Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
3rd Edition
ISBN: 9780133507676
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Chapter 2, Problem 4P

Consider the following potential events that might have occurred to Global on December 30, 2016. For each one, indicate which line items in Global's balance sheet would be affected and by how much. Also indicate the change to Global's book value of equity.

  1. Global used $20 million of its available cash to repay $20 million of its long-term debt.
  2. A warehouse fire destroyed $5 million worth of uninsured inventory.
  3. Global used $5 million in cash and $5 million in new long-term debt to purchase a $10 million building.
  4. A large customer owing $3 million for products it already received declared bankruptcy, leaving no possibility that Global would ever receive payment.
  5. Global's engineers discover a new manufacturing process that will cut the cost of its flagship product by more than 50%.

1. A key competitor announces a radical new pricing policy that will drastically undercut Global's prices.

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Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)

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IAS 10 Events After the Reporting Period; Author: Silvia of CPDbox;https://www.youtube.com/watch?v=ijYZlb1_ZyQ;License: Standard Youtube License