Mini Case a. Corporate finance is a basic component of how a business is run. All managers should keep this in mind to direct funds to the optimal division or product in a company. In addition, managers should understand how their company is financed and whether it has a risk of bankruptcy. Conversely, managers should understand if the equity in the business is undervalued and has the potential to grow. Corporate finance provides the skills managers need to: (1) identify and select the
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Mini Case (p. 45) a. Why is corporate finance important to all managers? In order to be able to evaluate and choose those projects that can add value to the company and consequently generate cash to compensate those who invested in the company, managers must have expertise in finance. b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. Proprietorship is a business owned by single
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Homework Assignment (week 1) Problems 1.1, 1.2, 1.3, 1.4, 1.5, 1.6, and 1.7 The Four Types of Firms (p. 19), 2-8 The Balance Sheet, 2-11 The Income Statement and 2-24 The Statement of Cash Flows Problem 1.1 The most important difference between a corporation and all other organizational forms are corporation is considered by law to be a unique legal entity, separate and apart from its owners, they are responsible for their own liability and business debts, and therefore shareholders’ liability
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------------------------------------------------- Top of Form Grading Summary | Grade Details - All Questions | 1. | Question : | (TCO D) A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price? | | | Student Answer: | | $17.39 | | | | $17.84 | | | | $18.29 | | | | $18.75 | | | | $19.22 | | Instructor
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FIN515 Homework 3 CHAPTER 5 Problem (p. 164) 5-29 Term Interest Rate Structure a. Calculate the present value of an investment that pays $1000 in two years and $2000 in five years for certain. PV = (C1/1+r2) ^2+(C1/1+r5) ^5 PV = 1,000/(1 + 0.0241)^2 + (2,000/(1 + 0.0332)^5= $2,652.15 b. Calculate the present value of receiving $500 per year, with certainty, at the end of the next five years. To find the rates for the missing years in the table, linearly interpolate between the years
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Chapter 18 Capital Budgeting and Valuation with Leverage 18-4. Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $1.5 million per year, growing at a rate of 2.5% per year. Goodyear has an equity cost of capital of 8.5%, a debt cost of capital of 7%, a marginal corporate tax rate of 35%, and a debt-equity ratio of 2.6. If the plant has average risk and Goodyear plans to maintain a constant debt-equity
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Problem 5-1 Current market price Given: Interest paid annually $1,000 par value 12 years to maturity Coupon rate of 8% Yield to maturity of 9% Using a financial calculator phone app PMT=80 FV=1000 I=9% N=12 Current market price=$928.39 Problem 5-2 Yield to Maturity Given: Interest paid annually $1,000 par value 12 years to maturity Coupon rate of 10% Current price=$850 Using a financial calculator phone app PV=-850 PMT=100 FV=1000 N=12 Yield to Maturity=12.48%
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Project One Financial Management FIN-515 Keller Graduate School of Management Prepared for: Professor Cynthia Taylor Prepared by: Abu N Rahman In current online business marketing competition there are two companies competing each eBay and Amazon. That’s why I choose those companies for financial analysis. Considering availability of information analyzing year 2013 Profitability Ratios Gross Margin eBay Amazon. $3081, 000/$4530, 000
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(13-10) Corporate Valuation The financial statements of Lioi Steel Fabricators are shown below—both the actual results for 2010 and the projections for 2011. Free cash flow is expected to grow at a 6% rate after 2011. The weighted average cost of capital is 11% Income Statements for the Year Ending December 31 (Millions of Dollars Except for Per Share Data) Actual 2010 Projected 2011 500.00 $ 530.00 360.00 381.60 37.50 39.80 397.50 $ 421.40 102.50 $ 108.60 13.90 16.00 88.60 $ 92.60 $35.44 53.16
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Problem 2-29 Yes, a firm with positive net income can run out of cash. It could run out of cash if it spends too much on financing activities. For an example a company could pay too much of a dividend, pay off too much long term debt, or buying back too many shares of stock. Problem 2-30 a) Current Ratio = Current Assets/Current Liabilities $51.94B / 33.06B = 1.5711 b) Quick Ratio = (Cash and Cash Equivalent + Marketable Securities + Accounts Receivables) / Current Liabilities ($27.65B +
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