Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 4DQ
Summary Introduction
To explain: The role that
Introduction:
Break-even analysis (BEP):
This analysis helps a firm to determine no
Cash flows analysis:
It is used to assess both activities of
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When using EBITDA instead of net
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expense added back?
O A. Depreciation and amortization
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OB. Depreciation and amortization
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how can depreciation be a cash flow?
b. Disregard the assumptions in Part a. What is the depreciable basis? What are the annual depreciation expenses?
c. Calculate the annual sales revenues and costs (other than depreciation). Why is it important to include inflation when estimating cash flows?
d. Calculate annual net operating profit after sales (NOPAT). Then calculate the operating cash flows.
Chapter 5 Solutions
Foundations of Financial Management
Ch. 5 - Discuss the various uses for break-even analysis....Ch. 5 - What factors would cause a difference in the use...Ch. 5 - Explain how the break-even point and operating...Ch. 5 - Prob. 4DQCh. 5 - What does risk taking have to do with the use of...Ch. 5 - Discuss the limitations of financial leverage....Ch. 5 - Prob. 7DQCh. 5 - Explain how combined leverage brings together...Ch. 5 - Explain why operating leverage decreases as a...Ch. 5 - Prob. 10DQ
Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Draw two break-even graphs-one for a conservative...Ch. 5 - Prob. 5PCh. 5 - Shawn Pen & Pencil Sets Inc. has fixed costs of ....Ch. 5 - Calloway Cab Company determines its break-even...Ch. 5 - Prob. 8PCh. 5 - Boise Timber Co. computes its break-even point...Ch. 5 - The Sterling Tire Company’s income statement for...Ch. 5 - Prob. 11PCh. 5 - Healthy Foods Inc. sells 50-pound bags of grapes...Ch. 5 - United Snack Company sells 50-pound bags of...Ch. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Lenow’s Drug Stores and Hall’s Pharmaceuticals...Ch. 5 - The capital structure for Cain Supplies is...Ch. 5 - Sterling Optical and Royal Optical both make glass...Ch. 5 - Prob. 19PCh. 5 - Sinclair Manufacturing and Boswell Brothers Inc....Ch. 5 - DeSoto Tools Inc. is planning to expand...Ch. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Mr. Gold is in the widget business. He currently...Ch. 5 - Delsing Canning Company is considering an...Ch. 5 - Prob. 2WECh. 5 - Prob. 3WECh. 5 - Prob. 4WECh. 5 - Prob. 5WE
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- (1)arrow_forwardWhich of the following is not true? GAP analysis Ignores changes in the market value of assets and liabilities. GAP analysis Ignores time value of money. GAP analysis is easy to compute and can accurately predicts the exact losses or gains Gap analysis fails to capture non-interest revenuearrow_forwardIf the total asset is smaller than total liabilities and equity on the balance sheet, what does that mean ( deficit or surplus)? And if it's a deficit should I add the AFN amount to cash and cash equivalents or to accruals and other payables? or to debt?arrow_forward
- Help plsarrow_forwardSelect all that are true with respect to depreciation. Group of answer choices Depreciation is a cash flow outflow at the time it is recorded in the financial statements Depreciation itself is not a cash flow Accounting depreciation impacts cash flow, Tax depreciation does not Accounting depreciation does not impact cash flow, Tax depreciation does impact cash flow The depreciation tax shield is a relevant cash flow for decision makingarrow_forwardWhich of the following is NOT a limitation of the payback rule? O It does not consider cash flows occurring after the payback period. O Lacks a decision criterion that is economically based. O It does not consider the time value of money. O It is difficult to calculate.arrow_forward
- Which of the following phrases best describes the term " actual cash value"? a. market value b. appraised value c. replacement cost less depreciation d. original cost less depreciationarrow_forwardWhy does an increase in the ratio of current assets to total assets decrease both profits and risk as measured by net working capital? How does changes in the ratio of current liabilities to total assets affect profitability and risk?arrow_forwardHow can the quality of financial statements be compromised? Discuss fully and explain, giving a numerical example, how the choice of a depreciation method can influence the accuracy of reportable earnings.arrow_forward
- Which sentence is incorrect? Select one: a. Depreciation is not the actual change in the value of the asset. b. Accumulated Depreciation account has effects on the cash flow statement. c. Accumulated Depreciation is called a contra asset account. d. Depreciation is the process of allocating the cost of an asset to expense, not a valuation process.arrow_forwardThe payback period method is inferior to the net present value method because it ________. is difficult to compute Deals with accounting income rather than cash flows Fails to consider cash flows beyond the payback periodarrow_forwardwould these be correct? What would be ?arrow_forward
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