The net present value using the adjusted present value method. Introduction: Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

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Answer 1

Question

Chapter 18, Problem 15P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

b)

Summary Introduction

To determine: The WACC of the project.

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

c)

Summary Introduction

To determine: The WACC using net present value method to verify the answer in part (a).

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

d)

Summary Introduction

To determine: The value of FCFE (free cash flow to equity).

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

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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

Answer 2

Question

Chapter 18, Problem 15P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

b)

Summary Introduction

To determine: The WACC of the project.

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

c)

Summary Introduction

To determine: The WACC using net present value method to verify the answer in part (a).

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

d)

Summary Introduction

To determine: The value of FCFE (free cash flow to equity).

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

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Answer 3

Question

Chapter 18, Problem 15P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

b)

Summary Introduction

To determine: The WACC of the project.

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

c)

Summary Introduction

To determine: The WACC using net present value method to verify the answer in part (a).

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

d)

Summary Introduction

To determine: The value of FCFE (free cash flow to equity).

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

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Answer 4

Question

Chapter 18, Problem 15P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

b)

Summary Introduction

To determine: The WACC of the project.

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

c)

Summary Introduction

To determine: The WACC using net present value method to verify the answer in part (a).

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

d)

Summary Introduction

To determine: The value of FCFE (free cash flow to equity).

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

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Answer 5

Chapter 18, Problem 15P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

b)

Summary Introduction

To determine: The WACC of the project.

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

c)

Summary Introduction

To determine: The WACC using net present value method to verify the answer in part (a).

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

d)

Summary Introduction

To determine: The value of FCFE (free cash flow to equity).

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

Answer 6

Chapter 18, Problem 15P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

Answer 7

Chapter 18, Problem 15P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

Answer 8

b)

Summary Introduction

To determine: The WACC of the project.

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

Answer 9

b)

Summary Introduction

To determine: The WACC of the project.

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

Answer 10

c)

Summary Introduction

To determine: The WACC using net present value method to verify the answer in part (a).

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

Answer 11

c)

Summary Introduction

To determine: The WACC using net present value method to verify the answer in part (a).

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

Answer 12

d)

Summary Introduction

To determine: The value of FCFE (free cash flow to equity).

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

Answer 13

d)

Summary Introduction

To determine: The value of FCFE (free cash flow to equity).

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 18.1 - What are the three methods we can use to include...Ch. 18.1 - Prob. 2CC Ch. 18.2 - Prob. 1CC Ch. 18.2 - Prob. 2CC Ch. 18.3 - Prob. 1CC Ch. 18.3 - Prob. 2CC Ch. 18.4 - Prob. 1CC Ch. 18.4 - Prob. 2CC Ch. 18.5 - How do we estimate a projects unlevered cost of...Ch. 18.5 - What is the incremental debt associated with a...

The net present value using the adjusted present value method. Introduction: Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

To determine: The net present value using the adjusted present value method. Introduction: Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

To determine: The WACC of the project. Introduction: WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

To determine: The value of FCFE (free cash flow to equity). Introduction: Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

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Chapter 18 Solutions

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

To determine: The WACC of the project.

Introduction:

WACC (Weighted Average Cost of Capital) is the rate at which a company is expected to pay (on an average) to all the security holders, in order to finance its assets.

To determine: The value of FCFE (free cash flow to equity).

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.