International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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You are establishing a new warehouse in sparks Nevada to better accommodate your customers in the western half of the U.S .you will have to access a specific amount of cash in a periodic basis as the need rises . What is your best funding option ?
A.family and friends
B. Intermediate loan
C.angel investor
D. Trade credit
E.Venture Capitalist
F. Short term loan
G.IPO
H. Personal assets
I. Long term loan
J. Bank line of credit
You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows:
Year
Cash Flow (£)
0
-30,000,000
1
8,000,000
2
8,000,000
3
8,000,000
4
8,000,000
5
8,000,000
6
14,000,000
The Financial Manager of Livingstone Thompson Ltd. has decided that the company’s cost of capital of 15% is an appropriate hurdle rate for this project and informed you who will be providing the finance.
Calculate the Internal Rate of Return (IRR)of this project. Record it step by step from beginning till the end result using the IRR formulas, but not formulas on excel.
You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows:
Year
Cash Flow (£)
0
-30,000,000
1
8,000,000
2
8,000,000
3
8,000,000
4
8,000,000
5
8,000,000
6
14,000,000
The Financial Manager of Livingstone Thompson Ltd. has decided that the company’s cost of capital of 15% is an appropriate hurdle rate for this project and informed you who will be providing the finance.
Calculate the Net Present Value (NPV) for this project.
Calculate the Internal Rate of Return (IRR)of this project.
Make a recommendation to your…
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- The management of Kawneer North America is considering investing in a new facility and the following cash flows are expected to result from the investment: A. What is the payback period of this uneven cash flow? B. Does your answer change if year 10s cash inflow changes to $500,000?arrow_forwardYou are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows: Year Cash Flow (£) 0 -30,000,000 1 8,000,000 2 8,000,000 3 8,000,000 4 8,000,000 5 8,000,000 6 14,000,000 The Financial Manager of Livingstone Thompson Ltd. has decided that the company’s cost of capital of 15% is an appropriate hurdle rate for this project and informed you who will be providing the finance. Calculate the Internal Rate of Return (IRR)of this project. Record it step by step using the formulasarrow_forwardThink about the cash flows associated with putting in the bank for five years, assuming you draw out the interest each year and then close the account. Now think about a set of hypothetical cash flows associated with putting the same money in a business, operating for five years, and then selling out. Write an explanation of why the IRR on the business project is like the bank’s interest rate. How are the investments different?arrow_forward
- The financial manager of Sarap Corporation wants to determine the amount of cash outlays to be spent for the nextperiod. He asked the help of the accountant and the latter provided a cash budget for the next year. According tothe computations, the company would be incurring cash expenses of P6,612,500 per month. The financial managerhas estimated a cost of P40 per transaction in case non-cash asset is converted to cash. The firm’s opportunity costratio is 12%.a. The optimum cash balance is?b. The average cash balance is?c. the number of conversion made during the year is?d. The total cash cost is?arrow_forwardIn the provided scenario, you address the time value of money also known as discounted cash flow analysis. This type of analysis is crucial to being able to viably analyze financial statements. The start - up firm you founded is trying to save $10, 000 in order to buy a parcel of land for a proposed small warehouse expansion. In order to do so, your finance manager is authorized to make deposits of S 1250 per year into the company account that is paying 12% annual interest. The last deposit will be less than $1250 if less is needed to reach $10,000. How many years will it take to reach the $10,000 goal and how large will the last deposit be? Show your workarrow_forwardThe financial manager of a firm wants to determine the amount of cash outlays to be spent for the next period. He asked the help of the accountant and the latter provided a cash budget for the next year. According to the computations, the company would be incurring cash expenses of P6,612,500 per month. The financial manager has estimated a cost of P40 per transaction in case non-cash asset is converted to cash. The firm’s opportunity cost ratio is 12%. The optimum cash balance is? The average cash balance is? the number of conversion made during the year is? The total cash cost is?arrow_forward
- ou are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows: Year Cash Flow (£) 0 -30,000,000 1 8,000,000 2 8,000,000 3 8,000,000 4 8,000,000 5 8,000,000 6 14,000,000 The Financial Manager of Livingstone Thompson Ltd. has decided that the company’s cost of capital of 15% is an appropriate hurdle rate for this project and informed you who will be providing the finance. Calculate the Internal Rate of Return (IRR)of this project. Record it step by step from beginning till the end result using the IRR formulas, but not formulas on excel.…arrow_forwardWhich of the following is a section of a cash flow statement? Select one: a.Fixed costs outflows b.Cash basis accounting systems c.Wage taxes d.EIN Question 22 Question text If you invest $1,525,000 in a business and earn a return of $775,000, what is your ROI? Select one: a.42% b.45% c.51% d.1.96% Question 23 Question text If Jacques invests $20,000 at 10% interest for 3 years, what will the future value of the money be? Select one: a.$26,620.00 b.$6620.00 c.$20,606.02 d.$26,000.00 Question 24 Question text Two common risks to cash flow stability are ________ and ________. Select one: a.credit squeeze; burn rate b.surplus inventory; pilferage c.burn rate; pilferage d.surplus inventory; credit squeeze Question 25 Question text A suggested allowance for contingencies and emergencies at start-up is _____ of estimated start-up costs. Select one: a.5 percent b.10 percent c.25 percent d.40 percentarrow_forwardA company has received a proposal from a manager asking to spend ₱1,500,000on equipment that will result in cash inflows as indicated in the table below:Year Cash Flow1 150,0002 150,0003 200,0004 600,0005 900,000What is the payback period if averaging and subtracting methods are used?arrow_forward
- The financial manager of Sarap Corporation wants to determine the amount of cash outlays to be spent for the next period. He asked the help of the accountant and the latter provided a cash budget for the next year. According to the computations, the company would be incurring cash expenses of P6,612,500 per month. The financial manager has estimated a cost of P40 per transaction in case non-cash asset is converted to cash. The firm's opportunity cost ratio is 12%. a. The optimum cash balance is?arrow_forwardYou have to test cash and PP&E of your client. Both accounts have the same balance at the end of the year: $25 million. In a typical company, which account will you spend more time testing AND WHY?arrow_forwardThe financial manager of Shatap Corporation wants to determine the amount of cash outlays to be spent for the next period. He asked the help of the accountant and the latter provided a cash budget for the next year. According to the computations, the company would be incurring cash expenses of $6,612,500 per month. The financial manager has estimated a cost of $40 per transaction in case non-cash asset is converted to cash. The firm's opportunity cost ratio is 12 %. What is the optimum cash balance, the average cash balance, the number of conversion made during the year, and the total cash cost?arrow_forward
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