... We focus on free cash flows rather than accounting profits because these are the flows that the firm receives and can reinvest. Only by examining cash flows are we able to correctly analyze the timing of the benefit or cost. Also, we are only interested in these cash flows on an after tax basis as only those flows are available to the shareholder. In addition, it is only the incremental cash flows that interest us, because, looking at the project from the point of the company as a whole, the incremental cash flows are the marginal benefits from the project and, as such, are the increased value to the firm from accepting the project. 2. Although depreciation is not a cash flow item, it does affect the level of the differential cash flows over the project’s life because of its effect on taxes. Depreciation is an expense item and, the more depreciation incurred, the larger are expenses. Thus, accounting profits become lower and in turn, so do taxes which are a cash flow item. 3. When evaluating a capital budgeting proposal, sunk costs are ignored. We are interested in only the incremental after-tax cash flows, or free cash flows, to the company as a whole. Regardless of the decision made on the investment at hand, the sunk costs will have already occurred, which means these are not incremental cash flows. Hence, they are irrelevant. Solution to Integrative...
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...Student Project Activity – Week 1 A. Week 1: Section 1.0 Executive Summary B. TCOs Addressed: TCO 10: Given a description of a new business, new product, service or project develop, present and defend the budget. C. Project Activity Overview – Scenario / Summary: You have been asked to create a budget proposal for one of these businesses: Papa Geo’s Restaurant, The Cutting Edge Landscaping, or Wireless World Electronics Retail Store. This week you will begin working on the proposal by drafting the Executive Summary. Use the Budget Proposal Template.docx. D. Deliverables: Save the first paragraph of Section 1.0 Executive Summary Draft as YourName_Project_WK1.docx and upload to the Week 1 Project Dropbox. E. Project Tasks: Task 1: | Download the Budget Proposal Template.docx from DocSharing. | Task 2: | Download the Course Project Description.docx. from DocSharing. | Task 3: | Review the three different business scenarios. | Task 4: | Select the business for which you will create a budget proposal. | Task 5: | Draft the first paragraph of the Section 1.0 Executive Summary. | Task 6: | Save the Draft and submit to the dropbox. | F. Grading Criteria | Description | Suggested Points | The business is briefly described in one paragraph. | 3 | The business description is in your own words. | 3 | The business description appears in the Executive Summary section...
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...Chapter 01 Introduction to Corporate Finance Multiple Choice Questions 1. Which one of the following terms is defined as the management of a firm's long-term investments? A. working capital management B. financial allocation C. agency cost analysis D. capital budgeting E. capital structure 2. Which one of the following terms is defined as the mixture of a firm's debt and equity financing? A. working capital management B. cash management C. cost analysis D. capital budgeting E. capital structure 3. Which one of the following is defined as a firm's short-term assets and its short-term liabilities? A. working capital B. debt C. investment capital D. net capital E. capital structure 4. A business owned by a solitary individual who has unlimited liability for its debt is called a: A. corporation. B. sole proprietorship. C. general partnership. D. limited partnership. E. limited liability company. 5. A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a: A. corporation. B. sole proprietorship. C. general partnership. D. limited partnership. E. limited liability company. 6. A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a: A. generally partner. B. sole proprietor. C. limited partner. D. corporate shareholder. E. zero partner. ...
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...interested in these cash flows on an after tax basis as only those flows are available to the shareholder. In addition, it is only the incremental cash flows that interest us, because, looking at the project from the point of the company as a whole, the incremental cash flows are the marginal benefits from the project and, as such, are the increased value to the firm from accepting the project. 2. Although depreciation is not a cash flow item, it does affect the level of the differential cash flows over the project's life because of its effect on taxes. Depreciation is an expense item and, the more depreciation incurred, the larger are expenses. Thus, accounting profits become lower and in turn, so do taxes which are a cash flow item. 3. When evaluating a capital budgeting proposal, sunk costs are ignored. We are interested in only the incremental after-tax cash flows, or free cash flows, to the company as a whole. Regardless of the decision made on the investment at hand, the sunk costs will have already occurred, which means these are not incremental cash flows. Hence, they are irrelevant. Solution to Integrative Problem, parts 4, 5, & 6. Section I. Calculate the change in EBIT, Taxes, and Depreciation (this become an input in the calculation of Operating Cash Flow in Section II). |Year |0 |1 |2 |3 |4 |5 ...
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...Exam 2 Key SECTION 1 3PM VERSION 2 SECTION 2 4:30PM VERSION 3 1. The 7 percent semiannual coupon bonds of the Garden Supplies Co. are selling for $976, have a face value of $1,000, and have a yield to maturity of 8.079 percent. How many years will it be until these bonds mature? A. 2.50 years b. 3.15 years c. 5.00 years d. 7.85 years e. 10.00 years N = ? = 5/2=2.5; I=8.079;PV=-976;PMT=70/2=35;FV=1000 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 006 #83 SECTION: 6.1 TOPIC: TIME TO MATURITY TYPE: PROBLEMS 2. You own two bonds. Both bonds pay annual interest, have 8 percent coupons, $1,000 face values, and currently have 8 percent yields to maturity. Bond 1 has 9 years to maturity and Bond 2 has 6 years to maturity. If the market rate of interest rises unexpectedly to 9 percent, Bond _____ will be the most volatile with a price decrease of _____ percent. a. 1; 7.26 B. 1; 6.00 c. 1; 4.49 d. 2; 1.61 e. 2; 3.57 Both bonds have a starting price of $1,000 since their coupon rates are equal to their yields to maturity. All else equal, with longer maturity bond will have the most interest rate risk (Bond 1). Price after interest rate change for Bond 1: N=9;I=9;PV=?=940.05;PMT=80;FV=1000. Percent change in price = (940.05 1000)/1000 = -.05995 = -6% BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: INTERMEDIATE Ross - Chapter 006...
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...pages here Cover sheet Candidate ID Word count 2_1288AS TAX215 Project (2700 words) Candidate declaration I declare that: * This is my own original work and I have acknowledged all materials, sources and references used in the preparation of this assignment. * I have abided by the Institute’s Bye-Laws. * This assignment has not been submitted previously for assessment. * I have not copied in part or whole or plagiarised the work of other candidates, students and/or authors. * The electronic version of this assignment has been submitted in compliance with the project requirements. I consent to the Institute notifying my employer and/or any tertiary institution at which I am enrolled if this assignment constitutes an actual or reasonably suspected breach of any of the Institute’s Bye-Laws and Exam Regulations. I acknowledge that the Institute will retain the original of this assignment. In submitting this assignment to the Institute, I declare it is my own work undertaken for the purpose of meeting the assessment requirements of the MICPA-CAANZ Programme module in which I am currently enrolled. I understand that the Institute will check my assignment for plagiarism and will retain a copy of my assignment for future plagiarism checking. This declaration confirms the above statements. Signature: AIMAN Date: 27/7/2015 QUESTION 1 i) In relocating to promoted area, the incentives that will be eligible for Roshmind...
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...Project Charter Xxxxxx Xxxxx CPMGT/300 XXX XX Instructor – Project Charter Project Overview The purpose of this project being set in motion is to create a new magazine for Commissary Solutions. The establishment of the magazine, Commissary Magazine, will aid the organization in achieving their success by expanding their target market being that the magazine will highlight the organization’s products and services. This project is to begin on Friday, October 10, 2014, and will concluded no later than Wednesday, December 31, 2014. The magazine is being created to improve relations with existing clientele, as well as building up new a clientele base. Development of the magazine will be supervised and managed by Allison Kushner, she will have an editor who will review, and supply authorization to each writer before the writer begins their research. Topics will highlight up and coming/hot topics as well as their release dates, and give recognition of staff members that deserve recognition. Section I. Project Purpose The construction of this magazine is to aid in the organization improving relations with existing clientele as we are building up a new clientele base. The establishment of the magazine; Commissary Magazine, will aid the organization in achieving their success by expanding their target market, being that the magazine will highlight the organization’s products and services. The magazine will emphasize the organization’s obligation to their clientele...
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...Project Report On ANALYSIS OF FINANCIAL ACTIVITIES IN TATA STEEL, WEST BOKARO UNDERTAKEN AT TATA STEEL LTD., WEST BOKARO DIVISION, RAMGARH, JHARKHAND Under the guidance of “Mr. M.R.S.S. Srinivas (Manager Accounts) & Mr. Kumar Sunil (Accounts Head)” Submitted as a part of academic curriculum for the award of The degree of Post Graduate Program in Management Indian Institute of Management Rohtak By: Ashish Priyadarshi PGP05.114 AUTHENTICATION CERTIFICATE “To Whom It May Concern” This is to certify that the Internship Dissertation, titled “ANALYSIS OF FINANCIAL ACTIVITIES IN TATA STEEL, WEST BOKARO”, is a bonafide work carried out by me at Tata Steel Ltd. It is the record of an original & independent study carried out by me, under the able supervision of Mr M.R.S.S. Srinivas (Manager Accounts). Signature of the Intern Ashish Priyadarshi Date:- Place:- Company guide’s certificate “To Whom It May Concern” This is to certify that the Internship Dissertation, titled “Analysis of Financial Activities in Tata Steel, West Bokaro” submitted by Mr. ASHISH PRIYADARSHI is a bonafide work carried out by him at TATA STEEL LTD. under my guidance. The matter embodies in this dissertation has not been submitted earlier for award of any degree or diloma to the best of my knowledge and belief. I recommend its submission for evaluation. Signature of company guide 1. MR...
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...The Security Analysis Project What is this project? This project provides an opportunity to get some hands-on experience applying investment theory and models to real firms. In the process, participants will get a chance to: evaluate the risk profile of a firm and examine the sources of risk; analyze its capital structure and decide whether the firm is under- or over-leveraged; examine its dividend policy and decide whether the firm is under- or over-leveraged; and value the firm. How is the project structured? This is a project requiring by individual analysis and group synthesis. Each group should have at least 5 members but not to exceed 7. Each group will pick an industry to study. Each group member will pick a firm within this chosen industry to analyze. The companies chosen does not imply that they be competitors. For instance, a group can pick a company that manufactures personal computers, a company that produces software, and a company that provides computer services as part of the same group. Each person will be responsible for doing the entire analysis for the company that he or she has chosen. At the end of the process, the group will write one integrated report for all the firms in the group. In this report, the firms will be compared and contrasted and the results will be presented as a whole rather than as five separate parts. How will the project be graded? Each group will be graded on the final project and all of the presentations during...
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...Assignment front sheet |Qualification |Unit number, title and level | |Pearson BTEC Level 5 HND Diploma in Business (QCF) |Unit 2: Managing Financial Resources and Decisions | | |Level : 4 | |Student name and ID number |Assessor name | | |Simon Masuku | |Interval Verifier |Alan Jeffery | |Date issued |Completion date |Submitted on | |1st May 2015 |3rd July 2015 before 12:00 midday | | |Assignment title |Managing Financial Resources and Decisions - Shaping Your Future – A Vocational Scenario | |LO...
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...NFP prodect- the city of Topeka Cassie Routh Leah Sugai Qiwei Xie Ander Garcia Question one- Examine the CAFR A) What information is provided in the introductory section? We believe there are four sections provided in the introduction. They are: * The letter of transmittal (page i-ii) * The mission statement (page iii) * The list of principal officials (page iv) * The organization chart (page v) B) What information is provided in the financial section? There are four major sections are provided in the financial section. The financial section involves the independent auditor’s report (which audited by the company of Cochran Head Vick & Co), the management’s discussion and analysis, basic financial statements such as government wide financial statements and fund financial statements, and the notes to the financial statements. The financial statement does contain two government wide financial statements which are the statement of net position (p15) and the statement of activities (p16) and seven fund financial statements. The management discussion and analysis section contains the overview of financial activities of the city of Topeka. C) What information is provided in the statistical section? The statistical section mainly provides information about the financial trends, debt capacity, revenue capacity and the economic information. Question - two basis of accounting The basis of accounting is used in the general fund is the general fund is the...
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...Multi-period Capital Budgeting under Uncertainty: Real Options Analysis” Table of Contents Section | Name | Page no. | Letter of Transmittal | i | Acknowledgement | ii | Table of Contents | iii | Section-A | Introduction | 01-02 | | A.1 Introduction | 01 | | A.2 Rationale of the study | 01 | | A.3 Objective of Our Study | 02 | | A.4 Scope | 02 | | A.5 Methodology of the Study | 02 | | A.6 Limitations of the Study | 02 | Section-B | Comparing NPV with Decision Trees and Real Options | 03-08 | | B.1 Comparing NPV with Decision Trees and Real Options | 03-05 | | B.2 Recognizing Real Options | 05 | | B.3 Differences between NPV, Decision Trees, and Real Options | 05-08 | | B.4 Risk-Neutral Probabilities | 08 | Section-C | Three Key Assumptions for pricing Real Options | 09-10 | | C.1 Three Key Assumptions for pricing Real Options | 09-10 | Section-D | Valuing Real Options on Dividend-Paying Assets | 10-12 | | D.1 Valuing Real Options on Dividend-Paying Assets | 10-12 | Section-E | Types of Real Options | 12-13 | | E.1 Types of Real Options | 12-13 | Section-F | Valuing Combinations of Simple Real Options | 13-16 | | F.1 Valuing Combinations of Simple Real Options | 13-16 | Section-G | Valuing Compound Options | 17-21 | | G.1 Simultaneous Compound Options | 17-19 | | G.2 Sequential Compound Options | 19-21 | Section-H | Switching Option | 22-26 | | H.1 Switching Option | 22-26 | Section-I | An Example of...
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...survey a cross-section of 127 companies to shed light on various dimensions of the investment decisions. The questions posed by our survey examine the hurdle rates firms use, calculations of project related cashflows, the interaction of cashflows and hurdle rates, and the determinants of firms’ capital structure policies. Unlike previous studies which examine investment decisions by either using survey data or data obtained from financial tapes, we use both sets of data. This approach produced one of our primary findings that there is a hurdle rate premium puzzle, in that hurdle rates used by our sample of firms exceed their cost of capital that we calculate using Compustat data by 5%. We investigate the determinants of the hurdle premium in question. Additionally, we find that both systematic and to a lesser extent unsystematic risk play a role in determining the hurdle rates. Furthermore, our findings show that while firms use discounted cashflow methods in evaluating projects, they do not always appear to handle the cashflow dimension of their investment decisions in a consistent manner. Finally, we uncover evidence that firms use the various financing alternatives available to them in the order predicted by the pecking-order hypothesis. However, some of the variables affiliated with the trade-off model also appear to play a role in the capital structure decision. JEL classification: G31; G32 Keywords: Capital budgeting; Cost of capital; Discount rates; Capital structure; Survey ...
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...FM12 Financial Management Assignment No.I Assignment Code: 2011FM12A1 Last Date of Submission: 31st March 2011 Maximum Marks:100 Attempt all the questions. All the questions are compulsory and carry equal marks. Section-A Ques. 1 A firm’s sales, variable costs and fixed cost mount to Rs.70,00,000, Rs.42,00,000 and Rs.6,00,000 respectively. It has borrowed Rs.45,00,000 at 9 percent and its equity capital totals Rs.55,00,000. a)What is the firm’s ROI? b)Does it have favourable financial leverage? c)If the firm belongs to an industry whose average asset turnover is 3, does it have a high or low asset leverage? d)What are the operating, financial and combined leverages of the firm? e)If the sales drop to Rs.50,00,000, what will the new EBIT be? f)At what level will the EBT of the firm equal to zero? Ques. 2 (a) Explain Certainty-Equivalent Approach in evaluating the riskiness of a project. (b) A project costs Rs.6,000 and it has cash flows of Rs.4,000, Rs.3,000, Rs.2,000 and Rs.1,000 in years 1 through 4. Assume that the associated αt factors are estimated to be: a0 = 1.00 a1 = 0.90, a2 = 0.70, a3 = 0.50 and a4 = 0.30, and the risk-free discount rate is 10 percent. Will you advice the project to be selected. Ques. 3 (a)Should the company restructure its business? What are the important financial and non-financial considerations? (b)Which financial alternative do you suggest for the company and why? (c)...
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...Analysis of Financial Statements (MBA) Project Instructions Project writing is not a difficult task at all. However, it is an art by which the writer represents his point of view in a way that it looks professional, clear and comprehensive, and finally leaves a long lasting impression on the reader. Ethics of project writings: Project writing has some ethics which must have to be followed by the writer in order to make a professional project. Emphasis on these ethics will make you learn how to write a project in a professional manner. Ethics of project writing include making a main page, writing a preface, giving an acknowledgement, making a table of contents, putting executive summary, giving an introduction to the project, mentioning the contents of the project, concluding it, including all the tables and annexure, and finally writing a bibliography. What this project involves: The idea is to concentrate on doing a full analysis of one firm. Since I suspect that you may have other courses or jobs, what is required here is somewhat less than a full analytical workup. You will be applying some of the financial principles we have discussed in class. A comprehensive outline is given below to make the project. 1. Select a company of your choice as a first step and apply principles that are mentioned below. (I understand that some data will not be available for the firms. However, you have to assume missing figures based on your understanding and our class discussions...
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