of $15 million. Assets Liabilities and Equity Cash $10 Deposits $68 Loans 50 Equity 7 Securities 15 Total Assets $75 Total Liabilities & Equity $75 Show the DI's balance sheet if the following conditions occur. a. The DI purchases liabilities to offset this expected drain. If the DI purchases liabilities, then the new balance sheet is: Cash $10 Deposits $53 Loans 50 Purchased liabilities 15 Securities 15 Equity 7 $75 $75
Words: 832 - Pages: 4
of property 5 Cash sales 5 Leasing 5 4.1 DISCUSS THE MAIN FINANCIAL STATEMENT 6 4.2. Compare appropriate formats of financial statements for different types of business 7 TYPES OF BUSINESS ORGANIZATIONS 7 Owner's Equity 7 Partners' Equity 8 Stockholders' Equity 8 SERVICE, MERCHANDISING, MANUFACTURING INCOME STATEMENTS 9 Service 9 Merchandising 10 Manufacturing 11 4.3 INTERPRET FINANCIAL STATEMENTS USING APPROPRIATE RATIOS AND COMPARISONS, BOTH INTERNAL AND EXTERNAL 13 The
Words: 3735 - Pages: 15
Answers to Problems 1. D 2. B 3. C 4. B 5. D 6. A Acquisition price $1,600,000 Equity income ($560,000 × 40%) 224,000 Dividends (50,000 shares × $2.00) (100,000) Investment in Harrison Corporation as of December 31 $1,724,000 7. A Acquisition price $700,000 Income accruals: 2014—$170,000 × 20% 34,000 2015—$210,000 × 20% 42,000
Words: 1057 - Pages: 5
company's financial condition at a specific point in time, * Follows the formula Assets = Liabilities + Shareholder’s Equity, which makes sense because the company must pay for the resources it owns (assets) by either borrowing money (liabilities) or through the combo of money received from the sale of stock and money retained in the company from net income (shareholder’s equity). * The Income Statement: * Is a financial statement that measures a company's financial performance over a specific
Words: 3257 - Pages: 14
debt and equity it is called Capital Structure. A firm’s capital structure decision includes its choice of a target capital structure, the average maturity of its debt, and the specific types of financing it decides to use at any particular time. The value of a firm’s operations is the present value of its expected future free cash flow (FCF) discounted at its weighted average cost of capital (WACC). The WACC depends on the percentages of debt and common equity, the cost of debt, the cost of stock
Words: 1505 - Pages: 7
his calculations into five parts 1) Single or Multiple Costs of Capital 2) Proportion of capital from debt and equity 3) Cost of Debt 4) Cost of Equity 5) WACC In part one; we disagreed with Cohen where he decided to value the company as a whole instead of valuing each division separately. Since Nike is a multidivisional firm Cohen should of aggregated the values of the individual divisions and calculate a different cost of capital for each one. Since the exhibit 1 and 3 provide
Words: 685 - Pages: 3
The cost of capital, corporation finance and the theory of investment Modigliani & Miller – 1958 Introduction In a world of certainty investment decision should be in line with either profit maximization or market value maximization. - According to profit maximization, a physical asset is worth acquiring if it increases the net profit of the owners of the firm. But net profit increases only if the expected rate of return on the asset exceeds the rate of interest - According to
Words: 1988 - Pages: 8
Diversification Leverage Cash vs Accrual Cash & Free Cash Flow Sunk Costs Opportunity Costs A. B. C. D. E. F. G. H. I. J. K. Agency Conflicts Capital Structure Cost of Capital - WACC Market Efficiency Arbitrage – No Free Lunch NPV vs IRR Relevant Costs CAPM Hedging Inflation Taxes Financing Growth and Expansion 1. Assets = Liabilities All resources are owed to someone: they belong to someone. 2. Assets = Owner’s equity + (Outsiders’) Liabilities We separate the liabilities because outsiders’
Words: 449 - Pages: 2
the current Semi Automatic Machines or proceed with the investment into the Vulcan Mold Maker. The decision will be based on the net incremental cash flow projected through cash flow forecasts, along with relevant qualitative characteristics and a cost-benefit analysis. 2.0 Assumptions used in preparation of the cash flow for Vulcan Mold Maker and the Semi Automatic Machines Two cash flows have been prepared to project the estimated cash inflow and outflow associated with using the Semi Automatic
Words: 3430 - Pages: 14
Marriott - The Cost of Capital 1/25/2012 Since Marriott and its three divisions all have debt and equity in their capital structure. The cost of capital is the same as Weighed average of cost of capital WACC. WACC = Rd x Wd x (1-T) + Re x We Cost of debt (pretax) = Rd | |Debt Rate Premium Over |Government Rate* |Pretax Cost of debt | | |Government |
Words: 1231 - Pages: 5
