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
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
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
What information should be included in a financial forecast accompanying a strategic plan and why?
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.
J&J Enterprises is formed on December 31, 2000. At that point it has one asset costing $2,487. The asset has a three-year life with no salvage value and is expected to generate cash flows of $1,000 on December 31, in the years 2001, 2002, and 2003. Actual results are the same as planned. Depreciation is the firm's only expense.
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
When speaking of the present value of future cash flows, is it referring to values found on a pro forma statement?
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
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
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
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
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
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
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
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
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
Why are several formulas often used to estimate the cost of common equity instead of the "right" formula?
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
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
--- 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
Company A is considering the acquisition of a firm in the Czech Republic with a plan to operate the firm for 3 years and then reevaluate the holding with the below estimations Free Cash flows are estimated as follows: Year 1 - 38.63M Czech Koruna (CZK), Year 2 - 44.33 M CZK, Year 3 - 50.48M CZK The third year termi
How can you sustain longer term relations with vendors in the face of the need to improve cash flow and hold down bank borrowing?
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
What are the implications of extending more liberal credit terms to customers? Adequate discussion plus an example would be nice.
How is discounted cash flow analysis used to make an investment decision?
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
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
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
Ebay inc. went public in September of 1998. The following information on shares outstanding was listed in the final prospectus filed with SEC. In the IPO, Ebay issued 3,500,000 new shares. The intial price to the public was $18.00 per share. The final first-day closing price was $44.88. 1. Two common statistics in IPOs are un