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Explain the purpose of the following financial statements: balance sheet, income statement, and statement of cash flows. Discuss the value that each of these items

  1. Explain the purpose of the following financial statements: balance sheet, income statement, and statement of cash flows. Discuss the value that each of these items provides your organization.
  2. What operational and strategic decisions can be made by reviewing these reports? In your discussion, please incorporate the requirement to meet Generally Accepted Accounting Principles (GAAP).
  3. Your company is planning to borrow $1 million on a 5-year, 15%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal?
  4. What is an opportunity cost rate? How is this rate used in discounted cash flow analysis, and where is it shown on a time line? Is the opportunity rate a single number that is used to evaluate all potential investments?
  5. Suppose a firm estimates its overall cost of capital for the coming year to be 10%. What might be reasonable costs of capital for average-risk, high-risk, and low-risk projects?

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