FNC 440
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FINC 440
Student’s Name
Institutional Affiliation
Instructor
Due Date
2
FINC 440
1.
WACC
WACC = Wd × Rd × (1 - t) + Wp × rp + We × Re
Wd = the percentage of the form's existing debt that is used when further funds are raised
Rd is an abbreviation for the marginal cost of debt pre-tax.
T = the tax rate at the margin
Wp is the percentage of preferred stock that the company issues in order to raise additional
capital.
Rp is an abbreviation for "marginal cost of preferred stock."
When it comes to obtaining additional cash, "we" refers to the share of stock that the company
utilizes.
R = the equity's marginal cost of capital
In order to determine the WACC, many rates must be used, including the return on the
firm’s ordinary stock, the return on its preferred stock, and the return on its long-term debt. The
business's WACC may be determined by using the information provided in the company form,
including the cost of equity, total equity, total debt, cost of capital, and corporation tax. Only the
cost of debt and the cost of equity need to be determined.
Cost of Debt
= Interest Expenses/Total Debt
= 2063 / 64522.5 = 3.1973 percent.
13.47 percent is the most recent two-year average tax rate.
3
Cost of Equity
= Risk-free rate of return + beta × (Expected rate of return – risk-free rate of
return)
Cost of Equity
= 3.507 percent + 0.90 (6 percent) = 8.907 percent
Weighted Average Cost of Capital
=
E / (E + D) × Cost of Equity + D / (E + D) × Cost of
Debt × (1 - Tax Rate)
=
0.9662 × 8.907% + 0.0338 × 3.1973% × (1 - 13.47%)
WACC
=
8.7%
2.
Beta
The beta measure of the asset's susceptibility to changes in the market's anticipated
return. Beta for Microsoft is at 0.90. A high beta indicates not just high risk but also high profits.
A lower beta indicates that there is less volatility in the stock (
Giese et al., 2019)
.
3.
Managing Earnings
Microsoft Company appears to manage earnings. For the three months ending in December
2022, Microsoft's Cost of Goods Sold amounted to $17,488,000,000. For the quarter ending in
December 2022, revenue was $52,747,000,000. For the quarter ending in December of 2022,
Microsoft's Cost of Goods Sold to Revenue ratio was 0.33. The company's bottom line is
influenced by its COGS because of the relationship between the two metrics of Gross Margin
and Cost of Goods Sold. For the fiscal quarter ending in December of 2022, Microsoft had a
gross margin of 66.85 percent, thus Microsoft appears to manage the earnings. When a
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4
company's yearly profits fluctuation is modest or nonexistent, it is a sign that the company's
earnings have stabilized.
4.
Most Important Things Learned
Readings and studying this week taught me how to compute the WACC, which is the
most significant thing I picked up, and I also gained more knowledge about the firm I chose to
analyze for this class. Those discoveries will be of use to me with the tasks that are to come in
this class.
5
Reference
Giese, G., Lee, L. E., Melas, D., Nagy, Z., & Nishikawa, L. (2019). Foundations of ESG
investing: How ESG affects equity valuation, risk, and performance.
The Journal of
Portfolio Management
,
45
(5), 69-83.
Related Questions
Match each term with it's definition.
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Font
Paragraph
Drawing
EXAMPLE 4:
The capital employed in a business has been financed, as below:
Equity Share Capital
OMR 600,000
7% Preference Share Capital
OMR 400,000
6% Debentures
OMR 800,000
OMR 200,000
Reserves and Surplus
The company earns a profit of OMR 4,00,000 before interest and Tax.
Calculate Return on capital employed (ROCE)
ces
NOTES
COMMENTS
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Aa v
AaBbCcDdEe
AaBbCcDdE
AaBbCcDdEe
Normal
Body Text
List Paragraph
No Spacing
Table Par
-Ov A v
Question 1: In the table below, you are given the financial performance indicators forCari Farm
during the period 2018 to 2020.
田
Cari Farm
Industry
Performance Area
2018
2019
2020
2018
2019
2020
Leverage:
Assets/Equity
Debt/Equity (%)
Interest Coverage
0.81
1.21
0.92
1.00
1.20
1.15
101.3
81.5
81.6
73.0
77.0
81.0
1.63
2.78
2.04
4.00
3.50
3.30
Liquidity:
Current Ratio
1.22
1.49
1.45
2.00
1.70
1.50
Acid-test Ratio
1.10
1.30
1.20
1.00
0.90
0.90
Profitability:
Profit Margin (%)
11.77
15.58
10.81
15.60
15.71
15.80
Efficiency:
Revenue/Assets
0.47
0.49
0.50
0.60
0.62
0.68
Please use the table above to answer the following questions:
a. Discuss the trend analysis on how Cari Farm performed over the period for each ratio
category.
b. Report on how Cari Farm performed as compared to the industry norms for each ratio
category.
c. Calculate the return on assets (ROA) as a percent and the return on…
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Match the words with the term.
Question 6 options:
12345
financial need
12345
risk capital
12345
internal source
12345
external sources
12345
financing requirement
1.
working capital
2.
subordinated debt
3.
lenders
4.
short-term debt
5.
retained earnings
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Is the balance column for profit and loss (capital equity) a CR or DR?
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Melissa Jucarez
u/22/2021
Corporate finance
TRB Of the fallowing see of ccsh flous?
Year
what
19 the
COsh Flows
-18.700
1
9,400
10,400
3
6is00
arrow_forward
Please send complete handwritten solution for Q7
only handwritten solution accepted
arrow_forward
Use the following information for Cronos Group, Inc. (CRON):
EBIT / Revenue
25.50%
Government Tax Rate
42.50%
Revenue / Assets
1.95 times
Current Ratio
3.15 times
EBT / EBIT
0.80 times
Assets / Equity
2.00 times
Its interest coverage ratio is closest to:
A.
2.50.
B.
5.00.
C.
7.15.
D.
9.25.
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Princip X
Princip X
Princip X
L Accorc X
* Sophia X
Premie X
UNIT
Princip X
https://strayer.sophia.org/spcc/principles-of-finance-practice-milestone-1-1/4
Question
Unit 1 Tutorials
6 If your
Consider the P/E ratios of the following companies:
Company A: 5.34
• Company B: 3.33
Company C: 7.90
Company D: 6.75
Company C is more
per unit of current net income than Company B.
O expensive
O economical
O volatile
O affordable
SAVE AND CONTINUE
"pe here to search
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Problem 17-5 (AICPA Adapted)
Investment in Hall Company at equity
statement of financial position:
Accounts receivable, net of allowance
Fearsome Company showed the following comparative
2021
2020
Cash and cash equivalents
2,350,000
600,000
1,000,000
2,200,000
2,000,000
5,000,000
1,050,000) ( 800,000)
400,000
350,000
700,000
850,000
2,000,000
1,500,000
4,000,000
Inventory
Land
Property, plant and equipment.
Accumulated depreciation
Goodwill
400,000
12,500,000
9,000,000
Accounts payable
Note payable - long term
Bonds payable
Share capital, P100 par
Share premium
Retained earnings
Treasury shares, at cost
600,000
500,000
1,600,000
5,250,000
2,700,000
1,850,000
550,000
2,100,000
4,000,000
1,750,000
1,300,000
700,000)
12,500,000
9,000,000
Additional information for 2021
1. The net income for the current year was P3,050,000.
2. Cash dividend paid amounted to P2,500,000.
3. The entity sold equipment costing P200,000, with carrying
amount of P50,000, for P70,000 cash.
4. The entity issued…
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Q7 Prepare common size Balance Sheet of XRI Ltd. from the following information:
Particulars
I. Equity and Liabilities
1. Shareholders' Fund
a) Share capital
b) Reserves and surplus
2. Non-current liabilities
Long-term borrowings
3. Current liabilities
Trade Payable
Total
II. Assets
1. Non-current assets
a) Fixed assets
- Tangible asset
Total
Plant & machinery
- Intangible assets
Goodwill
b) Non-current investments
2. Current assets
Inventories
Note No. March 31,
2016
15,00,000
5,00,000
6,00,000
14,00,000
March 31,
2017
16,00,000
10,00,000
12,00,000
5,00,000
15,50,000
10,50,000
41,50,000 32,50,000
5,00,000
8,00,000
12,00,000
10,00,000
1,50,000
2,50,000
41,50,000 32,50,000
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Please answer fast I will rate for you sure....
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Please do not give solution in image format thanku
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REQUIREMENTS
1. Recommendation for company A
2. Conclusion for company A
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Can you please help with December 31?
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1
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Evaluation Scale
7:33
8
7
5-6
Debt (Liabilities) and Equity
Current debt:
10
Accounts payable
Accruals
Short-term notes
Total current debt
Long-term debt
Total debt
Equity
TOTAL DEBT AND
EQUITY
$10,000 $12,000
$7,000 $8,000
$5,000 $5,000
$22,000 $25,000
Directions: answer the following questions:
1. Given the information provided by the financial statements,
what would you tell Abrahams? (As part of your answer,
calculate the firm's cash flows.)
2. How would you describe the cash flow pattern for the Maitz
Company?
$15,000 $15,000
In 500-750 words, submit this assignment in MS Word to your
instructor via the dropbox. This assignment is worth 30 marks.
You will be graded on the following evaluation rubric:
Evaluation Scale x Criteria = Total Marks
$37,000 $40,000
$55,000 $60,000
9-10 Exemplary level of performance or understanding.
Mastery level of performance or understanding.
Approaching mastery level of performance or understanding.
Adequate level of performance or understanding not…
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- Match each term with it's definition.arrow_forwardFont Paragraph Drawing EXAMPLE 4: The capital employed in a business has been financed, as below: Equity Share Capital OMR 600,000 7% Preference Share Capital OMR 400,000 6% Debentures OMR 800,000 OMR 200,000 Reserves and Surplus The company earns a profit of OMR 4,00,000 before interest and Tax. Calculate Return on capital employed (ROCE) ces NOTES COMMENTSarrow_forwardAa v AaBbCcDdEe AaBbCcDdE AaBbCcDdEe Normal Body Text List Paragraph No Spacing Table Par -Ov A v Question 1: In the table below, you are given the financial performance indicators forCari Farm during the period 2018 to 2020. 田 Cari Farm Industry Performance Area 2018 2019 2020 2018 2019 2020 Leverage: Assets/Equity Debt/Equity (%) Interest Coverage 0.81 1.21 0.92 1.00 1.20 1.15 101.3 81.5 81.6 73.0 77.0 81.0 1.63 2.78 2.04 4.00 3.50 3.30 Liquidity: Current Ratio 1.22 1.49 1.45 2.00 1.70 1.50 Acid-test Ratio 1.10 1.30 1.20 1.00 0.90 0.90 Profitability: Profit Margin (%) 11.77 15.58 10.81 15.60 15.71 15.80 Efficiency: Revenue/Assets 0.47 0.49 0.50 0.60 0.62 0.68 Please use the table above to answer the following questions: a. Discuss the trend analysis on how Cari Farm performed over the period for each ratio category. b. Report on how Cari Farm performed as compared to the industry norms for each ratio category. c. Calculate the return on assets (ROA) as a percent and the return on…arrow_forward
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