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The Discounted Cash Flows Model

Cash Flow Depreciation

If a company reported net income in 2007 of 2.4 million on total revenues of $30 million and depreciation expense totaled $1 million. What were total expenses for 2007 What were total expenses for 2007, assuming all expenses except depreciation were cash expenses What was the companyâ??s 2007 cash flow

Project Evaluation using WACC for Jake's (Bob Country) Bunker

Jake's Bunker (Bob's Country Bunker), a chain of economically priced motels in the Midwestern United States has reviewed its current target structure of 40% debt and 60% equity. It can issue debt at a rate of 9%. The last dividend paid on its stock was $1.25. The company is doing very well and expects to maintain its current

Calculating after-tax salvage value.

A project will produce an operating cash flow of $14,600 a year for 8 years. The initial fixed asset investment in the project will be $48,900. The net after-tax salvage value is estimated at $11,000 and will be received during the last year of the project's life. What is the NPV of the project if the required rate of return is

CAPM, Expected Return, Valuation, Cost of Capital for Project

1. You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are: Years Cash Flow 0 -100 1 - 10 +15 On the basis of the behavior of the firm's stock, you believe that the beta of the firm is 1.4. Assumi

Calculating Present Value of the Given Mixed Stream

See the attached file. Relationship between future value and present value-Mixed stream Using only the information in the accompanying table, answer the questions that follow. a. Determine the present value of the mixed stream of cash flows using a 5% discount rate. b. How much would you be willing to pay for an oppor

Time Value of Money


Preston Corporation: Computing the Internal Rate of Return

Preston Corporation is evaluating its potential investment in a $225,660 piece of equipment with a 3 year life and no salvage value. The company anticipates that pre-tax cash flows in each of the three years will equal 22 percent, 44 percent, and 66 percent, respectively, of the investment's face value. The tax rate is 28 percen

Valuation Models & Pricing an Asset or a Business

There are many different valuation models. What are some of them and how are they used to value an asset or business entity? Can you make any suggestions on how to enhance any of the valuation models to make them more accurate?

Managerial Accounting

Choose three publicly held companies on the Internet. Include at least two manufacturing companies (there must be a product). None can be a financial institution such as a bank or an insurance company. Refer to the financial statements and, for each of the last three years, identify Net Income and Cash Flow from Operating Activi

Finance: Company Analysis

Using AT&T: identify appropriate industry comparisons for the company and develop a fundamental analysis of the company using the analytical tools such as the Dupont Framework. For my purposes I am comparing Sprint and Verizon. Using market information to do comparisons (PE ratio, etc), develop valuation of company using g

Ranking of best investments

Java Corporation is trying to select the best investment from among four alternatives. Each alternative involves an initial outlay of $100,000. Their cash shows follow: Year A B C D 1 $10,000 $50,000 $25,000 $0 2

Accounting Questions McCormick & Company 2009 Annual Report

See the attached file. The questions are related to McCormick & Company 2009 annual report. Problem 1 The following questions all relate to McCormick's 2009 Statements of Cash Flow, Balance sheet, and Income Statement. (1) The change in accounts receivable, net of allowance

The Dividend Discount Model (DDM)

IGT, Inc. just paid a dividend of 1.75 per share. Analysts believe dividends will grow 16% per year for the next 5 years, and at 1% after that. How do I calculate the value of a share if the required return on the company's shares is 12%?

Finance: 16 Finance Multiple Choices.

See the attached file for the table to problem 2. 1. Key differences between common stock and bonds include all of the following EXCEPT A) common stockholders have a voice in management; bondholders do not. B) common stockholders have a senior claim on assets and income relative to bondholders. C) bonds have a stated ma

What does it take to determine the present value of an investment?

What does it take to determine the present value of an investment? How would you project the future cash flows? How do you determine what discount, or interest, rate to use? Think about today's economy. How would you use the current information to determine the value of an investment? Would it be higher or lower than it was a ye

Financial Management

Use both the CAPM (capital asset pricing model) and the constant growth model (CGM) to arrive at XYZ's stock price. Find an estimate of the risk-free rate of interest (krf). To obtain this value, go to Market Data and use the "U.S. 10-year Treasury" bond rate (middle column) as the risk-free rate. In addition,

Investment Analysis

Your client is considering the purchase of $100,000 in common stock, which pays no dividends and will appreciate in market value by 10 percent per year. At the same time, the client is considering an opportunity to invest $100,000 in a lease obligation that will provide the annual year-end cash flows listed in the table below.

Choosing the Best Investment Option

Question: A firm has the following investment alternatives: Cash Inflows Year..............A.............B............C 1.................$500.........$0..........$0 2...................500.........400..........0 3...................500.........800..........0 4...................600.........900.......1,900 Which investm

Jane's personal financial planning using cash flows

Cash flows: It is typical for Jane to plan, monitor and assess her financial position using cash flow over a given period, typically a month. Jane has a savings account and her bank loans money a 6% per year while it offers short term investment rates of 5%. Jane's cash flows during August were as follows: Item Cash inflow C

Benefits of Cash Flow analysis and management; evaluate negative cash flow

Please help explain or simplify the following questions concerning cash flow analysis. If there is a recent trend of negative cash flow, but the company's P&L statement is showing its running a profit, how can this be and how would you evaluate the state of the organization? Explain why comprehending and managing cash flow

Calculate the 1.5 year theoretical spot rates and the six month forward rate.

Calculate the 1.5-year theoretical spot rate if the 6-month spot rate is 1.75 percent and the 1-year spot rate is 1.95 percent. The 1.5-year note has a coupon of 3 percent and is selling for $101.3518. (Quotes are in decimals, not 32nds.) Then based on the data and your calculations, calculate the six-month forward rate 1.0 y

JL Ticker's Store: What is the operating cash flow using the tax shield approach?

A proposed expansion project is expected to increase sales of JL Ticker's Store by $35,000 and increase cash expenses by $21,000. The project will cost $24,000 and be depreciated using straight line depreciation to a zero book value over the 4 yr life of the project. The store has a marginal tax rate of 30%. What is the operati

Determining Rate of Return, After Tax, MACRS Depreciation & ROI

1. Ajax Leasing Services has been approached by Gamma Tools to provide lease financing for a new automated screw machine. The machine will cost $220,000 and will be leased by Gamma for five years. Lease payments will be made at the beginning of each year. Ajax will depreciate the machine on a straight-line basis of $44,000 pe

Acme: Evaluate the acquisition of a Czech firm using the DCF methodology

The company is considering the acquisition of a firm in the Czech Republic and would like your opinion on this. It plans to operate the firm for 3 years and then reevaluate the holding. 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 y