Which of the following would be most likely beincluded as part of free cash flows?The lost revenue that could have been used if awarehouse was leased outThe cost of an already completed marketing studyThe interest that will be paid to debt holders tofinance the projectThe salary paid to the firm's CEOToUN스용515

The amount available to the shareholders as a result of uptaking an investment is known as the…

Answered: Which of the following would be most…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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. The payback period The payback method helps firms establish and identify a maximum acceptable payback period that helps in their capital budgeting decisions. Consider the case of Cold Goose Metal Works Inc.: Cold Goose Metal Works Inc. is a small firm, and several of its managers are worried about how soon the firm will be able to recover its initial investment from Project Delta’s expected future cash flows. To answer this question, Cold Goose’s CFO has asked that you compute the project’s payback period using the following expected net cash flows and assuming that the cash flows are received evenly throughout each year. Complete the following table and compute the project’s conventional payback period. For full credit, complete the entire table. (Note: Round the conventional payback period to two decimal places. If your answer is negative, be sure to use a minus sign in your answer.) Year 0 Year 1 Year 2 Year 3 Expected cash flow -$6,000,000…
In the textbook's capital budgeting examples, the book assumes that the firm recovers all of its working capital invested into a project. In the real world, is this a reasonable assumption? Justify your position and discuss when it would
Why is understanding the relationship between the cash conversion cycle (CCC) and net working capital important to the contemporary business executive? Explain ways in which executive decisions regarding the CCC and net working capital can affect a company both adversely and beneficially. Support your response with a specific example from the business world.
The payback method helps firms establish and identify a maximum acceptable payback period that helps in their capital budgeting decisions. Consider the case of Green Caterpillar Garden Supplies Inc.: Green Caterpillar Garden Supplies Inc. is a small firm, and several of its managers are worried about how soon the firm will be able to recover its initial investment from Project Alpha’s expected future cash flows. To answer this question, Green Caterpillar’s CFO has asked that you compute the project’s payback period using the following expected net cash flows and assuming that the cash flows are received evenly throughout each year. Complete the following table and compute the project’s conventional payback period. For full credit, complete the entire table. (Note: Round the conventional payback period to two decimal places. If your answer is negative, be sure to use a minus sign in your answer.) Year 0 Year 1 Year 2 Year 3 Expected cash flow -$4,500,000…
Should interest expenses and dividend be included as an incremental cash flow in capital budgeting analysis? Please explain.
Incremental cash flows: a. refer to only cash flows which occur at the end of a project b. are cash flows which change if you proceed with the project c. refer to only cash flows which occur at the start of a project d. are never included in capital budgeting analysis e. refer to the existing cash flows of the business
Now that Hurd has more specifically located the source of the economic exposure, Unit B, it is considering ways to hedge this exposure. Since Unit B finances some of its operations, one idea being considered by Hurd management is a change the financial structure of Unit B to a mix of financing in dollars and financing in pounds. Note: Assume the interest rate on pounds is approximately equal to the interest rate on dollars. Career Success Tips ates, Unit B will need revenue of Unit B. TOTAL SCORE: 2/3 more fewer dollars for loan payments, which would partially offset the effect of this appreciation on the Grade Final Step
1. Interactions between financial market participants Financial markets facilitate the transfer of excess funds from those who have them to those who need them. In the following table, determine whether each financial market participant is a surplus unit or deficit unit. Financial Market Participant A state that is constantly running a budget deficit A firm that issues equity securities to expand operations A consumer that purchases equity securities from a new tech company Surplus Unit Deficit Unit S An angel investor Suppose Moonlit Productions needs to raise money to finance its new manufacturing facility, but their CFO does not want to part with any of the firm's equity. In this case, Moonlit Productions would likely issue securities to obtain the funding. Which of the following are ways that Moonlit Productions could obtain funds to finance the expansion of its operations, given its stated preference in the previous question? Check all that apply. Issue common stocks Issue…
Which of the following is a drawback of payback period method of investment appraisal? Oit is cash flow based OIt consider the time value of money it does not measure potential impact on shareholder wealth OIt is profit based
Understanding the impact of debt in the capital structure Suppose you are conducting a workshop on capital structure decisions and you want to highlight certain key issues related to capital structure. Your assistant has made a list of points for your session, but he thinks he might have made some mistakes. Review the Ilist and identify which items are correct. Check all that apply. Workshop Talking Points An increase in debt financing beyond a certain point is likely to increase the firm's cost of equity. An increase in debt financing decreases the risk of bankruptcy. An increase in the risk of bankruptcy is likely to reduce a firm's free cash flows in the future. Risks of bankruptcy increase management spending on perquisites and increase agency costs. The pretax cost of debt increases as a firm's risk of bankruptcy increases.
Several factors affect a firm’s need for external funds. Evaluate the effect of each following factor and place a check next to each factor that is likely to increase a firm’s need for external capital—that is, its AFN (additional funds needed). Check all that apply. The firm increases its dividend payout ratio. The firm switches its supplier for the majority of its raw materials. The new supplier offers less favorable credit terms and thus reduces the trade credit available to the firm, resulting in a reduction in accounts payable. The firm improves its production system and increases its profit margin. Accounts payable and accrued liabilities represent obligations that the firm must pay off. Assuming everything else holds constant, if they increase, the firm’s AFN will_________ .

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