EP FINANCIAL MARKET+INSTITUTION-LRNSMRT
7th Edition
ISBN: 9781264326006
Author: SAUNDERS
Publisher: MCG COURSE
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Question
Chapter 10, Problem 1DYU
Summary Introduction
To discuss: The difference between spot, forward and future contract.
Expert Solution & Answer
Explanation of Solution
Spot contract:
Spot contract is a contract in which purchasing and selling of currency, commodity, or security for sudden settlement on the spot date. Which is usually two business days after the transaction date.
Future contract:
Future contract is a standardized contract of buying and selling of underlying asset in a specified price and particular time in future.
Forward contract:
Forward contract is an agreement between parties to buy or sell an underlying asset in future at a specified date, and certain price.
The main differences between spot forward and future contract is as follows:
| Spot contract | Forward contract | Future contract |
| It is used to merchandise the commodity. | It is used to hedge against the price changes | It is used to hedge against the price changes |
| Trades in uneven amounts | Specified amount | Predetermined amount |
| There is a sudden settlement | On maturity | On a daily basis |
| Immediate contract | Customized contract | Standardized contract |
| No need of collateral | Collateral not required | Initial margin needed |
| Self-regulated | Self-regulated | Stock exchange |
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QUESTION #1:
A) What is the Net Operating Profit After Tax (NOPAT) for 2024?B) What is the Operating Cash Flow for 2024?
C) What is the Free Cash Flow for 2024?
Note: Marketable securities are non-operating current assets, and short-term debt (bank loan) is a non-operating current liability. Both of these items are excluded from the calculation of net operating working capital.
D) If the stock trades for $85 per share at the end of 2024, and there are 315,000 shares outstanding, what is the MVA in 2024?
E) Given that the firm’s WACC is 14%, what is the EVA during 2024?
F) Create common size income statement and balance sheet for 2024, 2023 and 2022.
G) Using 2022 as the base year, create income statement and balance sheet percentage change analysis for 2024 and 2023.
QUESTION #2:
In addition to the AAA Ltd. financial statements in Problem One, you are given more information as follows.
Sales are forecast to increase by 80% in 2025.
Short-term Debt, Long-term Debt, and Common…
Chapter 10 Solutions
EP FINANCIAL MARKET+INSTITUTION-LRNSMRT
Ch. 10 - Prob. 1DYUCh. 10 - Prob. 2DYUCh. 10 - Prob. 3DYUCh. 10 - Prob. 4DYUCh. 10 - Prob. 5DYUCh. 10 - Prob. 6DYUCh. 10 - Prob. 7DYUCh. 10 - Prob. 8DYUCh. 10 - Prob. 9DYUCh. 10 - Prob. 10DYU
Ch. 10 - Prob. 11DYUCh. 10 - Prob. 12DYUCh. 10 - Prob. 13DYUCh. 10 - Prob. 14DYUCh. 10 - Prob. 15DYUCh. 10 - Prob. 1QCh. 10 - Prob. 2QCh. 10 - Prob. 3QCh. 10 - Prob. 4QCh. 10 - Prob. 5QCh. 10 - Prob. 6QCh. 10 - Prob. 7QCh. 10 - Prob. 8QCh. 10 - Prob. 9QCh. 10 - Prob. 10QCh. 10 - Prob. 11QCh. 10 - Prob. 12QCh. 10 - Prob. 13QCh. 10 - Prob. 14QCh. 10 - Prob. 15QCh. 10 - Prob. 16QCh. 10 - Prob. 17QCh. 10 - Prob. 18QCh. 10 - Prob. 19QCh. 10 - Prob. 20QCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10PCh. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16PCh. 10 - An insurance company owns $50 million of...
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