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Finance
Name three of the common loan restrictions and explain how they relate to new venturing financing. What are some additional common loan restrictions?
What is the Small Business Administration (SBA), when was it organized, and what was its purpose?
What is the enterprise (entity) method of valuation and how does it differ from the equity methods of Chapters 9 and 10?
What is the meaning of harvesting a venture?
What is meant by financial distress?
Use the concept of cash flow insolvency over time and describe what could happen if the problem is temporary rather than permanent.
What is Chapter 11 bankruptcy and how is it used by ventures?
What is the purpose of Chapter 7 of the U.S. Bankruptcy Code? What are some of the characteristics of ventures that use Chapter 7 instead of private liquidation?
a. What should the management of Sports Products, Inc., pursue as its overriding goal? Why?b. Does the firm appear to have an agency problem? Explain.c. Evaluate the firm’s approach to pollution
The share price of BRKA has never been spilt. Why might the company refuse to split its shares to make them more affordable to average investors?In early 1980, investors could buy one share of
Is there a conflict between maximizing shareholder wealth and never paying bribes when doing business abroad? If so, how might you explain the firm’s position to shareholders asking why the company
Using the corporate tax rate schedule given in Table, perform the following:a. Calculate the tax liability, after-tax earnings, and average tax rates for the following levels of corporate earnings
The following table contains purchase and sale prices for the nondepreciable capital assets of a major corporation. The firm paid taxes of 40% on capital gains.a. Determine the amount of capital gain
What is finance? Explain how this field affects the life of everyone and of every organization.
Which legal form of business organization is most common? Which form is dominant in terms of business receipts and net profits?
Describe the roles and the basic relationship among the major parties in a corporation—stockholders, board of directors, and president. How are corporate owners compensated?
What financial activities is the treasurer or financial manage; responsible for handling in the mature firm?
Define agency costs, and explain their relationship to a firm’s corporate governance structure. How can the firm structure management compensation to minimize agency problems? What is the current
a. Calculate the firm’s 2009 financial ratios, and then fill in the preceding table.b. Analyze the firm’s current financial position from both a cross-sectional and a time-series
What are some innovative approaches that can be used to teach ethics at the university level?Academics who have toiled thanklessly in the field of business ethics now marvel at their recent
In addition to investors, who else might be benefiting directly from the implementation of the Sarbanes-Oxley Act?In 2000 and 2001, accounting irregularities at a number of large corporations forced
Use the financial statements on table (a) for Fox Manufacturing Company for the year ended December 31, 2009, along with the industry average ratios at the table (b), to;Table (a)Table (b)a. Prepare
Do some reading in periodicals and/or on the Internet to find out more about the Sarbanes-Oxley Act’s provisions for companies. Select one of those provisions, and indicate why you think financial
a. Use the historical and projected financial data provided to prepare a pro forma income statement for the year ended December 31, 2010. (Use the percent- of-sales method to estimate all values
What are some possible activities that Nardelli must avoid in order to reap the additional $18 million over 4 years?When Jack Welch retired as chairman and CEO of General Electric in 2000, Robert L.
Free cash how is often considered a more reliable measure of a company’s income than reported earnings. What are same possible ways that corporate accountants might be able to change their earnings
Pavlovich Instruments, Inc., a maker of precision telescopes, expects to report pre-tax income of $430,000 this year. The company's financial manager is considering the timing of a purchase of new
Why is depreciation (as well as amortization and depletion) considered a noncash charge? How do accountants estimate cash flow from operations?
What is the difference between the accounting and finance definitions of operating cash flow? Under what circumstances are they the same?
How can the two “bottom lines” of the cash budget be used to determine the firm’s short-term borrowing and investment requirements? Discuss.
a. Draw a rune line depicting all of the cash flows associated with Sunrise’s view of the retirement annuity.b. How large a sum must Sunrise accumulate by the end of year 12 to provide the 20-year,
As a reaction to problems in the subprime area, lenders are already tightening lending standards. What effect will this have on the housing market?As the housing market began to boom at the end of
Without referring to the preprogrammed function on your financial calculator or to tables, use the basic formula for future value along with the given interest rate, i, and the number of periods, n,
Use the future value interest factors in each of the cases shown in the following table to estimate, to the nearest year, how long it would take an initial deposit, assuming no withdrawals,a. To
Without referring to the preprogrammed function on your financial calculator or to tables, use the basic formula for present value, along with the given opportunity cost, i, and the number of
Jim Nance has been offered a future payment of $500 three years from today. If his opportunity cost is 7% compounded annually, what value should he place on this opportunity today? What is the most
An Iowa state savings bond can be converted to $100 at maturity 6 years from purchase. If the state bonds are to be competitive with U.S. savings bonds, which pay 8% annual interest (compounded
Consider the data in the following table.Determine, for each of the perpetuities:a. The appropriate present value interest factor.b. The present value.
Using only the information in the accompanying table, answer the questions that follow.a. Determine the present value of the mixed stream of cash flows using a 5% discount rates.b. How
A manager at a “check into cash” business defends his business practice as simply “charging what the market will bear.” “After all,” says the manager, “we don’t force people to come
What is the difference between an ordinary annuity and an annuity due? Which always has greater future value and present value for identical annuities and interest rates? Why?
What are the most efficient ways to calculate the present value of an ordinary annuity? What is the relationship between the PVIF and PVIFA interest factors?
How can the future value interest factors for an ordinary annuity be modified to find the future value of an annuity due?
How can the present value interest factors for an ordinary annuity be modified to find the present value of an annuity due?
What is a perpetuity? How can the present value interest factor for such a stream of cash flows be determined?
Which present value interest factors would be used to find(a) The growth rate associated with a series of cash flows and(b) The interest rate associated with an equal-payment loan?
How can you determine the unknown number of periods when you know the present and future values—single amount or annuity—and the applicable rate of interest? Discuss.
a. Calculate the annual rate of return for each asset in each of the 10 preceding years, and use those values to find the average annual return for each asset over the 10-year period.b. Use the
Is ‘hitting the number” an appropriate goal, given the Chapter 1 contrast of profit and shareholder wealth maximization? If no why do executives emphasize it.The poster boy for moral risk,
International mutual funds do not include any domestic assets whereas global mutual funds include both foreign and domestic assets. How might this difference affect their correlation with US equity
Greengage, Inc., a successful nursery, is considering several expansion projects. All of the alternatives promise to produce an acceptable return. The owners are extremely risk-averse; therefore,
Rate of return, standard deviation, coefficient of variation Mike is searching for a stock to include in his current stock portfolio. He is interested in Apple Inc.; he has been impressed with the
For each of the cases shown in the following table, use the capital asset pricing model to find the requiredreturn.
Integrity, especially honesty, is trait number one for being hired as a CFO in corporate America today. How might you assess a job candidate’s honesty if you were interviewing a potential CFO
When is the coefficient of variation preferred over the standard deviation for comparing asset risk?
Why do financial managers have some difficulty applying CAPM in financial decision making? Generally, what benefit does CAPM provide them?
a. If the price of the common stock into which the bond is convertible rises to $30 per share after 5 years and the issuer calls the bonds at $1,080, should Annie let the bond be called away from her
What effect will the new legislation likely have on the market share of the largest rating agencies? How will the new legislation affect the process of finding ratings information for
What effect do you think the inflation-adjusted interest rate has on the cost of an I-bond in comparison with similar bonds with no allowance for inflation?One of the negatives of debt instruments
A firm wishing to evaluate interest rate behavior has gathered yield data on live U.S. Treasury securities, each having a different maturity and all measured at the same point in time. The summarized
Calculate the value of each of the bonds shown in the following table, all of which pay interest annually.
Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and nonquantitative factors best predict bond defaults. Furthermore, some of the raters
Differentiate between standard debt provisions and restrictive covenants- included in a bond indenture. What are the consequences of violation of them by the bond issuer?
Assume a 5-year Treasury bond has a coupon rate of 4.5%.a. Give examples of required rates of return that would make the bond sell at a discount, at a premium, and at par..
a. What is the firm’s current book value per share?b. What is the firm’s current P/E ratio?c. (1) What are the required return and risk premium for Encore stock using the capital asset pricing
What are some of the real costs a company must face in preparing quarterly earnings guidance?Corporate managers have long complained about the pressure to focus on the short term, arid now business
Theories of behavioral finance can apply to other areas of human behavior in addition to investing. Think of a situation in which you may have demonstrated one of these behaviors Share your situation
Assume that the following quote for the Advanced Business Machines stock (traded on the NYSE) was found in the Thursday, December 14, issue of the Wall Street Journal.Given this information, answer
Given the following information for the stock of Foster Company, calculate its beta,Current price per share of common .............$50.00Expected dividend per share next year ........... $
Giant Enterprise has a beta of 1.20, the risk-free rate of return is currently 10%, and the market return is 14%. The company which plans to pay a dividend of $2.60 per share in the coming year,
Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to use the capital asset pricing model (CAPM) to determine the
Melissa is trying to value Generic Utility, Inc.’s stock, which is clearly not growing at all. Generic declared and paid a $5 dividend last year. The required rate of return for utility stocks is
What are the key differences between debt capital and equity capital?
Into what bodies are institutional VCs most commonly organized? How are their deals structured and priced?
What role does an investment banker play in a public offering? Explain the sequence of events in the issuing of stock.
What are the key sources of stock quotations? Describe the items of information included in a published stock quotation.
Brash Corporation initiated a new corporate strategy that fixes its annual dividend at $2.25 per share forever Currently the risk-free rate is 4.5%, and Brash has a beta of 1,8. If the market return
a. Calculate the initial investment associated with each of Clark Upholstery’s alternatives.b. Calculate the incremental operating cash inflows associated with each of Clark’s
What would your options be when faced with the demands of on imperial CEO who expects you to “make it work”? Brainstorm several options.The process of capital budgeting based on calculating
The Chinese government has encouraged foreign investments through favorable tax treatment Con you think of similar situations in your own country?Foreign direct investment in China soared in 2006.
A firm is considering the following three separate situations.Situation A. Build either a small office building or a convenience store on a parcel of land located a high-traffic area. Adequate
According to academic research, capital budgeting cash flow projections are used rarely in practice by small firms, which often use accounting projections instead. What is the most likely
What is capital budgeting? Do all capital expenditures involve fixed assets? Explains
What are the key motives for making capital expenditures? Discuss, compare, and contrast them.
What are the five steps involved in the capital budgeting process?
Differentiate between the members of each of the following pairs of capital budgeting terms: (a) Independent versus mutually exclusive projects; (b) Unlimited funds versus capital rationing; (c)
Canvas Reproductions, Inc., is considering two mutually exclusive investments. Project A requires an initial outlay of $20,000 and has expected cash inflows of $5,000 for each of the next 5 years.
a. Use the payback period to assess the acceptability and relative ranking of each lathe.b. Assuming equal risk, use the following sophisticated capital budgeting techniques to assess the
What are the potential risks to a company of unethical behaviors by employees? What are potential risks to the public and to stakeholder?Corporate ethics codes are often faulted for being “window
In your view, if the payback period method is used in conjunction with the NPV method, should it be used before or after the NW evaluation?In tough economic times, the standard for a payback period
Wells Printing is considering the purchase of a new printing press. The total installed cost of the press is $2.2 million. This outlay would be partially offset by the sale of an existing press. The
Holiday Manufacturing is considering the replacement of an existing machine. The new machine costs $1.2 million and requires installation costs of $150,000. The existing machine can be sold currently
Once the firm has determined its projects’ relevant cash flows, what must it do next? What is its goal in selecting projects?
a. Assuming that the two plans have the same risk as the firm, use the following capital budgeting techniques and the firm’s cost of capital to evaluate their acceptability and relative
What are some factors to consider when prioritizing and budgeting environmental compliance initiatives?It doesn’t matter whether you manufacture specialty chemicals or household cleansers, operate
A Monte Carla simulation program requires the user to first build an Excel spreadsheet model that captures the input variables for the proposed project. What issues and what benefits can the user
One way to avoid the EPA penalties for excessive air pollution is to use carbon credits. Carbon credits are a tradable permit scheme that allows businesses that cannot meet their greenhouse-
a. Calculate the cost of each source of financing, as specified:(1) Long-term debt, first $450,000.(2) Long-term debt, greater than $450,000.(3) Preferred stock, all amounts.(4) Common stock equity,
What effect would an increased cost of capital have on a firm’s future investments?Asbestos, once widely used in manufacturing and construction for its strength, durability, and resistance to
Why might a company use EVA as a measure of its performance in addition to the standard accounting measures?Answering the question, “Does the company use investors’ money wisely?” is one of the
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