FUND.OF FINANCIAL MGMT:CONCISE-MINDTAP
10th Edition
ISBN: 9781337910972
Author: Brigham
Publisher: CENGAGE L
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Chapter 12, Problem 7Q
Summary Introduction
To identify: The difference among beta risk, within-firm risk and stand-alone risk of a project.
Introduction:
Beta Risk:
Beta risk is a systematic risk that can be reduced through a diversified portfolio or investment projects. It is based on the market related and known as market risk.
Within-firm Risk:
The firm or project specific risk is known as within-firm risk. It is based on the project and assumes that a particular project is the only investment. Hence, the risk associated with it cannot be diversified for the corporation.
Stand-alone Risk:
Stand-alone risk is based on the assumption that only one project is available with the company and the single stock is available for the investors. Therefore, the stand-alone risk cannot be diversified.
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General Finance Question
Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes):
Income Statement
Balance Sheet
Sales
Costs
$ 40,000 Assets
34,160
$26,000
Debt
Equity
$ 7,000
19,000
Net income $ 5,840
Total
$26,000
Total
$26,000
The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the
form of a cash dividend. Costs and assets vary with sales, but debt and equity do not.
Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate
calculations and round your answers to the nearest whole dollar amount.)
Pro forma income statement
Sales
Costs
$ 48000
40992
Assets
$ 31200
Pro forma balance sheet
Debt
7000
Equity
19000
Net income
$ 7008
Total
$ 31200
Total
30304
What is the external financing needed? (Do not round intermediate calculations. Negative amount
should be indicated by a minus sign.)
External financing needed
$
896
Chapter 12 Solutions
FUND.OF FINANCIAL MGMT:CONCISE-MINDTAP
Ch. 12 - Prob. 1QCh. 12 - Prob. 2QCh. 12 - Explain why net operating working capital is...Ch. 12 - Prob. 4QCh. 12 - Prob. 5QCh. 12 - Prob. 6QCh. 12 - Prob. 7QCh. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - If you were the CFO of a company that had to...
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