Essay about Finacial Mangment Quetion and Answer

c) Optimization of the capital structure is also consistent with the growth of the company. The optimal capital structure

3.8 Identify sources and uses of short-term financing. 3.9 Evaluate how the business policies of a firm affect accounts receivable and inventories.

while after tax cost of capital is r (1-t). If the interest rate or yield to maturity is 6.5% and the rate

Compute the incremental cash flows of the investment for each year. (Do not round intermediatecalculations. A negative answer should be indicated by a minus sign.)

Cash flow from operations is a key indicator of a company’s financial health, because without the ability

See Table 1: Expected non-operating cash flow when the project is terminated at year 4 = 165,880$

• Cost of capital must reflect current capital market conditions (current required returns) • Cost of capital must also reflect the optimal relative proportions of debt and equity the firm will

The IRR is the discount rate that makes the present value of the cash inflows equal to the present value of the cash outflows. This is the same as saying that the IRR is the discount rate that makes the net present value equal to zero.

In the above question, what is the present value of the cash flows if the first payment will be made in four years?

3) What is the weighted average cost of capital and why is it important to estimate it? Is the

4. Additional investment in land and building is a relevant cash flow, so it must be added to the initial investment, and depending on

Net Working Capital Requirements JohnBoy Industries has a cash balance of $45,000, accounts payable of $125,000, inventory of $175,000, accounts receivable of $210,000, notes payable of $120,000, and accrued wages and taxes of $37,000. How much net working capital does the firm need to fund? (LG2)

7. [CPA Adapted] The assumption that cash flows are reinvested at the rate earned by the

2. The reinvestment rate assumption is the assumption that for the NPV calculation you can reinvest the cash inflows at the WACC and for the IRR calculation you can reinvest the cash flows at the IRR itself. With this assumption you would think that the NPV would be more preferred because the WACC is easier to determine.

Working capital is a measure of both a company’s efficiency and its short –term financial health. The working capital ratio indicates whether a company has enough short term assets to cover its short term debt. The adequacy of company‘s working capital depends on the industry in which it competes, its relationship and supplier and more.