1)

Depreciation for a profitable firm

A: decreases both operating and net income.

B: increases the net fixed assets as shown on the balance sheet.

C: reduces both the net fixed assets and the costs of a firm.

D: is a non-cash expense which increases the net operating income.

E: decreases net fixed assets, net income, and operating cash flows.

2) For a growing firm, the change in net working capital is generally:

A: positive.

B: negative.

C: highly erratic.

D: highly negative.

E: equal to zero.

3)The accounting statement of cash flows consists of the cash flows from:

A: operations, investing activities, and financing activities.

B: operations, investing activities, and divesting activities.

C: internal activities, external activities, and financing activities.

D: balance sheet accounts only.

E: income statement accounts only.

4) Total equity is $1,620, fixed assets are $1,810, long-term debt is $650, and short-term debt is $300. What is the amount of current assets?

A: $760

B: $360

C: $1,140

D: $480

E: $790

5) Brewster Mills has total revenues of $684,350, costs of goods sold of $472,500, net income of $11,520, and average inventory of $91,600. What is the days' sales in inventory?

A: 69.84 days

B: 70.76 days

C: 71.51 days

D: 5.16 days

E: 4.08 days

6) Using the internal rate of return method, a conventional investment project should be accepted if the internal rate of return is:

A: equal to, and only if it is equal to, the discount rate.

B: equal to or greater than the discount rate.

C: less than the discount rate.

D: negative.

E: positive.

Consider a firm whose only asset is a plot of vacant land, and whose only liability is debt of $15 million due in one year. If left vacant, the land will be worth $10 million in one year. Alternatively, the firm can develop the land at an upfront cost of $20 million. The developed land will be worth $35 million in one year. Suppose the risk-free interest rate is 10%, assume all cash flows are risk-free, and assume there are no taxes.

a) If the firm chooses not to develop the land, what is the value of the firm’s equity today? What is the value of the debt today?

b) What is the NPV of developing the land?

c) Suppose the firm raises $20 million from equity holders to develop the land. If the firm develops the land, what is the value of the firm’s equity today? What is the value of the firm’s debt today?

Please can you explain how you got your answer, thank you :)

Suppose A Company accepts all projects with payback periods less than 3 years. State which project(s) the company should undertake based on this policy and determine the total NPV from following this policy.

Financial intermediaries are often given credit for reduction in transaction costs and information asymmetry.
How they manage to do it?
Do the customers benefit from reduced transaction costs?
In what way?

Suppose you take out a 20-year mortgage for a house that costs $375,467. Assume the following:

• The annual interest rate on the mortgage is 5%.
• The bank requires a minimum down payment of 17% at the time of the loan.
• The annual property tax is 1.6% of the cost of the house.
• The annual homeowner's insurance is 1.1% of the cost of the house.
• The monthly PMI is $51
• Your other long-term debts require payments of $762 per month.

If you make the minimum down payment, what is the minimum gross monthly salary you must earn in order to satisfy the 28% rule and the 36% rule simultaneously?

The sales budget for your company in the coming year is based on a quarterly growth rate of 10 percent with the first-quarter sales projection at $165 million. In addition to this basic trend, the seasonal adjustments for the four quarters are 0, −$12, −$6, and $18 million, respectively. Generally, 50 percent of the sales can be collected within the quarter and 45 percent in the following quarter; the rest of the sales are bad debt. The bad debts are written off in the second quarter after the sales are made. The beginning accounts receivable balance is $84 million. Assuming all sales are on credit, compute the cash collections from sales for each quarter. Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and shows all the formula and steps.

Suppose you take out a 30-year mortgage for $169,221 at an annual interest rate of 3.8%. After 19 years, you refinance to an annual rate of 1.1%. How much interest did you pay on this loan?

For the shareholders of target firms with CEO getting close to retirement, do they suffer lower takeover premium and deal announcement returns in general? Explain.

How would a merger impact/affect, negatively or positively, the discounted cash flow method and dividend discount model?

Micah is investing in the stocks of the company KNS. KNS just paid a dividend of $1 per share (D0 = 1). Micah expects the dividend growth rate to be -10% for Year One and 5% for Year Two. Afterwards, Micah believes the growth rate to be constant at g forever. Micah uses CAPM model to determine the discount rate (expected rate of return). And he calculates the following: E(rm) = 6%, rf = 1%, and βKNS = 0.6. (a) If g = 3%, what is Micah’s estimate of the current price using the Dividend Discount Model?

(b) Suppose that the current price of KNS is $120 and Micah decides to short sell 100 shares of KNS stock using margin. The initial margin requirement is 50%. How much does Micah have to deposit into the margin account?

(c) If the price goes up to $140 per share and the maintenance margin is 35%, will Micah receive a margin call?

(d) Suppose Micah receives a margin call under 2(c). What is the minimum amount of cash that Micah can use to bring the margin back to 35%?

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $16 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $4.5 million with a 0.2 probability, $2.2 million with a 0.5 probability, and $0.4 million with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations. Debt/Capital ratio is 0. RÔE = % σ = % CV = Debt/Capital ratio is 10%, interest rate is 9%. RÔE = % σ = % CV = Debt/Capital ratio is 50%, interest rate is 11%. RÔE = % σ = % CV = Debt/Capital ratio is 60%, interest rate is 14%. RÔE = % σ = % CV =

Illustrates earnings before interest and taxes for a capital investment project

• Initial cost of the investment: $250,000

• Change in net working capital: $10,000 (50% of this is recoverable at the end of the project)

• Tax rate: 31%

• WACC: 15%

• Depreciation: straight line over five years

• Projected cash flow from salvage: $136,250

What is the Operating Cash Flow for Year 3?

What is the NPV?

if i have a 9​-year bond that's paying me interest of $28.10 ​semiannually, has a face value of $1,000​,and is selling for $843.43. What would its annual coupon rate and yield to​ maturity be?