A) How much is the cash and retained earning in 2019?

B) Bigquiz can borrow at 10% interest rate, if the company starts to borrow, do you think borrowing will increase or decrease the firms ROE? Why?

C) If the firm targets a 30% growth rate next year, and the firm doesnt want to issue new equity, how to finance? (suppose profit margin, asset turnover ratio, payout ratio remain constant over the period).

2. Bigquiz Inc. is considering whether to introduce a new machine. The projected unit sales are 100, 175, and 125 units per year for the next three years, respectively. Price is $1 million per unit, variable cost is $0.5 million per unit, and fixed costs are 15 million per year. The equipment costs 150 million today and can be sold three years later at a market value of 20 million. The machine will be depreciated on a three-year MACRS schedule (33.3%, 44.44%, 14.8%, 7.4%). The machine also requires an initial working capital of 10 million, and in each year working capital is estimated as 10% of the total sales. All working capital will be recovered by the end of the projects life. Tax rate is 35%. The companys beta is 1.5, risk free rate is 2% and market risk premium is 4%, how much is NPV of the project?

3. Bigquiz is experiencing rapid growth. Dividends are expected to grow at 20% per year during the next three years. After that period, dividend will grow at 5% for ever. Using two stage dividend discount model, how much is the stock price today? Use the same discount rate in problem 2

4. A) In perfect market without tax, Rebacca has 100 shares, how much is her cash flow now? (suppose the firms payout ratio is 100%)

b) Suppose the company decides to borrow 200 million long-term debt and use the proceedings to buyback shares. How much is Rebaccas cash flow after the capital restructuring? (10 points)

c) Why do more and more companies prefer stock repurchase to cash dividend?

Corporate Finance Review Questions You are given with the following information Based on the information, pare the company's talunce sheet and income statement Vendy that cash flow from assets cash flow to creditors plus cash flow to shareholders Calculate financial is, how his profit margin at tumeve, ROE and ROA How much is the internal growth and stainable growth rate? If the company targets a pronthate but wants to keep its current leverage, he will the company finance the external fund mode If risk free rate is market rik pemand the company's beta i 12. bomach is the cost of equity? How much is WACC Apply two-stage dividend discount model to vale stock. Suppose in the next three years sind will grow at 20%, then drops to scale powth rate forever. How much is the stock price and how much is the lack price one year from What is your rate of return for holding the seckane year? How much is capital gain, hoch is end yield Big Quiz is evaluating at the project will last for five years. The project requires avent of 120 million, sales are 125,150.175.200 and 100 mit for the next years, unit price is mellife cost cach year is 15 million de ces OSmilionant. The project requires in working capital of 10 million, working capital will be 10% of total revenue in each of the following years. When the project is over the machine can be sold for BigOuizadopes MACRS depreciation schedule 329, 1935, 11.2%, 11.52% 5.76 Calculate the NPV of the project. What happens to stock price after the counce this newe In perfect market without tar. Rebocca has 300 shares how much is her cash flow The fimm is considering capital structuring, in which the fim will switch to all-equity finance.howch is he cash flow if the firm is equity financed. If the fim does convert to all-equity financed.com Race maintain her current cash flow? Ise of cash flow, will Rebecca be better off if the company with to all-equity finance? How much as the cost of quity hefore and after the capitales How much Is the sock price before and after capital restructuring In term of valueil Rebecca be better off if the company switch to all fiance? What conclusive can you draw, why Currently the company pays so dividend Rehaca owns 300 shares. What happens to be cash flow and her total wealth of the company choose to pay mere dividend 2)py 100% dividend uses the income do wyback stocks Bigquiz Corporation (in millions) 2018 2019 sales 800 cost of goods sold 600 depreciation 60 interest rate 10.0% payout 40.0% tax rate 35.0% account receivable 26 30 cash 20 inventory 24 40 net fixed asset 330 360 account payable 0 0 note payable 0 0 long-term debt 0 0 common stock 100 100 retained earning 300 shares outstanding 10 Corporate Finance Review Questions You are given with the following information Based on the information, pare the company's talunce sheet and income statement Vendy that cash flow from assets cash flow to creditors plus cash flow to shareholders Calculate financial is, how his profit margin at tumeve, ROE and ROA How much is the internal growth and stainable growth rate? If the company targets a pronthate but wants to keep its current leverage, he will the company finance the external fund mode If risk free rate is market rik pemand the company's beta i 12. bomach is the cost of equity? How much is WACC Apply two-stage dividend discount model to vale stock. Suppose in the next three years sind will grow at 20%, then drops to scale powth rate forever. How much is the stock price and how much is the lack price one year from What is your rate of return for holding the seckane year? How much is capital gain, hoch is end yield Big Quiz is evaluating at the project will last for five years. The project requires avent of 120 million, sales are 125,150.175.200 and 100 mit for the next years, unit price is mellife cost cach year is 15 million de ces OSmilionant. The project requires in working capital of 10 million, working capital will be 10% of total revenue in each of the following years. When the project is over the machine can be sold for BigOuizadopes MACRS depreciation schedule 329, 1935, 11.2%, 11.52% 5.76 Calculate the NPV of the project. What happens to stock price after the counce this newe In perfect market without tar. Rebocca has 300 shares how much is her cash flow The fimm is considering capital structuring, in which the fim will switch to all-equity finance.howch is he cash flow if the firm is equity financed. If the fim does convert to all-equity financed.com Race maintain her current cash flow? Ise of cash flow, will Rebecca be better off if the company with to all-equity finance? How much as the cost of quity hefore and after the capitales How much Is the sock price before and after capital restructuring In term of valueil Rebecca be better off if the company switch to all fiance? What conclusive can you draw, why Currently the company pays so dividend Rehaca owns 300 shares. What happens to be cash flow and her total wealth of the company choose to pay mere dividend 2)py 100% dividend uses the income do wyback stocks Bigquiz Corporation (in millions) 2018 2019 sales 800 cost of goods sold 600 depreciation 60 interest rate 10.0% payout 40.0% tax rate 35.0% account receivable 26 30 cash 20 inventory 24 40 net fixed asset 330 360 account payable 0 0 note payable 0 0 long-term debt 0 0 common stock 100 100 retained earning 300 shares outstanding 10