Jefferson City Computers has developed a forecasting model to determine the additional funds it needs in the upcoming year. All else being equal, which of the following factors is likely to increase its additional funds needed (AFN)? A sharp increase in its forecasted sales and the company's fixed assets are at full capacity. A reduction in its dividend payout ratio. O The company reduces its reliance on trade credit that sharply reduces its accounts payable. Statements a and b are correct. O Statements a and c are correct.
Q: You deposit $63000 into an account which pays 5% compounded semiannually. How much can you withdraw…
A: Given:Principal (P) = $63,000Rate (r) for every six months = 5%Semi-Annually Rate = 5%/2 = 0.025…
Q: Which of the following end-of-period payments will provide the smallest future value to an investor…
A: The concept of time value of money states that worth of money changes with passage of time. This…
Q: Star Bank has the following asset portfolio on its balance sheet (and zero off-balance-sheet…
A: Risk weighted asset:A risk-weighted asset refers to an asset held by a financial institution that is…
Q: Find the equivalent of present worth (t = 0) of a uniform series of $4550 for 8 years, if the…
A: Present Worth calculates the current value of future cash flows or a series of payments, typically…
Q: The major principles to remember when considering real options include all of the following EXCEPT:…
A: REAL OPTIONS: As the name suggest real options include all tangible assets such as plant and…
Q: Value of Investment. Bob purchased stock in a new social media company for $28 per share shortly…
A: Future value is a financial concept that indicates the predicted worth of a sum of money at a…
Q: A ______ is a business owned by a single individual. Multiple Choice general partnership corporation…
A: Business structure refers to the legal form or organization under which a business operates.…
Q: a. Calculate the PV of free cash flow, assuming a cost of equity of 9%. (Do not round intermediate…
A: The value of cash available to a corporation after covering the costs of doing business is measured…
Q: Problem 9.18 (Nonconstant Growth stock Valuation) Taussing Technologies Corporation (TTC) has been…
A: Dividend discount model refers to the stock valuation metric which takes the present value of the…
Q: How much will you need to invest today to get the following cash flows at a discount rate of 8.25%:…
A: Present value refers to the current date value of the cash flows or the annuity. Cash flow is…
Q: The major area of vulnerability for many entrepreneurs is accounts receivable. true or false
A: Entrepreneur is an individual who identifies and creates opportunities to start, develop and manage…
Q: Current Attempt in Progress Assume that Walmart Inc. has decided to surface and maintain for 10…
A: Bid A:Parking area (in sq. yards)= 12,100cost (per sq. yards)= $5.75Maintenance cost= $0.25 Bid…
Q: Stocks A and B have the following historical returns: Year Stock A's Returns, ra Stock B's Returns,…
A: The coefficient of variation is considered as the proportion of a standard deviation to the expected…
Q: Here are the cash flows for two mutually exclusive projects: Co C₁ C₂ C3 -$ 26,000 +$ 10,300 +$…
A: To Calculate the rate at which we prefer Project B over Project A will be calculated as followsExcel…
Q: If a company reduces their fixed costs from $219,000 to $158,000 when the selling price of $35 per…
A: Operating profit is that amount which exclude all the expenses from the sales which is incurred by…
Q: An individual is currently 30 years old, wants to work until the age of 65 and plans on dying at the…
A: Interest rate = rate = 5%Annual spending = pmt = $40,000Life expectancy after retirement = nper = 85…
Q: A condo is advertised in The Wall Street Journal for $350,000. It states in the ad that a 20% down…
A: We need to use loan amortization formula to calculate monthly payment. The equation isWherePMT =…
Q: next 5 years and a 60% recovery rate. Ignoring the time value of money, the bank can improve its…
A: The expected loss on bank loans, often referred to as Expected Credit Loss (ECL) or Expected Loss…
Q: Determine the value of a share of Max Pax $7.55 cumulative preferred stock to an Investor who…
A: The "value of a share" refers to the estimated or intrinsic worth of an individual share of a…
Q: You want to buy a $23,000 car. You can make a 10% down payment, and will finance the balance with a…
A: A loan refers to a contract between a borrower and a lender where a sum is exchanged on the promise…
Q: What is the profitability index of a project that costs $8,000 and provides cash flows of $2,400 in…
A: The relationship between cash inflows and outflows at their current values is known as the…
Q: Mayr Inc. currently has no debt in its capital structure. It has 50,000 shares outstanding that are…
A: EBIT = $400,000Number of shares outstanding = 50,000Current share price = $158Tax rate = 30%The…
Q: Dave and his Partner decide to buy a house price of $730,000. they put 20% down, and their mortgage…
A: The mortgage refers to a covered loan that is borrowed to purchase a property with the loan being…
Q: Lambert, Inc. bonds have a face value of $1,000. The bonds carry a 8.54 percent coupon, pay interest…
A: Price of bond is the sum of present value of coupon payments and the par value of the bond based on…
Q: What is the growth rate of the following stream of cash flows? YEAR CASH FLOW 2018 R6 010 2017 R5…
A: Solution:Growth rate means the rate at which the stream of cash flows is rising.So, growth rate =…
Q: April decided to deposit $8,000 into a CD that offers her an APR of 4.4 percent with quarterly…
A: Future value is computed by following formula:-FV =A*(1+r)nFV = future value A =amount investedr =…
Q: Assume that a firm can issue preferred stock that has a $70 par value and pays a 15.0% annual…
A: The expenses related to offering new securities, such as common stock or bonds, to the general…
Q: Marcel Co. is growing quickly. Dividends are expected to grow at a rate of 0.06 for the next 4…
A: Solution:Gordon Growth Model (GGM) is the equity model which measures current price of share.For the…
Q: 4. Janjan has a promissory note due in 2 years, whose maturity is 100,000 pesos. a. Determine the…
A: Present value is a current price of future benefits at some specified period of time at some…
Q: ulate the internal rate of return for a $300.0m cash outflow at the end of year 0 and a $716.0m cash…
A: Internal rate of return is the break even rate at which present value of future cash flow is equal…
Q: You invested $100,000 into an account 25 years ago. The investment is now worth $350,000. Calculate…
A: The interest rate on the amount invested today after certain years will be found by using the…
Q: Assuming a 5% (0.05) interest rate, $500 invested today in a savings account today will be worth…
A: This is based on the concept of “compounding”. Compounding is an important element of time value of…
Q: The yield to maturity (YTM) on 1-year zero-coupon bonds is 6% and the YTM on 2-year zeros is 8%. The…
A: Here,YTM of 1 year zero coupon bond is 6%YTM of 2 year zero coupon bond is 8%YTM of 2 year Coupon…
Q: Cooperton Mining just announced it will cut its dividend from $4.08 to $2.34 per share and use the…
A: The fair value of any asset is the present value (PV) of the cash flow that the asset/ investment is…
Q: During the four quarters for 2020, the Browns received two quarterly dividend payments of $0.34, one…
A: In this question, we will calculate the total dividend income received by the Browns for the year…
Q: Suppose there is a risk-free asset whose return is 2% and that the market portfolio has an expected…
A: To calculate the alpha (α) of the asset, we can use the Capital Asset Pricing Model (CAPM), which…
Q: Interest expense for Rhodes Manufacturing was $500,000 in 2018. During 2018, $3.7 million in old…
A: Cash flows to bond holders will be interest paid, debt repaid and new debt raised. Cash flows to…
Q: What is the before tax NPV using a 15% equity discount rate? (round your final answer to whole…
A: Net Present Value (NPV) is a financial concept widely used in investment analysis and capital…
Q: Shack Homebuilders Limited is evaluating a new promotional campaign that could increase home sales.…
A: Variables in the question: Possible OutcomesAdditional Sales in UnitsProbabilitiesIneffective…
Q: The current capital structure of the company consists of 10,00,000 equity shares of Rs.10 each and…
A: The capital structure of the firm refers to the proportional contribution of the debt and equity to…
Q: Cellular Access, Inc. is a cellular telephone service provider that reported net income of $255…
A: Free cash flow is calculated as follows:-Free cash flow =
Q: In planning for your retirement, you would like to withdraw $40,000 per year for 18 years. The first…
A: Retirement planning should be done based on future requirement and should be done based on time…
Q: An asset costs $830,000 and will be depreciated in a straight-line manner over its four- year life.…
A: Here,The cost of Asset is $830,000The depreciation Method is a straight-line methodife of Asset is 4…
Q: XYZ has a weighted avg cost of capital of 0.07. The firm is going to invest in a machine that will…
A: Net present value is an important capital budgeting metric. Essentially it is the sum of present…
Q: What is the NPV of this project? (Do not round intermediate calculations and round your answer to 2…
A: Net present value is determined by deducting the current value of cash flows from the initial…
Q: What has been the main growth driver of the largest market in the world? The growth of the stock…
A: The biggest driver is gross fixed capital formation.
Q: Concurris Prototyping is committed to using the newest and finest equipment in its labs Accordingly,…
A: In this problem, we are required to find the annual worth of the defender ( current equipment ) and…
Q: You are going to save money for your son’s education. You have decided to place $4,146 every half…
A: Variables in the question:Deposit (PMT)=$4146Rate=9.51% p.a.Semi-annual rate==4.755%N=3 yearsnper=3…
Q: Fegley, Incorporated, has an issue of preferred stock outstanding that pays a $3.95 dividend every…
A: Required return on preferred stock paying perpetual dividend is calculated as follows:-Required…
Q: A stock had returns of 18.08 percent. -5.28 percent, 20.51 percent, and 8.69 percent for the past…
A: he variance of returns is a statistical measure that quantifies the degree of dispersion or…
Trending now
This is a popular solution!
Step by step
Solved in 6 steps
- DAS Co. is preparing its financial forecast for next year and its AFN is negative. This means that Select one: O a. the predicted change in total assets must be negative. O b. sales growth must be negative. O c. the dividend payout ratio must be greater than the predicted growth rate in sales. O d. the predicted change in spontaneous liabilities must be greater than the predicted change in total assets.The finance staff at Millcreek Company have constructed a forecast of the company’s net income.The chief executive officer (CEO) of Millcreek wonders why the forecast of next year’s interestexpense is the same as this year’s interest expense, whereas next year’s sales are expected toincrease by 20% over this year’s sales. What is the most likely explanation?a) Millcreek is expected to be more aggressive at minimizing its income tax expense next yearb) Millcreek expects its operating expenses to increase by 20% next year, the same as the expectedincrease in salesc) Millcreek is not expected to obtain any new loans next year, not repay any old loansd) Millcreek expects its operating expenses to increase by more than 20% increase in salesexpected next yearHow would answer this question? You are estimating your company's external financing needs for the next year. Your first-pass pro forma financial statements showed a large financing deficit for next year. Which of the following changes to your company's operating plan would reduce the financing deficit if incorporated in revised pro forma financial statements? None of the options are correct. Increase cost of goods sold as a percentage of sales Increase the dividend payout ratio Increase the sales growth rate Reduce the collection period
- Alderson Metals is compiling a cash balance projection by quarter for next year. Which one of the following adjustments to this projection will decrease the cumulative surplus? A. Reducing payroll costs from its current projection amount B. Decreasing the accounts receivable period by changing the firm's credit policy effective the first of next year C. Receiving more favorable credit terms from the firm's suppliers D. Increasing the dividend per share on the firm's outstanding common stock E. Refinancing the firm's long-term debt at a lower interest rateA company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise. Which of the following conditions would cause the AFN to increase? a. The company's profit margin increases. b. The company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity. c. The company increases its dividend payout ratio. d. The company decides to stop taking discounts on purchased materials. e. The company begins to pay employees monthly rather than weekly.A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio? 1. b. Reduce the company's days' sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment. 2. d. Borrow using short-term debt and use the proceeds to repay debt that has a maturity of more than one year. 3. e. Issue new stock and then use some of the proceeds to purchase additional inventory and hold the remainder as cash. 4. a. Use cash to increase inventory holdings. 5. c. Use cash to repurchase some of the company's own stock.
- A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise. Which of the following conditions would cause the AFN to increase? Answer AJThe company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity.- B)The company increases its dividend payout ratio. CThe company begins to pay employees monthly rather than weekly. DIThe company's profit margin increases. E)The company decides to stop taking discounts on purchased materials.O You have been asked to forecast the additional funds needed (AFN) for Houston, Hargrove, & Worthington (HHW), which is planning its operation for the coming year. The firm is operating at full capacity. Data for use in the forecast are shown below. However, the CEO is concerned about the impact of a change in the payout ratio from the 10% that was used in the past to 75%, which the firm's investment bankers have recommended. Based on the AFN equation, by how much would the AFN for the coming year change if HHW increased the payout from 10% to the new and higher level? All dollars are in millions. Last year's sales - So Sales growth rate=g Last year's total assets - Ag Last year's profit margin = PM Select the correct answer. O a $533 Ob $50.7 O $54.6 Od. 152.0 O. 1572 Dewan Ke -17p9607xlsx A Exercise 13-17 (1)adsx $300.0 40% $500 20.0% Last year's accounts payable Last year's notes payable Last year's accruals Initial payout ratio EXERCISE 13-17 D.xlsx A 0 Exercise 13-17.xlsx $50.0…David Lyons, CEO of Lyons Solar Technologies, is concerned about his firms level of debt financing. The company uses short-term debt to finance its temporary working capital needs, but it does not use any permanent (long-term) debt. Other solar technology companies have debt, and Mr. Lyons wonders why they use debt and what its effects are on stock prices. To gain some insights into the matter, he poses the following questions to you, his recently hired assistant: e. Suppose the expected free cash flow for Year 1 is 250,000 but it is expected to grow faster than 7% during the next 3 years: FCF2 = 290,000 and FCF3 = 320,000, after which it will grow at a constant rate of 7%. The expected interest expense at Year 1 is 128,000, but it is expected to grow over the next couple of years before the capital structure becomes constant: Interest expense at Year 2 will be 152,000, at Year 3 it will be 192,000 and it will grow at 7% thereafter. What is the estimated horizon unlevered value of operations (i.e., the value at Year 3 immediately after the FCF at Year 3)? What is the current unlevered value of operations? What is the horizon value of the tax shield at Year 3? What is the current value of the tax shield? What is the current total value? The tax rate and unlevered cost of equity remain at 25% and 14%, respectively.
- Suppose you are valuing a healthy, growing, profitable firm and you project that the firm will generate negative free cash flows for equity shareholders in each of the next five years. Can you use a free-cash-flows-based valuation approach when cash flows are negative? If so, explain how a free-cash-flows approach can produce positive valuations of firms when they are expected to generate negative free cash flows over the next five years.You will apply the concepts of company valuation that you have just learned to determine whether company XYZ is overvalued. We are currently at the end of the year "t". You performed a thorough financial analysis of XYZ and forecast the following Free Cash Flows (FCF): Year t+1: 352 million USDYear t+2: 385 million USDYear t+3: 407 million USDFrom year t+3 onward, you expect the FCFs to grow at a constant yearly rate of 4%. Through your analysis, you also determined that the appropriate Weighted Average Cost of Capital (WACC) for XYZ was 11%. Finally, you know that XYZ has 1000 million USD in debt and 100 million shares outstanding.Suppose that TV Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $5 million. The firm also has a profit margin of 15 percent, a retention ratio of 25 percent, and expects sales of $5.5 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth? Assets Liabilities and Equity Current assets $ 1,000,000 Current liabilities $ 1,000,000 Fixed assets 2,000,000 Long-term debt 1,000,000 Equity 1,000,000 Total assets $ 3,000,000 Total liabilities and equity $ 3,000,000