PRIN.OF CORPORATE FINANCE >BI<
12th Edition
ISBN: 9781260431230
Author: BREALEY
Publisher: MCG CUSTOM
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Question
Chapter 12, Problem 14PS
a)
Summary Introduction
To determine: Economic value added (EVA).
b)
Summary Introduction
To determine: Economic value added (EVA).
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1. A company’s average operating assets are P220,000 and its net operating income is P44,000. The company invested in new project, increasing average assets to P250,000 and increasing net operating income to P49,550. What is the project’s residual income if the required rat of return is 20%?
2. Gurey Corp. uses an imputed interest rate of 13% in the calculation of residual income. Division Tiffey, which is part of Gurey Corp., had invested capital of P1,200,000 and an ROI of 16%. On the basis of this information, what was Tiffey division residual income?
3. Helo Company has provided the following data: Sales, P5,000,000; Interest expense, P30,000; Total assets, beginning of the year, P185,000; Total assets, end of the year, P215,000; Return on assets, 15.5%; Tax rate, 30%. What is the net income of Helo Co.?
Question
Howlett, Newman & Associates Limited is considering four projects to modernise their operations. The initial capital outlay for each project is $280,000. The cost of capital for the company is 8%. The cash flow for each project are detailed in the table below.
Year Import/Expor Restarurant Transportation Landscaping initial (280,000) (280,000) (280,000) (280,000) Outlay
1 125,000 185,000 150,000
2 88,000 66,000
3 69,000 56,000 52,000 160,000
4 42,000 38,000 60,000 132,000
5 62,000 65,000
6 30,000
i) Caculate each project's Payback period
i) Calculate each project's Net Present Value (NPV).
iii) Calculate the MIRR of the projct with highest NPV.
1. The A Division of Sam Products Co. is considering an investment in a new project. The project has an estimated cost of P1,000,000. If Sam Products Co. has a target rate of return of 12%, how large does the return on investment on this project need to be to generate P170,000 of residual income?
2. Sam Division reported a residual income of P200,000 for the year just ended. The division has P8,000,000 of invested capital and P1,000,000 of income. On the basis of this information, the required rate of return was: (round off to 1 decimal places)
3. If the turnover increased by 40 percent and the margin decreased by 30 percent, the ROI would decreased by?
Chapter 12 Solutions
PRIN.OF CORPORATE FINANCE >BI<
Ch. 12 - Prob. 1PSCh. 12 - Terminology Define the following: a. Agency costs...Ch. 12 - Prob. 3PSCh. 12 - EVA Here are several questions about economic...Ch. 12 - Accounting measures of performance The Modern...Ch. 12 - Economic income Fill in the blanks: A projects...Ch. 12 - Prob. 7PSCh. 12 - Prob. 8PSCh. 12 - Prob. 9PSCh. 12 - Prob. 10PS
Ch. 12 - Management compensation We noted that management...Ch. 12 - Prob. 12PSCh. 12 - Prob. 13PSCh. 12 - Prob. 14PSCh. 12 - EVA Herbal Resources is a small but profitable...Ch. 12 - Prob. 16PSCh. 12 - Economic income Consider the following project:...Ch. 12 - EVA Use the Beyond the Page feature to access the...Ch. 12 - Accounting measures of performance Use the Beyond...Ch. 12 - EVA Ohio Building Products (OBP) is considering...
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