Muscarella Inc. has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 210,000 Total CL $ 70,000 Total CA $294,000 Long-term debt 70,000 Net fixed assets 126,000 Common equity $280,000 Total Assets $420,000 Total liab. and equity $420,000 Sales $280,000 Net income $ 21,000 The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current
With this new development, if we assume that the previous 4,796,000 shares of common stock that were originally issued in March of 1993 are now also worth $1 per share, this gives a total of $4,796,000. The total valuation of the company will then be $800,000 + $4,796,000 = $5,596,000. This is the value that we believe to represent the valuation of Neverfail as of November 1994. After round 1 of VC investment: Due to the deal with the Pacific Ridge, Neverfail share prices were going for $1.50 per share The Company was valued at $9 million as of December 1994 according to the case study. Initial value of Pacific ridge investment (December 1995) is: 666,667 * $1.50 + 133,333 * $0.3 = $1,040,000.4 (initial investment, exhibit 7).
Significant influence over Lennon was achieved by this acquisition. Lennon distributed a dividend of $2.50 per share during 2008 and reported net income of $670,000. What was the balance in the Investment in Lennon Co. account found in the financial records of Pacer as of December 31, 2008? A. $2,040,500 B.
Brandywine Income Statement, 2007 Revenue 12,000,000 Expenses: Depreciation 1,500,000 Other Expenses 9,000,000 Total Expenses 10,500,000 Net Income 1,500,000 Total Profit Margin 13% Brandywine Cash Flows Statement, 2007 Cash 12,000,000 Add: Depreciation 1,500,000 Less: Expenses (9,000,000) Net Cash 4,500,000 Supposed the company changed its depreciation calculation procedures (still within GAAP) such that its depreciation expenses doubled. How would this change affect Brandywine’s net income, total profit margin, and cash flow? If Brandywine doubled its depreciation expenses, their expenses would increase and the net income would vanish. As for profit margin it would decrease and the company would not be profitable and the cash flow would increase. For example, Brandywine home care would be as follow: Increase of depreciation Revenue 12,000,000 Expenses: Depreciation 3,000,000 Other Expenses 9,000,000 Total Expenses 12,000,000 Net Income - Total Profit Margin 0% Brandywine Cash Flows Statement, 2007 Cash 12,000,000 Add: Depreciation 3,000,000 Less: Expenses (9,000,000) Net Cash 6,000,000 Explain the difference between cash and accrual accounting.
For business alpha the total current asset calculation is to add all the assets In order to receive the full current assets. For business alpha the full current asset value is 251,000. The stock amount was 242,000 whilst the debt having 6,000 and the cash was 3,000. The current liabilities are something’s that are owned by the business which should be paid back by in less than one year. Examples of current liabilities are creditors.
A. I and IV only B. II and III only C. I, II, and III only D. II, III, and IV only E. I, II, III, and IV 3. Which one of the following is a capital budgeting decision? A. determining how many shares of stock to issue B. deciding whether or not to purchase a new machine for the production line C. deciding how to refinance a debt issue that is maturing D. determining how much inventory to keep on hand E. determining how much money should be kept in the checking account 4. Decisions made by financial managers should primarily focus on increasing which one of the following? A. size of the firm B. growth rate of the firm C. gross profit per unit produced D. market value per share of outstanding stock E. total sales 5.
Continental Carriers Continental Carriers, Inc. Advanced Financial Management Continental Carriers, Inc. (CCI) should take on the long-term debt to finance the acquisition of Midland Freight, Inc. for a few reasons. The company is heavy on assets, the debt ratio will only grow to 0.40 with the added $50M in debt. Also, the firm will benefit from an added $2M in a tax shield and be able to return $12.7M a year to its stockholders and investors, instead of $8.9M if equity is raised to finance the acquisition. Lastly, the stock price and earnings per share will increase to $3.87 in comparison to an equity-financed acquisition of $2.72 per share. CCI would be taking a somewhat high risk by issuing additional stock due to the uncertainty about the offering price.
Sensitivity Analysis Scenario 1: MRC Projections 1. Total Asset Value The Book Value of total asset is $ 69,227,000 as of December 31, 1960. However, as per Discount Cash Flow Projection table (Appendix. A), the total asset value of American Rayon as of December 31, 1960 is $ 64,646,000. Market Value of Business Asset 41,058 Cash 2,564 US Government Securities 20,024 Value of Financial Investment 22,588 Total Asset Value 63,646 2.
In the April-June quarter 2014 the total household indebtedness in the US (including mortgages, student loans, car loans, credit cards and home-equity lines) was estimated at $11.63 trillion dollars according to The Federal Reserve Bank of New York. However, it was noted that this was the first decline after three quarters of increases. (Wall Street Journal 2014) This essay will assess the possible causes of this rising indebtedness and it will consider the consequences this financial behaviour may be having on the economy. There are numerous reasons and causes for the rise of household indebtedness for both the US and the UK. Firstly, there has been a drastic change in the spending and borrowing behaviours of households.
APV vs. WACC Problem Given the following information, answer questions 1 and 2 below. Company and market data: Rf = 4% Rm = 10% βu = 0.9 D/V (target) = 40% RD = 4% Tc = 30% Project CFs: I0 = 1000, CF1 = 300, CF2 = 400, CF3 = 500 1) Calculate the project’s value using WACC 2) Calculate the project’s value using APV -Oops, we can’t until we know the financing (debt) pattern over time. (a) OK, assume the project is financed with 60% debt which is paid off in three equal, annual installments. (b) Now assume instead of (a) that the debt is rebalanced to be consistent with the firm’s target debt ratio (i.e. D/V = 40%).