Following is financial information for three ventures: Venture XX Venture YY Venture ZZ After-tax property margins 5% 25% 15% Asset turnover 2.0 times 3.0 times 1.0 times A. Calculate the ROA for each firm. B. Which venture is indicative of a strong entrepreneurial venture opportunity?
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Following is financial information for three ventures:
| Venture XX | Venture YY | Venture ZZ | |
| After-tax property margins | 5% | 25% | 15% |
| Asset turnover | 2.0 times | 3.0 times | 1.0 times |
A. Calculate the ROA for each firm.
B. Which venture is indicative of a strong entrepreneurial venture opportunity?
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- Brock Associates invested $80,000 in a business venture with the following results:MARR is 12%. Determine the internal rate of return and whether or not this is a desirable venture.Brock Associates invested $80,000 in a business venture with the following results: MARR is 12%. Determine the external rate of return and whether or not this is a desirable venture.Maxwell Private equity investor is considering making an investment capital firm. The investor values the firm at $1.5 mn (present value of exit value) following $300,000 capital investment by the investor. Calculate the venture capital firm's pre- money valuation and investor's proportional ownership.
- A company has a 40% share in joint venture and loans the venture P2 million. What figure will be shown for the loan in the balance sheet of the venture?a. P2,000,000b. P800,000c. P1,200,000d. ZeroAs an investor in the equity market you become aware of investment opportunity in 3 corporates. Assuming that the cost of equity is 8%, compute the fair value of X Limited, Y Limited and Z Limited using the Dividend discount model. a. Given the history of the company, X Limited is expected to pay a uniform dividend of Rs. 5.00 per share. b. Being in the IT Industry, Y Limited is expected to pay a dividend of Rs. 4.00 per share and an increase of 5% year on year thereafter. c. A pharmaceutical company, Z Limited has been paying a dividend of Rs. 2.00 over for the last 3 years. The company is expected to do extremely well and increase the dividend pay-out by 7% year on year. This year the dividend expected is Rs. 8.00. Additionally, what is the biggest lacuna in the Dividend Discount Model in valuing stocks? Give an example to explainWhen analysing a company, the equity sales person has noticed that the company has incurred a large development cost relating to a new product and has stated that the costs meet the necessary criterion to be capitalised. The analyst feels a more reasonable treatment of this item would be to expense it, in the year incurred. The company has a tax rate of 30%. The company acquires 100% of shares in another company called Horizon for cash of £4.8 million. Net assets Horizon are £3.3m.There is an upward fair value adjustment of £0.4 m required to the acquirees’ net assets. The acquired company has a 0.2, in process development costs that have not been previously recognised but now meet the necessary capitalisation criteria. Explain how a company could acquire intangible assets. With regard to the development costs, what will be the implication for the financial statements of the two different approaches? Include any relevant ratios.
- a) Consider two firms L (Levered) & U (Unlevered) which are identical in all respect except for the capital structure. Both firms have EBIT of sh.900,000 ,a cost of equity of 10% and no corporate taxes. Firm L is partially using sh.4,000,000 of 7.5% interest debt while firm U is all equity financed. All the other traditional assumptions are applicable.Required: Consider an investor who owns 10% of L’S Equity stock. He disposes the investment in L and borrows the amount equal to 10% of L’s debt and invests the entire proceeds in firm U. Show the investor’s income position. b) Consider the multifactor APT with two factors. The risk premiums on the factor 1 and factor 2 portfolios are 5% and 6%, respectively. Stock A has a beta of 1.2 on factor 1, and a beta of 0.7 on factor 2. The expected return on stock A is 17%. If no arbitrage opportunities exist, calculate the risk-free rate of return.Your venture has net income of $600, taxable income of $1,000, operating profit of $1,200, total financial capital (including both debt and equity) of $9,000, a tax rate of 40%, and a WACC of 10%. What is your venture's EVA? $400,000 $200,000 -20,000 -180,000Use below information for following two questions (Q24-Q25). AAA Corporation and BBB Corporation are identical in every way except their capital structures. AAA Corporation, an all-equity firm, has 35 million shares of stock outstanding, currently worth $25 per share. BBB Corporation uses leverage in its capital structure. The market value of BBB’s debt is $250mil., and its cost of debt is 3.5 percent. Each firm is expected to have earnings before interest and tax of $175mil. in perpetuity. Assume that every investor can borrow at 3.5 percent per year. Corporate tax rate is 35% and personal tax rate on bond interest income is 30%. Q24. What is the value of BBB corporations? $833.33 mil. $892.86 mil. $875 mil. $642.86 mil. $962.5 mil.
- Abdullah has OMR 5000 to invest in a small business venture. His partner has promised to pay him back OMR 8200 in five years. What is the return earned on this investment? Select one: a. None of these b. 10.39 % c. 12.40 % d. 10.75 % e. 14.50 % Gross working capital refer to the Select one: a. Firms liabilities in total current assets of the enterprise b. Firms investment in total fixed assets of the enterprise c. Firms investment in total Equity of the enterprise d. Firms investment in total current assets of the enterprise e. None of the optionsA venture has raised RM4,000 of debt and RM6,000 of equity to finance its firm. Its cost of borrowing is 6%, its tax rate is 40%, and its cost of equity capital is 8%. What is the venture’s weighted average cost of capital? * 1 point 8% 7.2% 6.2% 7%
