Chapter 2 Time Value of Money MINI CASE Assume that you are nearing graduation and that you have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination which covers several financial analysis techniques. The first section of the test addresses discounted cash flow analysis. See how you would do by answering the following questions. a. Draw time lines for (a) a $100 lump sum cash flow at the end of year 2, (b) an ordinary
Words: 4409 - Pages: 18
Produce the Same Project Rankings? 164 Capital Budgeting Principle: Ignore Sunk Costs and Consider Only Marginal Cash Flows 168 Capital Budgeting Principle: Don’t Forget the Effects of Taxes—Sally and Dave’s Condo Investment 169 Capital Budgeting and Salvage Values 176 Capital Budgeting Principle: Don’t Forget the Cost of Foregone Opportunities 180 In-House Copying or Outsourcing? A Mini-case Illustrating Foregone Opportunity Costs 181 Accelerated Depreciation 184 Conclusion 185 Exercises 186 158
Words: 1661 - Pages: 7
Problem Mini-Case Questions Ms. Nicole L. Givens 1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the projects when analyzing whether to undertake the project? The focus should be on free cash flows rather than accounting profits because these are the flows that the firm receives and can reinvest. After correctly examining cash flows an analyze of the
Words: 415 - Pages: 2
Leeds Metropolitan University 4/30/2012 IFM PLC | Consultancy Report | Financial Analysis and assessing future options for the company | Mohamed Kamara and Iwi Ugiagbe-Green Jens Hagenbeck ID: 33269369 Executive Summary This consultancy report aims at the Board of Directors of IFM Plc a multinational company providing financial services and was being ordered by Finance Director Mrs. Diana Worth. It analyses and evaluates a prospective joint venture between a German subsidiary
Words: 3668 - Pages: 15
Statement and Balance Sheets of one of the firm’s clients. Your boss has developed the following set of questions you must answer. 1. What is the free cash flow for 2013? 2. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? 3. Calculate the 2013 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company’s
Words: 2464 - Pages: 10
between the alternatives. Opportunity costs is the cost of choosing one alternative over the other. There are three different types of incremental analysis – present worth analysis, cash flow analysis and rate of return analysis. Cash flow analysis: · First step is to identify the incremental after tax cash flows for all alternatives. · When determining the above, only relevant costs are to be taken · Consider the cost of opportunity of not choosing the other alternative
Words: 345 - Pages: 2
Questions for Cooper Industries Harvard Case Study THE CASE SHOULD BE DONE BY TEAMS OF UP TO FOUR STUDENTS. The CASE WOULD BE PRESENTED AND DEFENDED IN CLASS BY TWO TEAMS. I EXPECT MANY OF YOU TO MAKE CLASS PRESENTATIONS BY UTILIZING POWERPOINT AND/OR OTHER MEANS. THE QUESTIONS BELOW WERE SUGGESETD BY THE AUTHORS OF THE CASE AND ADDRESS THE MAIN THE ISSUES, BUT YOU MAY EDIT / CONSOLIDATE THEM IF YOU FIND IT NECESSARY / CONVENIENT IN WRITING UP YOUR CASE. Cooper industries 1. If you were
Words: 1227 - Pages: 5
creates more value. First, we need to figure out the initial cash outflow of each project. Table 1 and table 2 illustrate the initial cash outflows of MMDCL and DYOD separately. As the upfront R&D and marketing are tax deductible and the tax rate is 40%, the initial expenditures are $3.02 million and $5.331 millions. Next step is to calculate the unlevered cash flows of each year. As the result 9.2 (p.310) illustrates, unlevered cash flow = profit before interest and taxes + depreciation and amortization
Words: 500 - Pages: 2
investors are usually exposed to less liability than in a regular partnership. | | | Question 2. | Question : | (TCO G) Which of the following statements is correct? | | | | | In the statement of cash flows, a decrease in accounts payable is reported as a use of cash. | | | Question 3. | Question : | (TCO G) Beranek Corp. has $410,000 of assets, and it uses no debt—it is financed only with common equity. The new CFO wants to employ enough debt to bring the debt to assets
Words: 1828 - Pages: 8
Case Study of Just For Feet Inc. Xuan Zhang Q1. Prepare common-sized balance sheets and income statements and compute key ratios for 1997-1998. What were the high-risk financial statement items for the 1998 audit? * Common-sized financial statements: * Key ratio analysis: Liquidity and solvency: | 1999 | 1998 | 1997 | Current ratio | 3.387 | 1.998 | 2.142 | Debt to equity | 1.117 | 0.672 | 0.720 | Times interest earned | 6.376 | 24.665 | 28.286 | Activity | |
Words: 1362 - Pages: 6
