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    The Discounted Cash Flows Model

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    Finance Problems Multiple Choice

    1. The primary objective of business financial management is to a. maximize total corporate profit. b. maximize net income. c. minimize the chance of losses. d. maximize shareholder wealth (i.e. stock price). 2. Theoretically, stock price is not directly determined by a. the risk associated with expected cash flows

    Cash flow was negatively impacted by an economic recession

    Company XYZ's cash flow was negatively impacted by an economic recession. The company now has a shortfall of $20 million in its planned cash flow. The company had originally targeted the cash for an expansion project. If the project is halted or scaled down, the company will have insufficient capacity to produce the goods necess

    Accounting case study - mostly pro-forma cash flow developments

    On a warm Chicago evening in August 2005, Regina Ryan leaned back in an overstuffed armchair in her brightly lit apartment above Ryan Funeral Home. Seventy-five years old and a widow, Regina smiled as she looked at the sons and daughters gathered before her: Maureen, Patrick, Sean, Brendan, Conner, and Siobhan. Finally sh

    Finance questions

    I would like the process to for these questions to be explained in plain language and systematically so I can grasp and understand. I am preparing for in-class exams so I need to ensure that I know and recognize what process should be used for the different problems. Thank you! 1. The president of Crandall Ceramics is trying

    Study Question

    What information should be included in a financial forecast accompanying a strategic plan and why?

    Raising fund for company

    A company has raised $80 million from selling stocks. It wants to take part in a venture that requires $40 million this year, its annual after tax cash flow over the next seven years will be only $325,000. If it does invest in this venture it expects its after-tax cash flow to be minus $10 million annually for the same period.

    Certified Financial Planner Practice Exam Questions

    These are sample Certified Financial Planner exam test questions from my textbook: If a client's primary goal in making lifetime gifts to his children is to lower his estate taxes he should make gifts of property that A. Are expected to depreciate significantly in the future B. Are expected to appreciate significantly in t

    Pro forma statement

    When speaking of the present value of future cash flows, is it referring to values found on a pro forma statement?

    Project evaluation depreciation

    ABC company purchased a machine 5 years ago at cost of $100000. The machine had an expected life of 10 years at the time of purchase, and an expected salvage value of $10,000 at the end of the 10 years.Taxation depreciation allowable is 10 percent per year over ten years. A new machine can be purchased for $150,000 including

    At what price should the stock of ABC company be selling for today?

    One year ago ABC Company paid a $4.00 dividend, and, during the current year, it has experienced a 10 percent growth rate. Due to a new, advance production technique, ABC expects to achieve a dramatic increase in its short-run growth rate -- 25 percent annually for the next 3 years. After this time, growth is expected to retur

    Discount Payback Period of the Project

    A project has the following cash flows:. Year Project Cash Flow 1 $-3,000 2 $ 1,000 3 $ 1,000 4 $ 1,000 Its cost of capital is 10 percent. What is the project's discounted payback period? Choices of answer: 3.00 years 3.30 years 3.52 years 3.75 years 4

    Calculating the Project's Discounted Payback

    Coughlin Motors is considering a project with the following expected cash flows: . Year Project Cash Flow 0 -$700 million 1 200 million 2 370 million 3 325 million 4 700 million The project's WACC is 10 percent. What is the project's discounted payback? Below

    Question about Market Value and WACC

    Please help with the following problem. The A. J. Croft Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6 percent. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero-growth company. AJC's current cost of equity is 8.8 perce

    Cost of capital, business structure

    1. Which of the following statements is most correct? a.Suppose a firm is losing money and thus, is not paying taxes, and that this situation is expected to persist for a few years whether or not the firm uses debt financing. Then the firm's after-tax cost of debt will equal its before-tax cost of debt. b.The component cost

    Corporate Finance

    1) a) Tropical Sweets is considering a project that will cost $70 million and will generate expected cash flows of $30 million per year for the next three years. The cost of capital for this type of project is 10 percent and the risk free rate is 6 percent. After discussions with the marketing department, you learn that there

    4 Questions

    1. What is the yield-to-maturity of the following bond (payments are made semiannually: Par Value (value at maturity): 10000 Annual Coupon: 7.8% Maturity: 10 years Current Market Value: $8,750 2. What should be the current market value (present value) of a preferre

    This is a Financial Management Problem

    1) You have been hired as a financial consultant to Jane Corporation, a large, publicly traded firm. The company is looking at setting up a manufacturing plant overseas. The project will be for five years. The company bought some land three years ago for $4.2 million in anticipation of using it as a possible plant site, but the

    Cost of Common Equity

    Why are several formulas often used to estimate the cost of common equity instead of the "right" formula?

    calculate the following discounted cash flow problems

    Please calculate the following discounted cash flow problems a. The future value of $1,250 received today and invested at 6 percent for 10 years b. The future value of an annuity of $275 invested each of the next 5 years at 4 percent. c. The present value of the following cash stream: year 1: 200, year 2: 200, ye

    Value of Cash Flow Declines

    The value of cash flow will decline if ____________________: i.) the discount rate rises ii.) the cash flow occurs closer in time iii.) compounding frequency rises iv.) its level of risk rises a) i. and ii. Only b) i. and iii. Only c) ii and iii only d) iii and iv only e) I, iii and iv only Suppose a

    Problem Set

    --- 9-3 The values of outstanding bonds change whenever the going rate of interest changes. In general, short-term interest rates are more volatile than long-term interest rates. Therefore, short-term bond prices are more sensitive to interest rate changes than are long-term bond prices." Is this statement true or false? Explai

    Capital management

    How can you sustain longer term relations with vendors in the face of the need to improve cash flow and hold down bank borrowing?

    Discounted cash flow problem

    A 100-acre tract of land within an urban municipality is scheduled to be subdivided into 320 home sites, averaging 80 feet road frontage. There is active demand for homes in the $120,000 to $140,000 price bracket. The average price of dwellings planned for the subject tract is $125,000. The ratio of site to property value in

    Projection Evaluation 21

    Revenues generated by an new fad product are forecast as follows: Year Revenues 1 $40,000 2 30,000 3 20,000 4 10,000 Thereafter 0 Expenses are expected to be 40 percent of revenues, and working capital required in each year is exp

    Role of financial department at Strident

    Consider the role of the finance department at Strident Marks. The finance department has a couple of new hires, and the CFO has asked that you spend a short amount of time with them, catching them up on some areas that are very important to the company at this time. These also happen to be areas for which Strident Marks does no

    New Project Analysis

    The Campbell Company is ev aluation the proposed acquistion of a new milling machine. The machine's base price is $108,000, and it would cost another $12,500 to modify it for special use by your firm. The machine falls into the MACRS 3-years class, and it would be sold after 3 years for $65,000. The machine would require and