no other debt outstanding. Other relevant parameters are as follows: • • • • • Company Z current asset value: €100 million Total bond issue face value: €80 million (i.e., leverage of 80%) Risk free interest rate: 2% Standard deviation of return on company Z assets: 30% Bond maturity date: one year from
Debt Breakpoint Debt Breakpoint= $ amount of senior Debt available% common Long term debt in capital structure+D&A Expense $ amount of senior debt=$41,000,000 in this case Note that long term debt in capital structure is wLtd in wstd+wLtd+wp+we=1. In our example, Debt Breakpoint= 41,000,000.27+8,249,000=160,100,852 3. Determining the capital budget (Please note that the WACC below will differ slightly from those done in class but the results are the same as far as the budget goes) Project | IRR | Value of Project (mil $) | Cumulative Value (mil $) | Breakpoint(mil $) | WACC % | A | 18.3% | $3 | $3 | | 11.49% | B | 17.6% | $3 | Choose A since A and B are mutually exclusive | GP 1 | 17.3% | $40 | $43 | | 11.49% | FL | 15.7% | $65 | $108 | $69 | 12.38% | GP2 | 14.0% | $50 | $158 | | 12.38% | LA | 13.5% | $32 | $190 | $160 | 12.75% | TX | 12.5% | $47 | $237 | | 12.75% | GP3 | 11.5% | $20 | $257 | | 12.75% | Note that TX and GP3 have IRR’s less than the WACC of 12.75% and therefore should not be accepted as project in the capital budget. Note that A and B are mutually exclusive so we choose the one with the higher IRR. Choose A, GP1, FL, GP2 and LA as part of the Capital Budget since all have IRRs greater than 12.75%.
Finance MiniCase: Planning for Growth at S&S Air 1. Calculate the internal growth rate and sustainable growth rate for S&S Air. Internal Growth Rate: ROA x b / 1 – ROA x b ROA = Net Income/ Total Assets = 1, 537,452/ 18,308,920 = .084% B= Addition to retained earnings/ net income= 977,452/ 1,537,452 = .635% Internal growth rate= (.635 * .084) / (1- (.635 * .084)) = .564 This number is telling us that S&S Air can expand at a maximum rate of .564% per year without external financing, meaning retained earnings are the only source of financing. Sustainable Growth Rate: ROE x b / 1- ROE x b ROE = Net Income/ Total Equity (roa x em = net income/e) = 1,537,452/ 10,069,920 = .15 SGR= (.635 * .15) / 1- (.635 * .15) = .107 This number
The Governmental Accounting Standards Board (GASB) is the accepted primary standard-setting body for establishing governmental accounting and financial reporting principles. MHMRA has highlighted it financial position in the management’s discussion and the analysis section. First, it mentions about the how the assets have exceeded it liabilities by year end 2009 by 52, 836,370 of their net assets. The amount of the net assets for government wide had increased by 5,289,963 for the fiscal year the yearly adjustments have not been made. The reason for the increase of the funds for MHMRA’s to relate to no unreserved and undesignated fund and expected expenditures.
The plan assigned 95% of the Company’s equity to SFO bondholders and 5% to SFI bondholders. As banks were to be repaid in full, they were deemed to be “unimpaired” and therefore not entitled to vote on the plan. Plan enterprise value had increased from $1.25 billion to approximately $1.4 billion. The Long-Term Incentive Plan would remain in place and dilute debt holders. Daniel Snyder would be reThe facilities consisted of a $150 million in a revolving credit facility, as well as a $680 million term loan.