EBK CORPORATE FINANCE
4th Edition
ISBN: 9780134202785
Author: DeMarzo
Publisher: VST
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Question
Chapter 9.3, Problem 2CC
Summary Introduction
To find: The enterprise value of a firm
Introduction:
Enterprise value:
It is the total economic value of the firm. Enterprise value is the total aggregate value of enterprises on its current market capitalization.
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Students have asked these similar questions
Crenshaw, Incorporated, is considering the purchase of a $367,000 computer with an economic life of five years. The computer will be
fully depreciated over five years using the straight-line method. The market value of the computer will be $67,000 in five years. The
computer will replace five office employees whose combined annual salaries are $112,000. The machine will also immediately lower
the firm's required net working capital by $87,000. This amount of net working capital will need to be replaced once the machine is
sold. The corporate tax rate is 22 percent. The appropriate discount rate is 15 percent. Calculate the NPV of this project.
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
NPV
Answer is complete but not entirely correct.
S 103,141.80
Your firm is contemplating the purchase of a new $610,000 computer-based order entry system. The system will be depreciated
straight-line to zero over its five-year life. It will be worth $66,000 at the end of that time. You will save $240,000 before taxes per year
in order processing costs, and you will be able to reduce working capital by $81,000 (this is a one-time reduction). If the tax rate is 21
percent, what is the IRR for this project?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
IRR
%
QUESTION 1
Examine the information provided below and answer the following question.
(10 MARKS)
The hockey stick model of start-up financing, illustrated by the diagram below, has received a lot of attention in the
entrepreneurial finance literature (Cumming & Johan, 2013; Kaplan & Strömberg, 2014; Gompers & Lerner, 2020). The model
is often used to describe the typical funding and growth trajectory of many startups. The model emphasizes three main
stages, each of which reflects a different phase of growth, risk, and funding expectations.
Entrepreneur, 3 F's
Debt(banks & microfinance)
Research Business angels/Angel Venture funds/Venture capitalists
Merger, Acquisition
Grants
investors
PO
Public market
Growth (revenue)
Break even
point
Pide
1st round
Expansion
2nd round
3rd round
Research
commercial idea
Pre-seed
Initial concept
Seed
Early
Expansion
Financial stage
Late
IPO
Inception and
prototype
Figure 1. The hockey stick model of start-up financing (Lasrado & Lugmayr, 2013)
REQUIRED:…
Chapter 9 Solutions
EBK CORPORATE FINANCE
Ch. 9.1 - How do you calculate the total return of a stock?Ch. 9.1 - Prob. 2CCCh. 9.2 - In what three ways can a firm increase its future...Ch. 9.2 - Under what circumstances can a firm increase its...Ch. 9.3 - How does the growth rate used in the total payout...Ch. 9.3 - Prob. 2CCCh. 9.3 - Prob. 3CCCh. 9.4 - Prob. 1CCCh. 9.4 - What implicit assumptions are made when valuing a...Ch. 9.5 - State the efficient market hypothesis.
Ch. 9.5 - Prob. 2CCCh. 9 - Assume Evco, Inc., has a current price of 50 and...Ch. 9 - Anle corporation has a current price of 20, is...Ch. 9 - Suppose Acap Corporation will pay a dividend of...Ch. 9 - Prob. 4PCh. 9 - NoGrowth Corporation currently pays a dividend of...Ch. 9 - Summit Systems will pay a dividend of 1.50 this...Ch. 9 - Prob. 7PCh. 9 - Canadian-based mining company EI Dorado Gold (EGO)...Ch. 9 - In 2006 and 2007, Kenneth Cole Productions (KCP)...Ch. 9 - DFB, Inc., expects earnings at the end of this...Ch. 9 - Cooperton Mining just announced it will cut its...Ch. 9 - Procter and Gamble (PG) paid an annual dividend of...Ch. 9 - Colgate-Palmolive Company has just paid an annual...Ch. 9 - Prob. 14PCh. 9 - Halliford Corporation expects to have earnings...Ch. 9 - Prob. 16PCh. 9 - Maynard Steel plans to pay a dividend of 3 this...Ch. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Suppose that In January 2006, Kenneth Cole...Ch. 9 - In addition to footwear, Kenneth Cole Productions...Ch. 9 - You read in the paper that Summit Systems from...Ch. 9 - Prob. 31PCh. 9 - Prob. 32PCh. 9 - Prob. 33P
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