S w 906N01 WILEY INTERNATIONAL Professors Paul Bishop and Stephen Sapp revised this case (originally prepared by Professor Robert Higgins) solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmittal
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Supplement of Formulae and Present Value Tables Formulae 1. CAPITAL STRUCTURE a) After-Tax Marginal Cost of Debt: kb = k(1− T) or where b) (1− T)I F k = interest rate; T = corporate tax rate; I = annual interest payment on debt; F = face value of debt Cost of Preferred Shares: kp = Dp NPp where c) Dp = stated annual dividend payment on shares; NPp = net proceeds on preferred share issue Cost of Common Equity: i) Cost of Common Shares (Capitalization of Dividends with Constant
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Stock: a) Using 12 percent 1.90 x (1.05/0.07) = $28.50 b) Using 15 percent 1.90 x (1.05/0.10) = $19.95 c) When a required rate of return goes up, the anticipated price goes down. In other words, the ‘better deal’ on the stock (lower price) gets you a higher overall return. Bond: a) The present value of that stream of payments is $785.45. b) When annual interest rate changes to 12.36%, i calculated the semiannual rate (which is 6%) and the present value is re-calculated as $917
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Chapter 4 12. The times lines are: | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PV | $4,500 | $4,500 | $4,500 | $4,500 | $4,500 | $4,500 | $4,500 | $4,500 | $4,500 | | | 0 | 1 | 2 | 3 | 4 | 5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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goal? A. 15.07% B. 15.13% C. 15.17% D. 15.20% E. 15.24% 2. Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,000, $9,000, and $15,000 over the next three years, respectively. After that time, Marko feels ABC will be worthless. Marko has determined that a 14% rate of return is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.? A. $19,201.76 B. $21,435.74 C. $23,457.96 D. $27,808.17 E. $29,808
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Time Value Money How would you explain the Time Value Money in business and what considerations are made when calculating TVM? Provide a sample TVM and solution. I have read the text in our books and also looked up TVM on the Internet. I feel like all this new information is foreign to me. I am trying to find as many resources as possible to re-explain the concepts learned in our text to help me gain a better understanding of each new concept being presented. I found an article on Investopedia
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Critically Important Categories in Exhibit 2: * Net Income * Earnings per Share * Market Value of Shareholder’s Equity After winning the price war, Pan Europa foods made serious gains in their market share. After doing so, it should now be time for the firm to hone-in on these new market gains to increase gross sales, which have remained flat for the past couple years. With these goals in mind, Ponti, Morin, and Humbolt should be leading the way for Pan Europa Foods. 2.) Using equivalent
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can you say about the company’s liquidity position in 2013? 4. Calculate the 2013 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. 5. Calculate the 2013 debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDA coverage ratios. What can you conclude from these ratios? 6. Calculate the 2013 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these
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of Phoenix FP/101 Quiz Week 2 Week 2 Objectives 1. Identify social and economic influences on personal financial goals and decisions.(Chapter 1, Pg. 2-11) 2. Develop personal financial goals. (Chapter 1, Pg. 16-20) 2.3 Calculate time value of money situations associated with personal financial decisions. (Appendix 40-44) 1. Concept: Influences on financial goals and decisions 1. The Rule of 72 is a. A tool to determine the number of years until retirement for an employee
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for future value (FV) of that sum. What is that characteristic? What questions would you ask a mortgage lender if you used the Time Value of Money calculations to compare loan terms with what you "expect" to pay (or owe) based on your calculations. If you've never considered a home loan, substitute a car loan or (dare I say it ...) a student loan. Time value of money is most important factor when we are dealing with loans, investment analysis, capital budgeting. Positive or negative signs associated
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