EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103164535
Author: DeMarzo
Publisher: PEARSON
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Chapter 31, Problem 3P
Etemadi Amalgamated, a U.S. manufacturing firm, is considering a new project in the euro area. You are in Etemadi’s
You know that the spot exchange rate is S = $1.15/ €. In addition, the risk-free interest rate on dollars is 4% and the risk-free interest rate on euros is 6%.
Assume that these markets are internationally integrated and the uncertainty in the free cash flows is not correlated with uncertainty in the exchange rate. You determine that the dollar WACC for these cash flows is 8.5%. What is the dollar
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Unite Assissment 02 : New City Band
Part 02:
Base & Flexible Budget
Base Budget
Flexible Budget
Fixed or Variable
Revenue
City Contributions
Fixed Annual Contribution
F
Per Concert Contributions
V
Public Contributions
V
Endowment Earnings
F
Total Revenue
Expenses
Conductors Stipend
F
Musicians Stipend
V
Insurance
Fixed Insurance Premium
F
Per-Concert Insurance Premium
V
Music Costs
Music Acquisitions
F
Performance Rights
V
Total Expenses
Surplus/(Deficit)
Sonja Jensen is considering the purchase of a fast-food franchise. Sonja will be operating on a lot that is to be converted into a parking lot in six years,
but that may be rented in the interim for $700 per month. The franchise and necessary equipment will have a total initial cost of $68,000 and a salvage
value of $9,000 (in today's dollars) after six years. Sonja is told that the future annual general inflation rate will be 5%. The projected operating
revenues and expenses (in actual dollars) other than rent and depreciation for the business are given in the table below. Assume that the initial
investment will be depreciated under the five-year MACRS and that Sonja's tax rate will be 30%. Sonja can invest her money at a rate of at least 14%
in other investment activities during this inflation-ridden period.
Click the icon to view the projected operating revenues and expenses.
Click the icon to view the MACRS depreciation schedules.
(a) Determine the cash flows associated with the…
Chapter 31 Solutions
EBK CORPORATE FINANCE
Ch. 31.1 - Prob. 1CCCh. 31.1 - What implication do internationally integrated...Ch. 31.2 - Prob. 1CCCh. 31.2 - When do these two methods give the same NPV of the...Ch. 31.3 - Prob. 1CCCh. 31.3 - Prob. 2CCCh. 31.4 - Prob. 1CCCh. 31.4 - Prob. 2CCCh. 31.5 - What conditions cause the cash flows of a foreign...Ch. 31.5 - Prob. 2CC
Ch. 31 - You are a U.S. investor who is trying to calculate...Ch. 31 - Mia Caruso Enterprises, a U.S. manufacturer of...Ch. 31 - Etemadi Amalgamated, a U.S. manufacturing firm, is...Ch. 31 - Prob. 4PCh. 31 - You work for a U.S. firm, and your boss has asked...Ch. 31 - Prob. 6PCh. 31 - Prob. 7PCh. 31 - Prob. 8PCh. 31 - Prob. 9PCh. 31 - Prob. 10PCh. 31 - Prob. 11PCh. 31 - Prob. 12PCh. 31 - Assume that in the original Ityesi example in...
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- Sonja Jensen is considering the purchase of a fast-food franchise. Sonja will be operating on a lot that is to be converted into a parking lot in six years, but that may be rented in the interim for $700 per month. The franchise and necessary equipment will have a total initial cost of $68,000 and a salvage value of $9,000 (in today's dollars) after six years. Sonja is told that the future annual general inflation rate will be 5%. The projected operating revenues and expenses (in actual dollars) other than rent and depreciation for the business are given in the table below. Assume that the initial investment will be depreciated under the five-year MACRS and that Sonja's tax rate will be 30%. Sonja can invest her money at a rate of at least 14% in other investment activities during this inflation-ridden period. Click the icon to view the projected operating revenues and expenses. Click the icon to view the MACRS depreciation schedules. (a) Determine the cash flows associated with the…arrow_forwardUnit 02 Part 3: New City BandAs the volunteer business manager for the New City Band (City Band), you are responsible for preparing the operating budget for the organization’s upcoming summer concert season. Each year, City Band presents up to 20 weekend performances, depending on weather conditions. The concerts are free to the public,but the band hangs a pot from the bandstand and people leave small donations in it. On average, City Band gets $100 in donations at each of its performances. In addition to donations, New City pays the band $3,000 per season plus $125 for each performance.City Band also has a small endowment of $100,000 on which it expects to earn 3.5 percent in the coming fiscal year. City Band’s trustees have decided to use that money to pay for operating expenses if they need to.City Band pays its conductor $3,000 for the summer season and has aninsurance policy to protect it against any loss of equipment or damage to the bandstand. That policy costs the band…arrow_forwardhow to solvearrow_forward
- How much working capital does Airbnb have for the year 2024? Discuss the components of working capital and calculations. What is the amount of the total assets that Airbnb reported for the year 2024? List the assets included. What is the amount of the total liabilities that tAirbnb reported for the year 2024? List the liabilities included.arrow_forwardHow much working capital does Airbnb have for the year 2024? State the components of working capital and calculations. What is the amount of the total assets that Airbnb reported for the year of 2024 and list the assets?arrow_forwardWhat is an account that requires present value calculations. State both the account name and the amount for the account you select. What inventory method does Airbnb employ and explain how this method works? Calculate Airbnb inventory turnover for the year 2024. What does inventory turnover tells an investor?arrow_forward
- What was the free cash flow for the year 2024 for Airbnb and formula used for their calculations? Explain the importance of free cash flow.arrow_forwardWhat is the useful lives for the various types of property, plant, and equipment owned by Airbnb?arrow_forwardWhat depreciation method does Airbnb employ and how does this depreciation method works? Does Airbnb have any impaired assets?arrow_forward
- New City BandAs the volunteer business manager for the New City Band (City Band), you are responsible for preparing the operating budget for the organization’s upcoming summer concert season. Each year, City Band presents up to 20 weekend performances, depending on weather conditions. The concerts are free to the public,but the band hangs a pot from the bandstand and people leave small donations in it. On average, City Band gets $100 in donations at each of its performances. In addition to donations, New City pays the band $3,000 per season plus $125 for each performance.City Band also has a small endowment of $100,000 on which it expects to earn 3.5 percent in the coming fiscal year. City Band’s trustees have decided to use that money to pay for operating expenses if they need to.City Band pays its conductor $3,000 for the summer season and has aninsurance policy to protect it against any loss of equipment or damage to the bandstand. That policy costs the band $500 for the summer plus…arrow_forwardWhat are asset type and the useful lives for a company mean?arrow_forwardWhat was the amount of cash (and cash equivalents) that Airbnb reported for the year of 2024? State the amounts for each item you included in this number. How much working capital does Airbnb have for the year 2024? State the components of working capital and calculations. What is the amount of the total assets that Airbnb reported for the year of 2024 and list the assets?arrow_forward
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Working capital explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=XvHAlui-Bno;License: Standard Youtube License