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Bu 312

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Assignment 1: Bus 312
You must provide complete answers that describe and demonstrate how you arrived at your solution. Numeric solutions alone are unacceptable. In addition, copying and pasting suggested solutions is not sufficient effort to earn a mark for this or any other assignment. Hand in a “hard copy” of your assignment to the marker box. No e-mail submissions. No late assignments, no exceptions.

1. (From Final Exam Summer 2009) ABC Company Ltd., is considering a possible business investment that requires a $350,000 expenditure today. Immediately after the $350,000 expenditure, the new venture’s market to book ratio (value to expenditure) is 1.6.
Required: What is the new venture’s Net Present Value (NPV)?
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Choose “Options” from the “Tools” menu item. In the “View” dialogue box, make sure that the “formulas” box has a check. The formulas rather than the numeric values should now appear in the cells. In EXCEL2007 click the tab “Formulas” and then the tab “Show Formulas.” In EXCEL 2010 click on the tab “Formulas” and then click “Show Formulas.” You need not ensure that your formulas are printed in their entirety (i.e., don’t worry if some of your formulas is too wide to be printed). The intent of printing the formulas is to demonstrate to the marker that you have diligently attempted the question. Print the spreadsheet. [pic] [pic]

5. Invested Capital, ROIC, Trade-Capital, Free Cash-flow.

ABC Co. Ltd. has the following year-end accounting balance sheet.

|Current Assets |$500,000 |Accounts Payable |$400,000 |
|Net Fixed Assets |$1,600,000 |Short-Term Debt |500,000 |
| | |Equity |1,200,000 |

Equity on the balance sheet represents the sum of all the accounting “equity” accounts.

Expected sales for the upcoming year are $4,100,000. Costs of goods sold are 65% of sales and other operating expenses are $850,000. The interest rate on ABC’s short-term debt is 10% per annum.

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