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pProb 33DivProb 35+Net Inc 22500000NWC07NWC08FCF*Cap ex. = Change in Net Fixed Asset + Depr
Cap ex = 8000 Prob 37abc Prob 39a
Ret Ern 07+372146dProb 47JStmt of Stockholder's Equity Includes Common Equity with Retained EarningsCalculate Total Assets1You know TA Turnover = 3.2 and Sales = $6,000,000Total Assets = $1,875,0008Company is financed 50% debt, so the other 50% is equity$Equity = .50 x $1,875,000 = $937,500Use DuPont ROE formula8You are given or have calculated everything but Net Inc.Prob 51NI/yrPVPMTFVEndxProb 531 P/YrProb 57Prob 55FEnter cash flows with Cf key, enter I/Yr of 8. Solve for NPV = 923.98 Prob 59a Prob 59b500(1.06)1 = 530500(1.06)2 = 561.80 Prob 59c500/(1.06)1
= 471.70 Prob 59d500/(1.06)2
= 445.00
Prob 511a
Prob 511bbFails to consider compounding. The annual growth rate is less than 20% or 14.87% as we calculated
Prob 513a
Prob 513b
Prob 513c
Prob 513d
Prob 515a
Prob 515b
Prob 515cProb 515d1Prob 515d2Prob 515d3 Set Calc to Begin Mode for 15d Prob 517
Prob 519a
Prob 519bProb 519c2Prob 519c1I/YrMBonds have a 9% call premium, so company must pay $1,090 for each $1,000 bond Prob 78a Prob 78buInvestor would be happy that they received 15.03% per year retrun vs. the 14% Yield to maturity expected at purchase.Since bonds have been called, however, rates must have fallen significantly, which means reinvestment will be at a lowere rate than the 14% received 6 years ago.KThe price of the bonds has fallen, so the YTM increased from 9.0% to 9.69%.Prob. 710a
Prob 710bSee slide 720 thru 72280/901.40 = 8.875%@Current yield (CY) is the coupon divided by the current price. Cap gains yield(CGY) = YTM  CYCGY = 9.691  8.875 = .816%lTotal expected return of 9.691% will come from 8.875% in coupon and .816% in the price increase of the bond.Prob. 710ceAs rates change, the price of the bond will change and therefore the investor's return will change. If yields fall, as an example, the price of the bond will increase more than calculated and the investor's return will be greater than expected.
Prob 121aNo. $50,000 is a sunk costoSale of building is an opportunity cost, therefore the aftertax sale price must be charge against the project. Prob 123Calculate book value. Calculate gain on sale.Calculate tax on gain.!AT net salvage value = $4,600,000Prob 12  9CF year 0 = $7,160 ?Remember to calculate and subtract the tax on the machine sale.RCalculate change in gross profit and note that sales increase and costs decrease. *Adjust increase in gross profit for taxes.`Calculate new depreciation and subtract the old depreciation to find the change in depreciation.jAdjust the change in depreciation for taxes. Year 1 change in depreciation = $1600$350 = $1250*.4 = $500k OR, since the depreciation went up by $1250 in year 1, the company will pay $500 less in taxes in year 1.FAdd after tax revenue increase for year 1 to depreciation tax savings. Year 1 cash flow should = $2000.Calculate cash flows 26qCash flow 6 will include working capital recovery (+), salvage value of new machine (+), tax on salvage value ()* and opportunity cost of old machine ().Cash flow 6 = 3232NPV = 921.36rVPW ju
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