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Spreadsheet Exercise: Chapter 11
(Table 4.2 contains the applicable MACRS depreciation percentages.)
To Do
Create a spreadsheet similar to Tables 11.1, 11.5, 11.7, and 11.9 to answer the a.
Create a spreadsheet to calculate the initial cash flow.
b.
c.
d.
Create a spreadsheet to calculate the terminal cash flow associated with t
e.
Repeat all of the calculations above assuming that the new machine quali
Damon Corporation, a sports equipment manufacturer, has a machine currently
years ago for $120,000. The firm depreciates the machine under MACRS using
removal and cleanup costs are taken into consideration, the expected net selling
$70,000. Damon can buy a new machine for a net price of $160,000 (including
proposed machine will be depreciated under MACRS using a five-year recover
machine its working capital needs will change: Accounts receivable will incre
$19,000, and accounts payable will increase $16,000.
Earnings before depreciation, interest, and taxes (EBDIT) for the present mach
the successive five years. For the proposed machine, the expected EBDIT for e
$110,000, $120,000, $120,000, and $120,000, respectively. The corporate tax r
Damon expects to be able to liquidate the proposed machine at the end of its fi
paying removal and cleanup costs). The present machine is expected to net $8,
period. Damon expects to recover its net working capital investment upon term
Do not use cell references to cells in rows 19 to 36. For all required answer
in row 40.
Create a spreadsheet to prepare a depreciation schedule for both the prop
machines are depreciated under MACRS using a five-year recovery perio
only three years of depreciation remaining.
Create a spreadsheet to calculate the periodic cash flows for Damon corp
present machine.
Solution
Original purchase price 3 years ago
$ 120,000 Net selling price of the existing machine
$ 70,000 Cost of new machine (including installation costs)
$ 160,000 Installation costs
$ 15,000 Salvage value of new machine (after 5 years)
$ 24,000 Salvage value of existing machine (after 5 years)
$ 8,000 Changes to working capital:
Increase in accounts receivable
$ 15,000 Increase in inventory
$ 19,000 Increase in acounts payable
$ 16,000 EBDIT per year for the present machine next 5 years
$ 95,000 EBDIT for the proposed machine for next five years:
Year 1
$ 105,000 Year 2
$ 110,000 Year 3
$ 120,000 Year 4
$ 120,000 Year 5
$ 120,000 Tax
21%
Depreciation MACRS 5-year recovery
Year
Recovery
1
20%
2
32%
3
19%
4
12%
5
12%
6
5%
a.
Create a spreadsheet to calculate the initial cash flow.
Tax on sale of old machine
Purchase price of the old machine
Accumulated depreciation
− Depreciation for year 1
− Depreciation for year 2
− Depreciation for year 3
Total accumulated depreciation
Book value of old machine at end of year 3
Selling price of old machine
Recaptured depreciation
Tax on recaptured depreciation
Change in net working capital
Increase in accounts receivable
$ 15,000 Increase in inventory
$ 19,000 Change in current assets
Increase in accounts payable
$ 16,000 Change in current liabilities
Change in working capital
Installed cost of new machine
Cost of machine
$ 145,000 Installation cost
$ 15,000 Total installed cost − proposed (depreciable value)
After-tax proceeds from sale of old machine
Proceeds from sale of old machine
$ 70,000 Tax on sale of old machine
$ - Total after-tax proceeds
Change in net working capital
Initial Cash Flow b.
Depreciation Schedule With Proposed Machine
Year
Cost
Rate
Depreciation
1
$ 160,000 20%
2
$ 160,000 32%
3
$ 160,000 19%
4
$ 160,000 12%
Create a spreadsheet to prepare a depreciation schedule for both the prop
machines are depreciated under MACRS using a five-year recovery perio
only three years of depreciation remaining.
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5
$ 160,000 12%
6
$ 160,000 5%
Total
Depreciation Schedule With Present Machine
Year
Cost
Rate
Depreciation
1
$ 120,000 12%
2
$ 120,000 12%
3
$ 120,000 5%
4
5
6
c.
Year 1
Year 2
With proposed machine
Earnings before depr., int. and taxes
$ 105,000 $ 110,000 − Depreciation
$ - $ - Earnings before interest and taxes
− Taxes
21%
Net operating profits after taxes
+ Depreciation
$ - $ - Operating cash flows
With present machine
Earnings before depr., int. and taxes
$ 95,000 $ 95,000 − Depreciation
$ - $ - Earnings before interest and taxes
− Taxes
21%
Net operating profits after taxes
+ Depreciation
$ - $ - Periodic cash flows
d.
Create a spreadsheet to calculate the terminal cash flow associated with t
Create a spreadsheet to calculate the periodic cash flows for Damon Corp
present machine.
After-tax proceeds from sale of proposed machine
Proceeds from sale of proposed machine
Book value as of end of year 5
Net gain
Tax on gain
21%
Total after-tax proceeds - proposed
After-tax proceeds from sale of present machine
Proceeds from sale of present machine
Book value as of end of year 5
Net gain
Tax on gain
21%
Total after-tax proceeds - present
Change in net working capital
Terminal Cash Flow
Requirements
1
2
3
4
5
6
7
8
9
10
11
12
In cell G52
, by using cell references to the given data, calculate the depre
In cell G53
, by using cell references to the given data, calculate the depre
In cell G54
, by using cell references to the given data, calculate the depre
In cell H55
, by using cell references to the given data, calculate the total machine.
In cell H57
, by using cell references to the given data, calculate the book
year 3.
In cell H59
, by using cell references to the given data, calculate the recap
In cell H60
, by using cell references to the given data, calculate the tax o
In cell H65
, by using cell references to the given data, calculate the chan
In cell H68
, by using cell references to the given data, calculate the chan
In cell G71
, by using cell references to the data in cells G21
and G72
, ca
In cell H73
, by using cell references to the data in cells G71
and G72
, ca
machine.
In cell H77
, by using cell references to the given data, calculate the total machine.
In cell H79
, by using cell references to the given data, calculate the initia
In cell range F85:F90
, by using cell references to the given data, calculat
machine.
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
In cell F91
, by using cell references to the given data, calculate the total In cell range F95:F100
, by using cell references to the given data, calcul
machine. Enter =0
in those years without depreciation.
In cell F101
, by using cell references to the given data, calculate the total
In cell range F106:K106
, the earnings before depreciation, interest and ta
years 1:6 are shown.
In cell range F107: K107
, the depreciation expense with the proposed m
In cell range F108:K108
, by using cell references to the given data, calcu
for years 1:6 of the new machine.
In cell range F109:K109
, by using cell references to the given data, calcu
machine.
In cell range F110:K110
, by using cell references to the given data, calcu
for years 1:6 of the new machine.
In cell range F111:K111
, the depreciation expense with the proposed ma
In cell range F112:K112
, by using cell references to the given data, calcu
of the new machine.
In cell range F115:K115
, the earnings before depreciation, interest and ta
1:6 are shown.
In cell range F116: K116
, the depreciation expense with the current mac
In cell range F117:K117
, by using cell references to the given data, calcu
for years 1:6 of the old machine.
In cell range F118:K118
, by using cell references to the given data, calcu
machine.
In cell range F119:K119
, by using cell references to the given data, calcu
for years 1:6 of the old machine.
In cell range F120:K120
, the depreciation expense with the current mach
In cell range F121:K121
, by using cell references to the given data, calcu
of the old machine.
In cell H128
, by using cell references to the given data, calculate the net In cell H129
, by using cell references to the given data, calculate the tax In cell I130
, by using cell references to the given data, calculate the total
In cell H135
, by using cell references to the given data, calculate the net In cell H136
, by using cell references to the given data, calculate the tax In cell I137
, by using cell references to the given data, calculate the total
In cell I139
, by using cell references to the given data, calculate the term
Now move on to spreadsheet Chapter 11.e
. Repeat all of the calculation
qualifies for 100% bonus depreciation in spreadsheet Chapter 11.e. Reme
among the previous steps and spreadsheet Chapter 11.e must be complete
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following:
the project.
ifies for 100% bonus depreciation.
y in use that was originally purchased three g a five-year recovery period. Once g price for the present machine will be g installation costs of $15,000). The ry period. If the firm acquires the new ease $15,000, inventory will increase hine are expected to be $95,000 for each of each of the next five years are $105,000, rate (T) for the firm is 21%.
ve-year usable life for $24,000 (after ,000 upon liquidation at the end of same mination of the project. Important: rs, use cell references to values starting posed and the present machine. Both od. Remember that the present machine has poration for both the proposed and the
$ 120,000 Important: Do not use cell references to cells in row
answers, use cell references to values starting in row
$ 70,000 $ 16,000 $ - answers, use cell references to values starting in row
posed and the present machine. Both od. Remember that the present machine has
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Year 3
Year 4
Year 5
Year 6
$ 120,000 $ 120,000 $ 120,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 95,000 $ 95,000 $ 95,000 $ 95,000 $ - $ - $ - $ - $ - $ - $ - $ - the project.
poration for both the proposed and the
$ 24,000 $ - $ 8,000 $ - $ - Points
1
1
1
1
1
1
1
1
1
1
1
1
1
6
eciation for year 1 of the old machine.
eciation for year 2 of the old machine.
eciation for year 3 of the old machine.
accumulated depreciation of the old k value of the old machine at the end of ptured depreciation.
on the recaptured depreciation.
nge in current assets.
nge in working capital.
alculate the cost of the new machine.
alculate the installed cost of the new after-tax proceeds from sale of the old al cash flow.
te the depreciation schedule of the new
1
6
1
0
6
6
6
0
6
0
6
6
6
0
6
1
1
1
1
1
1
1
0
depreciation of the new machine.
late the depreciation schedule of the old l depreciation of the old machine.
axes with the proposed machine for the machine for the years 1:6 are shown.
ulate the earnings before interest and taxes ulate the taxes for years 1:6 of the new ulate the net operating profits after taxes achine for the years 1:6 are shown.
ulate the operating cash flows for years 1:6 axes with the current machine for the years chine for the years 1-6 are shown.
ulate the earnings before interest and taxes ulate the taxes for years 1:6 of the old ulate the net operating profits after taxes hine for the years 1:6 are shown.
ulate the periodic cash flows for years 1:6 gain of the new machine.
on gain of the new machine.
l after-tax proceeds of the new machine.
gain of the old machine.
on gain of the old machine.
l after-tax proceeds of the old machine.
minal cash flow.
ns above assuming that the new machine ember, the points for this step are allocated ed to finish the problem.
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ws 19 to 36. For all required w 40.
Spreadsheet Exercise: Chapter 11.e
(Table 4.2 contains the applicable MACRS depreciation percentages.)
To Do
Create a spreadsheet similar to Tables 11.1, 11.5, 11.7, and 11.9 to answer the (This is part e. from Spreadsheet Exercise in Chapter 11.)
a.
Create a spreadsheet to calculate the initial cash flow.
b.
c.
d.
Create a spreadsheet to calculate the terminal cash flow associated with t
Solution
Damon Corporation, a sports equipment manufacturer, has a machine currently
years ago for $120,000. The firm depreciates the machine under MACRS, usin
and cleanup costs are taken into consideration, the expected net selling price fo
Damon can buy a new machine for a net price of $160,000 (including installati
will be depreciated under MACRS, using a 5-year recovery period. If the firm capital needs will change: Accounts receivable will increase $15,000, inventory
payable will increase $16,000.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) for th
for each of the successive 5 years. For the new machine, the expected EBITDA
$110,000, $120,000, $120,000, and $120,000, respectively. The corporate tax r
Damon expects to liquidate the new machine after 5 years for $24,000. The old
liquidation at the end of the same period, when Damon expects to recover its n
subject to a tax rate of 21%.
Create a spreadsheet to prepare a depreciation schedule for both the prop
machine is depreciated under MACRS using a 5-year recovery period. A
100% bonus depreciation. Remember that the present machine has only 3
Create a spreadsheet to calculate the periodic cash flows for Damon corp
present machine.
Original purchase price 3 years ago
$ 120,000 Net selling price of the existing machine
$ 70,000 Cost of new machine (including installation costs)
$ 160,000 Installation costs
$ 15,000 Salvage value of new machine (after 5 years)
$ 24,000 Salvage value of existing machine (after 5 years)
$ 8,000 Changes to working capital:
Increase in accounts receivable
$ 15,000 Increase in inventory
$ 19,000 Increase in accounts payable
$ 16,000 EBDIT per year for the present machine next 5 years
$ 95,000 EBDIT for the proposed machine for next five years:
Year 1
$ 105,000 Year 2
$ 110,000 Year 3
$ 120,000 Year 4
$ 120,000 Year 5
$ 120,000 Tax
21%
Depreciation MACRS 5-year recovery
Year
Recovery
1
20%
2
32%
3
19%
4
12%
5
12%
6
5%
a.
Create a spreadsheet to calculate the initial investment.
Tax on sale of old machine
Purchase price of the old machine
Accumulated depreciation
− Depreciation for year 1
− Depreciation for year 2
− Depreciation for year 3
Total accumulated depreciation
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Book value of old machine at end of year 3
Selling price of old machine
Recaptured depreciation
Tax on recaptured depreciation
Change in net working capital
Increase in accounts receivable
$ 15,000 Increase in inventory
$ 19,000 Change in current assets
Increase in acounts payable
$ 16,000 Change in current liabilities
Change in working capital
Installed cost of new machine
Cost of machine
$ 145,000 Installation cost
$ 15,000 Total installed cost − proposed (depreciable value)
After-tax proceeds from sale of old machine
Proceeds from sale of old machine
$ 70,000 Tax on sale of old machine
$ - Total after-tax proceeds
Change in net working capital
Initial Cash Flow b.
Depreciation Schedule With Proposed Machine
Year
Cost
Rate
Depreciation
1
$ 160,000 100%
2
3
4
5
6
Total
Create a spreadsheet to prepare a depreciation schedule for both the prop
machines are depreciated under MACRS using a 5-year recovery period.
only 3 years of depreciation remaining.
Depreciation Schedule With Present Machine
Year
Cost
Rate
Depreciation
1
$ 120,000 12%
2
$ 120,000 12%
3
$ 120,000 5%
4
5
6
c.
Year 1
Year 2
With proposed machine
Earnings before depr., int. and taxes
$ 105,000 $ 110,000 − Depreciation
$ - $ - Earnings before interest and taxes
− Taxes
21%
Net operating profits after taxes
+ Depreciation
$ - $ - Operating cash flows
With present machine
Earnings before depr., int. and taxes
$ 95,000 $ 95,000 − Depreciation
$ - $ - Earnings before interest and taxes
− Taxes
21%
Net operating profits after taxes
+ Depreciation
$ - $ - Periodic cash flows
d.
Create a spreadsheet to calculate the terminal cash flow associated with t
After-tax proceeds from sale of proposed machine
Proceeds from sale of proposed machine
Book value as of end of year 5
Net gain
Tax on gain
21%
Create a spreadsheet to calculate the periodic cash flows for Damon Corp
present machine.
Total after-tax proceeds - proposed
After-tax proceeds from sale of present machine
Proceeds from sale of present machine
Book value as of end of year 5
Net gain
Tax on gain
21%
Total after-tax proceeds - present
Change in net working capital
Terminal Cash Flow
Requirements
1
2
3
4
5
6
7
8
9
10
11
12
13
In cell G52
, by using cell references to the given data, calculate the depre
In cell G53
, by using cell references to the given data, calculate the depre
In cell G54
, by using cell references to the given data, calculate the depre
In cell H55
, by using cell references to the given data, calculate the total machine.
In cell H57
, by using cell references to the given data, calculate the book
year 3.
In cell H59
, by using cell references to the given data, calculate the recap
In cell H60
, by using cell references to the given data, calculate the tax o
In cell H65
, by using cell references to the given data, calculate the chan
In cell H68
, by using cell references to the given data, calculate the chan
In cell G71
, by using cell references to the data in cells G21
and G72
, ca
In cell H73
, by using cell references to the data in cells G71
and G72
, ca
machine.
In cell H77
, by using cell references to the given data, calculate the total machine.
In cell H79
, by using cell references to the given data, calculate the initia
In cell range F85:F90
, by using cell references to the given data, calculat
machine.
In cell F91
, by using cell references to the given data, calculate the total In cell range F95:F100
, by using cell references to the given data, calcul
machine. Enter =0
in those years without depreciation.
In cell F101
, by using cell references to the given data, calculate the total
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14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Save the workbook. Close the workbook and then exit Excel. Submit the
In cell range F106:J106
, the earnings before depreciation, interest and ta
years 1:5 are shown.
In cell range F107: J107
, the depreciation expense with the proposed ma
In cell range F108:J108
, by using cell references to the given data, calcu
for years 1:5 of the new machine.
In cell range F109:J109
, by using cell references to the given data, calcu
machine.
In cell range F110:J110
, by using cell references to the given data, calcu
years 1:5 of the new machine.
In cell range F111:J111
, the depreciation expense with the proposed mac
In cell range F112:J112
, by using cell references to the given data, calcu
of the new machine.
In cell range F115:J115
, the earnings before depreciation, interest and ta
1:5 are shown.
In cell range F116: J116
, the depreciation expense with the current mach
In cell range F117:J117
, by using cell references to the given data, calcu
for years 1:5 of the old machine.
In cell range F118:J118
, by using cell references to the given data, calcu
machine.
In cell range F119:J119
, by using cell references to the given data, calcu
years 1:5 of the old machine.
In cell range F120:J120
, the depreciation expense with the current mach
In cell range F121:J121
, by using cell references to the given data, calcu
of the old machine.
In cell H128
, by using cell references to the given data, calculate the net In cell H129
, by using cell references to the given data, calculate the tax In cell I130
, by using cell references to the given data, calculate the total
In cell H135
, by using cell references to the given data, calculate the net In cell H136
, by using cell references to the given data, calculate the tax In cell I137
, by using cell references to the given data, calculate the total
In cell I139
, by using cell references to the given data, calculate the term
following:
the project.
y in use that was originally purchased 3 ng a 5-year recovery period. Once removal or the old machine will be $70,000. ion costs of $15,000). The new machine acquires the new machine, its working y will increase $19,000, and accounts he old machine are expected to be $95,000 A for each of the next 5 years are $105,000, rate (T) for the firm is 21%.
d machine should net $8,000 upon net working capital investment. The firm is posed and the present machine. The old Assume that the new machine qualifies for 3 years of depreciation remaining.
poration for both the proposed and the
$ 120,000
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$ 70,000 $ 16,000 $ - posed and the present machine. Both . Remember that the present machine has
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Year 3
Year 4
Year 5
Year 6
$ 120,000 $ 120,000 $ 120,000 $ - $ - $ - $ - $ - $ - $ 95,000 $ 95,000 $ 95,000 $ - $ - $ - $ - $ - $ - the project.
$ 24,000 $ - poration for both the proposed and the
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$ 8,000 $ - $ - Points
1
1
1
1
1
1
1
1
1
1
1
1
1
6
1
6
1
eciation for year 1 of the old machine.
eciation for year 2 of the old machine.
eciation for year 3 of the old machine.
accumulated depreciation of the old k value of the old machine at the end of ptured depreciation.
on the recaptured depreciation.
nge in current assets.
nge in working capital.
alculate the cost of the new machine.
alculate the installed cost of the new after-tax proceeds from sale of the old al cash flow.
te the depreciation schedule of the new depreciation of the new machine.
late the depreciation schedule of the old l depreciation of the old machine.
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0
5
5
5
0
5
0
5
5
5
0
5
1
1
1
1
1
1
1
e workbook as directed.
0
axes with the proposed machine for the achine for the years 1:5 are shown.
ulate the earnings before interest and taxes ulate the taxes for years 1:5 of the new ulate the net operating profits after taxes for chine for the years 1:5 are shown.
ulate the operating cash flows for years 1:5 axes with the current machine for the years hine for the years 1:5 are shown.
ulate the earnings before interest and taxes ulate the taxes for years 1:5 of the old ulate the net operating profits after taxes for hine for the years 1:5 are shown.
ulate the periodic cash flows for years 1:5 gain of the new machine.
on gain of the new machine.
l after-tax proceeds of the new machine.
gain of the old machine.
on gain of the old machine.
l after-tax proceeds of the old machine.
minal cash flow.
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Consider the following project cash flow.
YEAR
CASH FLOW
0
-1000
1
500
2
500
3
500
4
500
5
500
Use this information to calculate the Internal Rate of Return by linear interpolation(the trial and error method).
WITH WORKING PLEASE
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Using Excel, create a table that shows the relationship between the interestearned and the amount deposited, as shown. we will first create the dollar amount column and the interest row, as shown . Next we will type into cell B3 the formula = $A3*B$2. We can now use the Fill command to copy the formula in other cells, resulting in the table as shown. Note that the dollar sign before A3 means column A is to remain unchanged in the calculations when the formula is copied into other cells. Also note that the dollar sign before 2 means that row 2 is to remain unchanged in calculations when the Fill command is used.
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From the dropdown box beside each numbered balance sheet item, select the option of its balance sheet classification. If the item should not appear on the balance sheet, choose the option "No item required" from the selection choices.
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Determine the present value of the following single amounts.
Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. (FV of $1, PV
of $1, FVA
of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Determine the present value of the following single amounts.
Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA
of $1, PVA of $1, FVAD of $1 and PVAD of $1)
1.
2.
3.
4.
Future Amount
$
25,000
$
19,000
$
30,000
$
45,000
¡=
6%
10%
12%
11%
n =
11
14
29
10
Present Value
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Typed plz and asap thanks please provide me. A quality solution take care of plagiarism
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Explain how Monte Carlo simulation can be used to help set afirm’s target cash balance.
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1. Basic concepts
A. Finance, or financial management, requires the knowledge and precise use of the language of the field.
Match the terms relating to the basic terminology and concepts of the time value of money on the left with the descriptions of the terms on the right. Read each description carefully and type the letter of the description in the Answer column next to the correct term. These are not necessarily complete definitions, but there is only one possible answer for each term.
Term
Answer
Description
Discounting
A.
A schedule or table that reports the amount of principal and the amount of interest that make up each payment made to repay a loan by the end of its regular term.
Time value of money
B.
A loan in which the payments include interest as well as loan principal.
Amortized loan
C.
A value that represents the interest paid by borrowers or earned by lenders, expressed as a percentage of the amount borrowed or invested over a…
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I've found out the EVA for each one as you can see but don't know how to calculate ROC. I think it's operating income/capital charge. Anyways I wanted to ask how I would solve part B which is telling me to examine. Can you tell me what you would do for B
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All parts are under one questions and per your policy therefore all parts can be answered.
1. Concepts used in cash flow estimation and risk analysis
You can come across different situations in your life where the concepts from capital budgeting will help you in evaluating the situation and making calculated decisions. Consider the following situation:
The following table contains five definitions or concepts. Identify the term that best corresponds to the concept or definition given.
A.
Concept or Definition
Term
A computer-generated probability simulation of the most likely outcome, given a set of probable future events
The most likely scenario in a capital budgeting analysis
A measure of the project’s effect on the firm’s earnings variability
A method to determine market risk by using the betas of single-product companies in a given industry
The risk that is measured by the project’s beta coefficient
B. Marston…
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1. Basic concepts
Finance, or financial management, requires the knowledge and precise use of the language of the field.
A. Match the terms relating to the basic terminology and concepts of the time value of money on the left with the descriptions of the terms on the right. Read each description carefully and type the letter of the description in the Answer column next to the correct term. These are not necessarily complete definitions, but there is only one possible answer for each term.
Term
Answer
Description
Discounting
A.
A cash flow stream that is generated by a share of preferred stock that is expected to pay dividends every quarter indefinitely.
Time value of money
B.
A cash flow stream that is created by an investment or loan that requires its cash flows to take place on the last day of each quarter and requires that it last for 10 years.
Amortized loan
C.
A cash flow stream that is created by a lease that requires the payment to…
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what are the three sections for debits, credits, and total. Here is a picture with an empy cells for what it should look like. The blue cells should be from the chart of accounts
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