Compute the payback period for a project with the following cash flows, if the company's discount rate is 12%. Initial outlay = $450 Cash flows: Year 1 = $325 Year 2 = $65 Year 3 = $100 • 3.17 years • 2.6 years • 2.88 years • 3.43 years Want help? Click to download FIN 370 7. Which of the following best describes why cash flows are utilized rather than accounting profits when evaluating capital projects? • Cash flows have a greater present value than accounting profits.
• having liability exposure similar to that of a sole proprietor. • being taxed like a corporation. • being taxed like a corporation with liability like a partnership. 4. Which one of the following is least apt to help convince managers to work in the best interest of the stockholders?pay raises based on length of service • implementation of a stock option plan • threat of a proxy fight • management compensation tied to the market value of the firm’s stock • threat of a takeover of the firm by unsatisfied stockholders 5. a. Compute the future value of $2,000 compounded annually for 20 years at 4 percent.
Texaco stock is currently selling for $60 per share while Delta sells for $40 per share. You determine that the major factor that will impact your investment is the price of oil. After careful forecasting, you narrow the possible outcomes down to 3 major categories, each of which is equally likely to occur. Possibility Oil price increases Oil price unchanged Oil price decreases Texaco Stock pays a $4 per share dividend; stock price is $68 pays a $3 per share dividend; stock price is $60 pays a $2 per share dividend; stock price is $52 Delta Air Lines Stock pays no dividend; stock price is $32 pays a $2 per share dividend; stock price is $42 pays a $2 per share dividend; stock price is
Close substitutes B. Diseconomies of scale Correct C. Government licensing D. Price-taking behavior Answer Key: C Question 3 of 19 5.0 Points Other things equal, which reduces competition in an industry? A. Patent laws Correct B. Freedom of entry for new firms C. An increase in the number of producers D. An increase in the number of buyers Answer Key: A Question 4 of 19 5.0 Points The representative firm in a purely competitive industry: A. Will always earn a profit in the short run B.
Once the GDP is determined the GDP Per Capita can also be solved for. To figure out the GDP per capita one must divide your GDP: 140,000 by the country’s population of 500,000 or [140,000/500,000=0.28]. The GDP Per Capita is 0.28. The composition of GDP by percentage is 28%. The way this relates to Keynesian economics: (the theory of the total spending of the economy) is due to its impact of increase in government spending in short run and long run.
a. The MRS and the MRT are not equal. b. The budget line is steeper than the indifference curve at the current consumption level (Y is on the vertical axis and X is on the horizontal axis). c. The consumer’s total utility would increase if he/she chose consumption such that MUX increases and MUY
CASH FLOW BUDGETING ANALYSIS……………………………………….. 13 2.2. MARGINAL COST STATEMENT ANALYSIS………………………………… 13 3. CRITICAL ANALYSIS OF STATEMENTS BY JOHNSON AND KAPLAN….. 14 CALCULATIONS: 1 Travis Perkins plc | | Vertical Trend Analysis For Comprehensive Income Statement | The Group | 2008(%) | 2007(%) | Revenue | 100 | 100 | Cost of Sales | -65.45 | -65.5 | Gross Profit | 34.55 | 34.5 | Selling & Distribution Costs | -22.91 | -20.37 | Administration Expenses | -5.18 | -4.45 | Other operational income | 0.35 | 0.36 | Share of Results of Associate | -0.04 | 0 | Other | 1.77 | 0 | Operating Profit before exceptional items | 8.54 | 10.04 | Finance Income | | 0.12 | Finance Costs | -2.41 | -1.95 | Profit before tax | 6.37 | 8.2 | Tax | -1.84 | -2.52 | Profit for the year | 4.53 | 5.68 | Exceptional Items | -1.77 | 0 | Operating Profit after exceptional Items | 6.77 | 10.04 | Profit after tax (after exceptional Items) | 3.21 | 5.81 | Horizontal Trend Analysis For Comprehensive Income Statement | The Group | 2008(%) | 2007(%) | Revenue | 99.75 | 100 | Cost of Sales | 99.66 | 100 | Gross Profit | 99.9 | 100 | Selling & Distribution Costs | 112.17 | 100 | Administration Expenses | 116.15 | 100 | Other operational income | 98.25 | 100 | Share of Results of Associate | 0 | 0 | Other | 0 | 0 | Operating Profit before exceptional items | 84.87 | 100 | Finance Income | 208.11 |
When the buy-back price is more than or equal to $75, the buyer would purchase 18,000 units because the buyer could receive the largest profit in 18,000 units compared with other quantities. This decision doesn’t make sense, because the manufacture should focus on the profit, and his goal is to maximize the profit. From the trend analyzed above, the profit would decrease as the buy-back price increases when the order quantity is fixed, so to induce the buyer to purchase the
We can compute the levered value of the plant using the WACC method. Goodyear’s WACC is ￼ Therefore, ￼ A divestiture would be profitable if Goodyear received more than $47.6 million after tax. Problem 18-5 Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent’s debt cost of capital is 6.1% and its marginal tax rate is 35%. a.What is Alcatel-Lucent’s WACC?
Using the following calculation, we find: z= x- μ σ -1.96 = 10,000 – 20,000 σ σ=5102 Standard deviation σ = 5,102 μ = 20,000 mean 2. Stock outs were calculated by the four management numbers. Equation is: z = (x – μ)/ σ 15,000: Z = (15,000-20,000)/5102 z = -0.98 Then, reference the cumulative probabilities for standard deviation table in the beginning of the book to identify what -0.98 represents, which is .1635. Since stock outs are any quantity greater than what management suggested, they need to be subtracted from 1. 1 - .1635 = .8365 which = 83.65% Same logic/steps for the rest of the values: 18,000 24,000 28,000 Z = (18,000-20,000)/5102 z=(24,000-20,000)/5102 z=(28,000-20,000)/5102 z = -.39 z=.78 z= 1.57 1 - .3483 = .6517 1 - .7823 = .2177 1 –.9418 = .0582 which = 65.17% which = 21.77% which = 5.82% 3.