Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Question
Chapter 13, Problem 3MC
Summary Introduction
Case summary:
Company S considering adding a new line to its product mix and the production line would be set up in unused space in the main plant. It has installed machinery which generates the incremental sales of $1,250 units per year.
Due to this the sale price and cost prices are increased by 3% and firm’s net working capital would have to increase by an amount equal to 12% of sales revenues.
To determine: Annual sales revenue and costs except depreciation and the reasons of considering the inflation while estimating cash flows.
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Students have asked these similar questions
b. Disregard the assumptions in Part a. What is the depreciable basis? What are the annual depreciation expenses?
c. Calculate the annual sales revenues and costs (other than depreciation). Why is it important to include inflation when estimating cash flows?
d. Calculate annual net operating profit after sales (NOPAT). Then calculate the operating cash flows.
In terms of future value (FV) which of the following considerations is correct?
Select one:
O A. Consider only future cash flows as relevant factors
O B. Consider only past cash flows as relevant factors
O C. Consider past sales revenues and cost of sales as relevant factors
O D. Consider future gross profit and net profits as relevant factors
What are:
the payback method,
the Accounting Rate of Return, and
Discounted Cash Flow Model (Net Present Value and Internal Rate of Return)
Chapter 13 Solutions
Intermediate Financial Management
Ch. 13 - Define each of the following terms:
Project cash...Ch. 13 - Prob. 2QCh. 13 - Why is it true, in general, that a failure to...Ch. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Why are interest charges not deducted when a...Ch. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Distinguish among beta (or market) risk,...
Ch. 13 - Prob. 11QCh. 13 - New-Project Analysis
The Campbell Company is...Ch. 13 - Scenario Analysis Shao Industries is considering a...Ch. 13 - Prob. 1MCCh. 13 - Prob. 2MCCh. 13 - Prob. 3MCCh. 13 - Prob. 5MCCh. 13 - Prob. 6MCCh. 13 - Calculate the cash flows for each year. Based on...Ch. 13 - Prob. 8MCCh. 13 - (1) What are the three types of risk that are...Ch. 13 - Prob. 12MCCh. 13 - Prob. 13MCCh. 13 - What is a real option? What are some types of real...
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Similar questions
- In computing the periods net operating cash flows, why are increases in current liabilities and decreases in current assets added back to net income?arrow_forwardWhich of the following methods consider the time value of money? A. payback and accounting rate of return B. payback and internal rate of return C. internal rate of return and accounting rate of return D. internal rate of return and net present valuearrow_forwardWhich of the following phrases best describes the term " actual cash value"? a. market value b. appraised value c. replacement cost less depreciation d. original cost less depreciationarrow_forward
- Under the principle of cashflow estimation, why it is important that cashflow should be measured on after-tax basis?arrow_forwardWhen deducing cash flow numbers, which of the following refers to a reflection of value? Select an answer: accounts receivable wage expenses accounts payable income statementarrow_forwardExplain the term cash flow statement?arrow_forward
- What is the difference between the Direct Method and Indirect Method for calculating Cash Flow?arrow_forwardhow are accrual accounting earnings used in valuation and why are current earnings considered more useful than current cash flows for assessing future cash flows?arrow_forwardWhy, in most cases, accrual-basis net income provides a better measure of perfomance than net operating cash flow?arrow_forward
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