Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN: 9781337395250
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Textbook Question
Chapter 17, Problem 2P
AFN EQUATION Refer to problem 17-1. What additional funds would be needed if the company's year-end 2018 assets had been $4 million? Assume that all other numbers are the same. Why is this AFN different from the one you found in problem 17-1? Is the company's "capital intensity" the same or different? Explain.
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Chapter 17 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 17 - Prob. 1QCh. 17 - Assume that an average firm in the office supply...Ch. 17 - Would you agree that computerized corporate...Ch. 17 - Certain liability and net worth items generally...Ch. 17 - Suppose a firm makes the following policy changes....Ch. 17 - AFN EQUATION Carlsbad Corporation's sales are...Ch. 17 - AFN EQUATION Refer to problem 17-1. What...Ch. 17 - AFN EQUATION Refer to problem 17-1 and assume that...Ch. 17 - PRO FORMA INCOME STATEMENT Austin Grocers recently...Ch. 17 - EXCESS CAPACITY Williamson Industries has 7...
Ch. 17 - REGRESSION AND INVENTORIES Jasper Furnishings has...Ch. 17 - PRO FORMA INCOME STATEMENT At the end of last...Ch. 17 - LONG-TERM FINANCING NEEDED At year-end 2018, total...Ch. 17 - SALES INCREASE Paladin Furnishings generated 4...Ch. 17 - REGRESSION AND RECEIVABLES Edwards Industries has...Ch. 17 - REGRESSION AND INVENTORIES Charlie's Cycles Inc....Ch. 17 - EXCESS CAPACITY Earleton Manufacturing Company has...
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AFN Equation Refer to Problem 9-1. What would be the additional funds needed if the companys year-end 2018 assets had been 7 million? Assume that all other numbers, including sales, are the same as in Problem 9-1 and that the company is operating at full capacity. Why is this AFN different from the one you found in Problem 9-1? Is the companys capital intensity ratio the same or different?
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AFN EQUATION Refer to problem 16-1. What additional funds would be needed if the companys year-end 2016 assets had been 4 million? Assume that all other numbers are the same. Why is this AFN different from the one you found in problem 16-1? Is the companys capital intensity the same or different? Explain.
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AFN Equation Refer to Problem 9-1. Return to the assumption that the company had 5 million in assets at the end of 2018, but now assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Why is this AFN different from the one you found in Problem 9-1?
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AFN EQUATION Refer to Problem 16-1 and assume that the company had 3 million in assets at the end of 2019. However, now assume that the company pays no dividends. Under these assumptions, what additional funds would be needed for the coming year? Why is this AFN different from the one you found in Problem 16-1?
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Additional Funds Needed
The Booth Company’s sales are forecasted to double from $1,000 in 2018 to $2,000 in 2019. Here is the December 31, 2018, balance sheet:
Booth’s fixed assets were used to only 50% of capacity during 2018, but its current assets were at their proper levels in relation to sales. All assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist. Booth’s after-tax profit margin is forecasted to be 5% and its payout ratio to be 60%. What is Booth’s additional funds needed (AFN) for the coming year?
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A company is considering an investment where the estimated cash flows are as follows: Year Cash Flow 0 (100000) 1 60000 2 80000 3 40000 4 30000 The company cost of capital is 13%. What is the NPV?
51800
61871
56800
122000
51000
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Assume that Anonas Company is planning to invest P4M in a new project which will provide net cash inflows of P1.5M in 2022, P1.4M in 2023, P1.3M in 2024, P1.2M in 2025 and P1.1M in 2026. The company uses 12% as cost of capital. If the IRR will be computed using Excel Formula, which computation will give the lowest rate? • IRR• XIRR• MIRR• Answer not given
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REQUIRED Study the information given below and answer the following questions:
1. Calculate the Payback Period (expressed in years, months and days).
2. Calculate the Accounting Rate of Return on average investment (expressed to two decimal places).
3. Identify TWO (2) reasons why Umdloti Limited should not use the accounting rate of return to evaluate capital investments.
4. Calculate the Net Present Value.
5. Calculate the Internal Rate of Return (expressed to two decimal places) if the net cash flows are R320 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.
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Company B is deciding which between the 2 projects should it invest in (supported by the cash flow patterns shown below). The company's cost of capital is approximately 9% but due to the current economic environment, its cost of equity may increase and may be a bit more than the approximated value.
Year
Project 1
Project 2
0 (initial outlay)
-13 million
-12 million
1
3 million
8 million
2
3 million
6 million
3
5 million
1 million
4
5 million
1 million
5
5 million
1 million
1. calculate the NPV and IRR of both projects
2. which project should the company invest in? would you choose to follow the npv or irr route? explain your answer
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Company B is deciding which between the 2 projects should it invest in (supported by the cash flow patterns shown below). The company's cost of capital is approximately 9% but due to the current economic environment, its cost of equity may increase and may be a bit more than the approximated value.
Year
Project 1
Project 2
0 (initial outlay)
-13 million
-12 million
1
3 million
8 million
2
3 million
6 million
3
5 million
1 million
4
5 million
1 million
5
5 million
1 million
calculate the NPV and IRR of both projects
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What is the net effect on a firm's cash flow from changes in net working capital if a new project requires: $30,000 increase in inventory, $10,000 increase in accounts receivable, $35,000 increase in machinery, and a $20,000 increase in accounts payable?
Group of answer choices
a. cash inflow $5,000
b. cash inflow $55,000
c. cash outflow $10,000
d. cash outflow $20,000
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Based on the investor expectations of earning at least 12%, should this projected below be completed?
Year 0 1 2 3 4 5 6
Cash Flow (133,000) 37,000 42,750 44,000 46,500 82,500 77,000
Please explain why or why not the company should move forward with this endeavor.
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