Chapter 8: Strategy and Analysis in Using Net Present Value Concept Questions - Chapter 8
8.1 ?What are the ways a firm can create positive NPV.
1.Be first to introduce a new product.
2.Further develop a core competency to product goods or services at lower costs
than competitors.
3.Create a barrier that makes it difficult for the other firms to compete
effectively.
4.Introduce variation on existing products to take advantage of unsatisfied
demand
5.Create product differentiation by aggressive advertising and marketing
networks.
https://www.doczj.com/doc/ad5634523.html,e innovation in organizational processes to do all of the above.
?How can managers use the market to help them screen out negative NPV projects?
8.2 ?What is a decision tree?
It is a method to help capital budgeting decision-makers evaluating projects
involving sequential decisions. At every point in the tree, there are different
alternatives that should be analyzed.
?What are potential problems in using a decision tree?
Potential problems 1) that a different discount rate should be used for different
branches in the tree and 2) it is difficult for decision trees to capture managerial
options.
8.3 ?What is a sensitivity analysis?
It is a technique used to determine how the result of a decision changes when
some of the parameters or assumptions change.
?Why is it important to perform a sensitivity analysis?
Because it provides an analysis of the consequences of possible prediction or
assumption errors.
?What is a break-even analysis?
It is a technique used to determine the volume of production necessary to break
even, that is, to cover not only variable costs but fixed costs as well.
?Describe how sensitivity analysis interacts with break-even analysis.
Sensitivity analysis can determine how the financial break-even point changes
when some factors (such as fixed costs, variable costs, or revenue) change. Answers to End-of-Chapter Problems
QUESTIONS AND PROBLEMS
Decision Trees
8.1 Sony Electronics, Inc., has developed a new type of VCR. If the firm directly goes to the market with the product, there is only a 50 percent chance of success. On the other hand, if the firm conducts test marketing of the VCR, it will take a year and will cost $2 million.
Through the test marketing, however, the firm is able to improve the product and increase the probability of success to 75 percent. If the new product proves successful, the present value (at the time when the firm starts selling it) of the payoff is $20 million, while if it turns out to be a failure, the present value of the payoff is $5 million. Should the firm conduct test marketing or go directly to the market? The appropriate discount rate is 15 percent.
8.1 Go directly:
NPV = 0.5 ? $20 million + 0.5 ? $5 million
= $12.5 million
Test marketing:
NPV = -$2 million + (0.75 ? $20 million + 0.25 ? $5 million) / 1.15
= $12.13 million
Go directly to the market.
8.2 The marketing manager for a growing consumer products firm is considering launching a new product. To determine consumers’ interest in such a product, the manager can conduct a focus group that will cost $120,000 and has a 70 percent chance of correctly predicting the success of the product, or hire a consulting firm that will research the market at a cost of $400,000. The consulting firm boasts a correct assessment record of 90 percent. Of course going directly to the market with no prior testing will be the correct move 50 percent of the time. If the firm launches the product, and it is a success, the payoff will be $1.2 million.
Which action will result in the highest expected payoff for the firm?
8.2 Focus group: -$120,000 + 0.70 ? $1,200,000 = $720,000
Consulting firm: -$400,000 + 0.90 ? $1,200,000 = $680,000
Direct marketing: 0.50 ? $1,200,000 = $600,000
The manager should conduct a focus group.
8.3 Tandem Bicycles is noticing a decline in sales due to the increase of lower-priced import products from the Far East. The CFO is considering a number of strategies to maintain its market share. The options she sees are the following:
? Price the products more aggressively, resulting in a $1.3 million decline in cash flows.
The likelihood that Tandem will lose no cash flows to the imports is 55 percent; there is a
45 percent probability that they will lose only $550,000 in cash flows to the imports.
? Hire a lobbyist to convince the regulators that there should be important tariffs placed upon overseas manufacturers of bicycles. This will cost Tandem $800,000 and will have a 75 percent success rate, that is, no loss in cash flows to the importers. If the lobbyists do not succeed, Tandem Bicycles will lose $2 million in cash flows. As the assistant to the CFO, which strategy would you recommend to your boss? Accounting Break-Even Analysis
8.3 Price more aggressively:
-$1,300,000 + (0.55 ? 0) + 0.45 ? (-$550,000)
= -$1,547,500
Hire lobbyist:
-$800,000 + (0.75 ? 0) + 0.25 ? (-$2,000,000)
= -$1,300,000
Tandem should hire the lobbyist.
8.4 Samuelson Inc. has invested in a facility to produce calculators. The price of the machine is $600,000 and its economic life is five years. The machine is fully depreciated by the straight-line method and will produce 20,000 units of calculators in the first year. The variable production cost per unit of the calculator is $15, while fixed costs are $900,000. The corporate tax rate for the company is 30 percent. What should the sales price per unit of the calculator be for the firm to have a zero profit?
8.4 Let sales price be x.
Depreciation = $600,000 / 5 = $120,000
BEP: ($900,000 + $120,000) / (x - $15) = 20,000
x = $66
8.5 What is the minimum number of units that a distributor of big-screen TVs must sell in a given period to break even?
Sales price _ $1,500
Variable costs _ $1,100
Fixed costs _ $120,000
Depreciation _ $20,000
Tax rate _ 35%
8.5 The accounting break-even
= (120,000 + 20,000) / (1,500 - 1,100)
= 350 units
8.6 You are considering investing in a fledgling company that cultivates abalone for sale to local restaurants. The proprietor says he’ll return all profits to you after covering operating costs and his salary. How many abalone must be harvested and sold in the first year of operations for you to get any payback? (Assume no depreciation.)
Price per adult abalone _ $2.00
Variable costs _ $0.72
Fixed costs _ $300,000
Salaries _ $40,000
Tax rate _ 35%
How much profit will be returned to you if he sells 300,000 abalone?
8.6 a. The accounting break-even
= 340,000 / (2.00 - 0.72)
= 265,625 abalones
b. [($2.00 ? 300,000) - (340,000 + 0.72 ? 300,000)] (0.65)
= $28,600
This is the after tax profit.
Present Value Break-Even Analysis
8.7 Using the information in the problem above, what is the present value break-even point if the discount rate is 15 percent, initial investment is $140,000, and the life of the project is seven years? Assume a straight-line depreciation method with a zero salvage value.
A = $33,650
8.7 EAC = $140,000 / 7
15
.0
Depreciation = $140,000 / 7 = $20,000
BEP = {$33,650 + $340,000 ? 0.65 - $20,000 ? 0.35} / {($2 - $0.72) ? 0.65}
= 297,656.25
≈ 297,657 units
8.8 Kids & Toys Inc. has purchased a $200,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method for its economic life of five years and will be worthless after its life. The firm expects that the sales price of the toy is $25 while its variable cost is $5. The firm should also pay $350,000 as fixed costs each year. The corporate tax rate for the company is 25 percent, and the appropriate discount rate is 12 percent. What is the present value break-even point?
8.8 Depreciation = $200,000 / 5 = $40,000
A = $200,000 / 3.60478
EAC = $200,000 / 5
12
.0
= $55,482
BEP = {$55,482 + $350,000 ? 0.75 - $40,000 ? 0.25} / {($25 - $5) ? 0.75}
= 20,532.13
≈ 20533 units
8.9 The Cornchopper Company is considering the purchase of a new harvester. The company is currently involved in deliberations with the manufacturer and the parties have not come to settlement regarding the final purchase price. The management of Cornchopper has hired you to determine the break-even purchase price of the harvester.
This price is that which will make the NPV of the project zero. Base your analysis on the following facts: ? The new harvester is not expected to affect revenues, but operating expenses will be reduced by $10,000 per year for 10 years.
? The old harvester is now 5 years old, with 10 years of its scheduled life remaining. It was purchased for $45,000. It has been depreciated on a straight-line basis.
? The old harvester has a current market value of $20,000.
? The new harvester will be depreciated on a straight-line basis over its 10-year life.
? The corporate tax rate is 34 percent.
? The firm’s required rate of return is 15 percent.
? All cash flows occur at year-end. However, the initial investment, the proceeds from selling the old harvester, and any tax effects will occur immediately. Capital gains and losses are taxed at the corporate rate of 34 percent when they are realized.
? The expected market value of both harvesters at the end of their economic lives is zero.
8.9 Let I be the break-even purchase price.
Incremental C0
Sale of the old machine $20,000
Tax effect 3,400
Total $23,400
Depreciation per period
= $45,000 / 15
= $3,000
Book value of the machine
= $45,000 - 5 ? $3,000
= $30,000
Loss on sale of machine
= $30,000 - $20,000
= $10,000
Tax credit due to loss
= $10,000 ? 0.34
= $3,400
Incremental cost savings:
$10,000 (1 - 0.34) = $6,600
Incremental depreciation tax shield:
[I / 10 - $3,000] (0.34)
The break-even purchase price is the Investment (I), which makes the NPV be zero.
NPV = 0
= -I + $23,400 + $6,600 10
15
.0
A
+ [I / 10 - $3,000] (0.34) 10
15
.0
A
= -I + $23,400 + $6,600 (5.0188)
+ I (0.034) (5.0188) - $3,000 (0.34) (5.0188)
I = $61,981
Scenario Analysis
8.10 Ms. Thompson, as the CFO of a clock maker, is considering an investment of a $420,000 machine that has a seven-year life and no salvage value. The machine is depreciated by a straight-line method with a zero salvage over the seven years. The appropriate discount rate for cash flows of the project is 13 percent, and the corporate tax rate of the company is 35 percent. Calculate the NPV of the project in the following scenario. What is your conclusion about the project?
Pessimistic Expected Optimistic
Unit sales 23,000 25,000 27,000
Price $ 38 $ 40 $ 42
Variable costs $ 21 $ 20 $ 19
Fixed costs $320,000 $300,000 $280,000
8.10 Pessimistic:
NPV = -$420,000 +
()
{}
23,000$38$21$320,0000.65$60,0000.35
1.13t
t1
7--?+?
=
∑
= -$123,021.71 Expected:
NPV = -$420,000 +
()
{}
25,000$40$20$300,0000.65$60,0000.35
1.13t
7
--?+?
=
∑
t1
= $247,814.17 Optimistic:
NPV = -$420,000 +
()
{}
27,000$42$19$280,0000.65$60,0000.35
1.13t
t1
7
--?+?
=
∑
= $653,146.42
Even though the NPV of pessimistic case is negative, if we change one input while all others are assumed to meet their expectation, we have all positive NPVs like the one before. Thus, this project is quite profitable.
Pessimistic NPV
Unit sales 23,000 $132,826.30
Price $38 $104,079.33
Variable costs $21 $175,946.75
Fixed costs $320,000 $190,320.24
8.11 You are the financial analyst for a manufacturer of tennis rackets that has identified a graphite-like material that it is considering using in its rackets. Given the following information about the results of launching a new racket, will you undertake the project?
(Assumptions: Tax rate _ 40%, Effective discount rate _ 13%, Depreciation _ $300,000
per year, and production will occur over the next five years only.)
Pessimistic Expected Optimistic
Market size 110,000 120,000 130,000
Market share 22% 25% 27%
Price $ 115 $ 120 $ 125
Variable costs $ 72 $ 70 $ 68
Fixed costs $ 850,000 $ 800,000 $ 750,000
Investment $1,500,000 $1,500,000 $1,500,000
8.11 Pessimistic:
NPV = -$1,500,000
+
()
{}
110000022000060000040
113
1
,.$850,.$300,.
.
?--?+?
=
∑$115$72
5
t
t
= -$675,701.68
Expected:
NPV = -$1,500,000
+
()
{}
120000025000060000040
113
1
,.$800,.$300,.
.
?--?+?
=
∑$120$70
5
t
t
= $399,304.88
Optimistic:
NPV = -$1,500,000
+
()
{}
130,0000.27$125$68$750,0000.60$300,0000.40
1.13t
t1
5
?--?+?
=
∑
= $1,561,468.43
The expected present value of the new tennis racket is $428,357.21. (Assuming there are equal chances of the 3 scenarios occurring.)
8.12 What would happen to the analysis done above if your competitor introduces a graphite composite that is even lighter than your product? What factors would this likely affect? Do an NPV analysis assuming market size increases (due to more awareness of graphite-based rackets) to the level predicted by the optimistic scenario but your market share decreases to the pessimistic level (due to competitive forces). What does this tell you about the relative importance of market size versus market share?
8.12 NPV =
()
{}
-+
?--?+?=
∑
1,500,000
130,0000.22$120$70$800,0000.60$300,0000.40
1.13t
t1
5
= $251,581.17
The 3% drop in market share hurt significantly more than the 10,000 increase in market
size helped. However, if the drop were only 2%, the effects would be about even. Market size is going up by over 8%, thus it seems market share is more important than market size. The Option to Abandon
8.13 You have been hired as a financial analyst to do a feasibility study of a new video game for Passivision. Marketing research suggests Passivision can sell 12,000 units per year at $62.50 net cash flow
per unit for the next 10 years. Total annual operating cash flow is forecasted to be $62.50 _ 12,000 _ $750,000. The relevant discount rate is 10 percent.
The required initial investment is $10 million.
a. What is the base case NPV?
b. After one year, the video game project can be abandoned for $200,000. After one year,
expected cash flows will be revised upward to $1.5 million or to $0 with equal
probability. What is the option value of abandonment? What is the revised NPV?
A) = -$5,391,574.67
8.13 a. NPV = -$10,000,000 + ( $750, 000 ?10
10
.
A)
b.Revised NPV = -$10,000,000 + $750,000 / 1.10 + [(.5 ? $1,500,000 ?9
.
10
+ (.5 ? $200,000 )] / 1.10
= -$5,300,665.58
Option value of abandonment = -$5,300,665.58 – ( -$5,391,574.67 )
= $90,909.09
8.14 Allied Products is thinking about a new product launch. The vice president of marketing suggests that Allied Products can sell 2 million units per year at $100 net cash flow per unit for the next 10 years. Allied Products uses a 20-percent discount rate for new product launches and the required initial investment is $100 million.
a. What is the base case NPV?
b. After the first year, the project can be dismantled and sold for scrap for $50 million. If expected cash flows can be revised based on the first year’s experience, when would it make sense to abandon the project? (Hint: At what level of expected cash flows does it make sense to abandon the project?)
A) = $738.49Million
8.14 a. NPV = -$100M + ( $100 ? 2M ?10
.
20
A
b.$50M = C9
.
20
C = $12.40 Million (or 1.24 Million units )
CHAPTER 2 Financial Statements & Cash Flow Multiple Choice Questions: I. DEFINITIONS BALANCE SHEET b 1. The financial statement showing a firm’s accounting value on a particular date is the: a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders’ equity sheet. Difficulty level: Easy CURRENT ASSETS c 2. A current asset is: a. an item currently owned by the firm. b. an item that the firm expects to own within the next year. c. an item currently owned by the firm that will convert to cash within the next 12 months. d. the amount of cash on hand the firm currently shows on its balance sheet. e. the market value of all items currently owned by the firm. Difficulty level: Easy LONG-TERM DEBT b 3. The long-term debts of a firm are liabilities: a. that come due within the next 12 months. b. that do not come due for at least 12 months. c. owed to the firm’s suppliers. d. owed to the firm’s shareholders. e. the firm expects to incur within the next 12 months. Difficulty level: Easy NET WORKING CAPITAL e 4. Net working capital is defined as: a. total liabilities minus shareholders’ equity. b. current liabilities minus shareholders’ equity. c. fixed assets minus long-term liabilities. d. total assets minus total liabilities. e. current assets minus current liabilities. Difficulty level: Easy LIQUID ASSETS d 5. A(n) ____ asset is on e which can be quickly converted into cash without significant loss in value.
公司理财(英文版)题 库2
CHAPTER 2 Financial Statements & Cash Flow Multiple Choice Questions: I. DEFINITIONS BALANCE SHEET b 1. The financial statement showing a firm’s accounting value on a particular date is the: a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders’ equity sheet. Difficulty level: Easy CURRENT ASSETS c 2. A current asset is: a. an item currently owned by the firm. b. an item that the firm expects to own within the next year. c. an item currently owned by the firm that will convert to cash within the next 12 months. d. the amount of cash on hand the firm currently shows on its balance sheet. e. the market value of all items currently owned by the firm. Difficulty level: Easy LONG-TERM DEBT b 3. The long-term debts of a firm are liabilities: a. that come due within the next 12 months. b. that do not come due for at least 12 months. c. owed to the firm’s suppliers. d. owed to the firm’s shareholde rs. e. the firm expects to incur within the next 12 months. Difficulty level: Easy NET WORKING CAPITAL e 4. Net working capital is defined as: a. total liabilities minus shareholders’ equity. b. current liabilities minus shareholders’ equity. c. fixed assets minus long-term liabilities. d. total assets minus total liabilities. e. current assets minus current liabilities. Difficulty level: Easy LIQUID ASSETS d 5. A(n) ____ asset is on e which can be quickly converted into cash without significant loss in value.
CHAPTER 8 Making Capital Investment Decisions I. DEFINITIONS INCREMENTAL CASH FLOWS a 1. The changes in a firm's future cash flows that are a direct consequence of accepting a project are called _____ cash flows. a. incremental b. stand-alone c. after-tax d. net present value e. erosion Difficulty level: Easy EQUIVALENT ANNUAL COST e 2. The annual annuity stream o f payments with the same present value as a project's costs is called the project's _____ cost. a. incremental b. sunk c. opportunity d. erosion e. equivalent annual Difficulty level: Easy SUNK COSTS c 3. A cost that has already been paid, or the liability to pay has already been incurred, is a(n): a. salvage value expense. b. net working capital expense. c. sunk cost. d. opportunity cost. e. erosion cost. Difficulty level: Easy OPPORTUNITY COSTS d 4. Th e most valuable investment given up i f an alternative investment is chosen is a(n): a. salvage value expense. b. net working capital expense.
Chapter 04 Discounted Cash Flow Valuation Answer Key Multiple Choice Questions 1. An annuity stream of cash flow payments is a set of: A.level cash flows occurring each time period for a fixed length of time. B. level cash flows occurring each time period forever. C. increasing cash flows occurring each time period for a fixed length of time. D. increasing cash flows occurring each time period forever. E. arbitrary cash flows occurring each time period for no more than 10 years. Difficulty level: Easy Topic: ANNUITY Type: DEFINITIONS
2. Annuities where the payments occur at the end of each time period are called _____, whereas _____ refer to annuity streams with payments occurring at the beginning of each time period. A. ordinary annuities; early annuities B. late annuities; straight annuities C. straight annuities; late annuities D. annuities due; ordinary annuities E.ordinary annuities; annuities due Difficulty level: Easy Topic: ANNUITIES DUE Type: DEFINITIONS
CHAPTER 8 MAKING CAPITAL INVESTMENT DECISIONS Answers to Concepts Review and Critical Thinking Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will be used in a project. The relevant cost is what the asset or input is actually worth today, not, for example, what it cost to acquire. 2. a.Yes, the reduction in the sales of the company’s other products, referred to as erosion, and should be treated as an incremental cash flow. These lost sales are included because they are a cost (a revenue reduction) that the firm must bear if it chooses to produce the new product. b. Yes, expenditures on plant and equipment should be treated as incremental cash flows. These are costs of the new product line. However, if these expenditures have already occurred, they are sunk costs and are not included as incremental cash flows. c. No, the research and development costs should not be treated as incremental cash flows. The costs of research and development undertaken on the product during the past 3 years are sunk costs and should not be included in the evaluation of the project. Decisions made and costs incurred in the past cannot be changed. They should not affect the decision to accept or reject the project. d. Yes, the annual depreciation expense should be treated as an incremental cash flow. Depreciation expense must be taken into account when calculating the cash flows related to a given project. While depreciation is not a cash expense that directly affects c ash flow, it decreases a firm’s net
CHAPTER 20 INTERNATIONAL CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. a. The dollar is selling at a premium because it is more expensive in the forward market than in the spot market (SFr 1.53 versus SFr 1.50). b.The franc is expected to depreciate relative to the dollar because it will take more francs to buy one dollar in the future than it does today. c.Inflation in Switzerland is higher than in the United States, as are nominal interest rates. 2.The exchange rate will increase, as it will take progressively more pesos to purchase a dollar. This is the relative PPP relationship. 3.a.The Australian dollar is expected to weaken relative to the dollar, because it will take more A$ in the future to buy one dollar than it does today. b.The inflation rate in Australia is higher. c.Nominal interest rates in Australia are higher; relative real rates in the two countries are the same. 4. A Yankee bond is most accurately described by d. 5. No. For example, if a cou ntry’s currency strengthens, imports bee cheaper (good), but its exports bee more expensive for others to buy (bad). The reverse is true for currency depreciation. 6.Additional advantages include being closer to the final consumer and, thereby, saving on transportation, significantly lower wages, and less exposure to exchange rate risk. Disadvantages include political risk and costs of supervising distant operations. 7. One key thing to remember is that dividend payments are made in the home currency. More generally, it may be that the owners of the multinational are primarily domestic and are ultimately concerned about their wealth denominated in their home currency because, unlike a multinational, they are not internationally diversified.
Fundamentals of Corporate Finance, 12e (Ross) Chapter 11 Project Analysis and Evaluation 1) Forecasting risk is defined as the possibility that: A) some proposed projects will be rejected. B) some proposed projects will be temporarily delayed. C) incorrect decisions will be made due to erroneous cash flow projections. D) some projects will be mutually exclusive. E) tax rates could change over the life of a project. 2) The key means of defending against forecasting risk is to: A) rely primarily on the net present value method of analysis. B) increase the discount rate assigned to a project. C) shorten the life of a project. D) identify sources of value within a project. E) ignore any potential salvage value that might be realized. 3) Steve is fairly cautious when analyzing a new project and thus he projects the most optimistic, the most realistic, and the most pessimistic outcome that can reasonably be expected. Which type of analysis is he using? A) Simulation testing B) Sensitivity analysis C) Break-even analysis D) Rationing analysis E) Scenario analysis 4) Scenario analysis is best suited to accomplishing which one of the following when analyzing a project? A) Determining how fixed costs affect NPV B) Estimating the residual value of fixed assets C) Identifying the potential range of reasonable outcomes D) Determining the minimal level of sales required to break-even on an accounting basis E) Determining the minimal level of sales required to break-even on a financial basis 5) Which one of the following will be used in the computation of the best-case analysis of a proposed project? A) Minimal number of units that are expected to be produced and sold B) The lowest expected salvage value that can be obtained for a project's fixed assets C) The most anticipated sales price per unit D) The lowest variable cost per unit that can reasonably be expected E) The highest level of fixed costs that is actually anticipated
CHAPTER 15 Capital Structure: Basic Concepts Multiple Choice Questions: I. DEFINITIONS HOMEMADE LEVERAGE a 1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called: leverage. a. homemade recapture. b. dividend c. the weighted average cost of capital. d. private placement. debt offset. e. personal Difficulty level: Easy MM PROPOSITION I b 2. The proposition that the value of the firm is independent of its capital structure is called: a. the capital asset pricing model. b. MM Proposition I. c. MM Proposition II. d. the law of one pric e. e. the efficient markets hypothesis. Difficulty level: Easy MM PROPOSITION II c 3. The proposition that the cost of equity is a positive linear function of capital structure is called: a. the capital asset pricing model. b. MM Proposition I. c. MM Proposition II. d. the law of one pric e. e. the efficient markets hypothesis. Difficulty level: Medium INTEREST TAX SHIELD a 4. The tax savings of the firm derived from the deductibility of interest expense is called the: a. interest shield. tax basis. b. depreciable umbrella. c. financing d. current yield. e. tax-loss carryforward savings. Difficulty level: Easy
CHAPTER 9 Risk Analysis, Real Options, and Capital Budgeting Multiple Choice Questions: I、DEFINITIONS SCENARIO ANALYSIS b 1、An analysis of what happens to the estimate of the net present value when you examine a number of different likely situations is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy SENSITIVITY ANALYSIS c 2、An analysis of what happens to the estimate of net present value when only one variable is changed is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy SIMULATION ANALYSIS d 3、An analysis which combines scenario analysis with sensitivity analysis is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy BREAK-EVEN ANALYSIS e 4、An analysis o f the relationship between the sales volume and various measures of profitability is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy VARIABLE COSTS a 5、Variable costs: a、change in direct relationship to the quantity of output produced、 b、are constant in the short-run regardless of the quantity of output produced、 c、reflect the change in a variable when one more unit of output is produce d、
公司理财习题答案 第十二章 Chapter 12: Risk, Return, and Capital Budgeting 12.1 Cost of equity R S = 5 + 0.95 (9) = 13.55% NPV of the project = -$1.2 million + $340,.00011355 1 5 t t =∑ = -$20,016.52 Do not undertake the project. 12.2 a. R D = (-0.05 + 0.05 + 0.08 + 0.15 + 0.10) / 5 = 0.066 R M = (-0.12 + 0.01 + 0.06 + 0.10 + 0.05) / 5 = 0.02 b. D R - D R M R -R M (M R -M R )2 (D R -R D )(M R -R M ) -0.116 -0.14 0.0196 0.01624 -0.016 -0.01 0.0001 0.00016 0.014 0.04 0.0016 0.00056 0.084 0.08 0.0064 0.00672 0.034 0.03 0.0009 0.00102 0.0286 0.02470 Beta of Douglas = 0.02470 / 0.0286 = 0.864 12.3 R S = 6% + 1.15 ? 10% = 17.5% R B = 6% + 0.3 ? 10% = 9% a. Cost of equity = R S = 17.5% b. B / S = 0.25 B / (B + S) = 0.2 S / (B + S) = 0.8 WACC = 0.8 ? 17.5% + 0.2 ? 9% (1 - 0.35) = 15.17% 12.4 C σ = ()21 04225.0 = 0.065 M σ = ()21 01467 .0 = 0.0383 Beta of ceramics craftsman = CM ρC σ M σ / M σ2 = CM ρC σ/ M σ = (0.675) (0.065) / 0.0383 = 1.146 12.5 a. To compute the beta of Mercantile Manufacturing’s stock, you need the product of the deviations of Mercantile’s returns from their mean and the deviations of the market’s returns from their mean. You also need the squares of the deviations of the market’s returns from their mean.
一、***是什么意思？ 1）Capital budgeting 资金预算 2）Capital Structure 资金结构 3）Net working capital 二、组织结构图谁负责谁？ 三、The corporate firm Forms of Business Organization ●Attributes: ●It is the cheapest business to form. ●It pay no corporate income taxes. ●The owner has unlimited liability. ●Its life is limited. ●It has difficulty in raising funds. 1)The sole proprietorship 独资企业特点P7 2)The Partnership 合伙企业（The business is owned by two or more persons.）Attributes:特征 @Initiation @Liability @ Life @ Ability to raise funds @Taxation @Controlling （1）General Partnership @ All partners agree to provide fraction of the work and cash and to share the profit and loss. @Each partner is liable for all of the debts . （2）Limited Partnership One or more partners are designated general partners and other partners are designated limited partners. 3）The Corporation: 公司 A corporation is owned by individuals who normally are not active in the day –to –day operation of that business. It is by far the most important form of business. Features:特征 1.Starting @Starting a corporation is more complicated @Preparing articles of incorporation and a set of by laws: Name of corporation Intended life Business purpose
CHAPTER 7 Net Present Value and Other Investment Rules Multiple Choice Questions: I. DEFINITIONS NET PRESENT V ALUE a 1. The difference between the present value of an investment and its cost is the: a. net present value. b. internal rate of return. c. payback perio d. d. profitability index. e. discounted payback period. Difficulty level: Easy NET PRESENT V ALUE RULE c 2. Which one of the following statements concerning net present value (NPV) is correct? a. An investment should be accepted if, and only if, the NPV is exactly equal to zero. b. An investment should be accepted only if the NPV is equal to the initial cash flow. c. An investment should be accepted if the NPV is positive and rejected if it is negative. d. An investment with greater cash inflows than cash outflows, regardless of when the cash flows occur, will always have a positive NPV and therefore should always be accepted. e. Any project that has positive cash flows for every time period after the initial investment should be accepted. Difficulty level: Easy PAYBACK c 3. The length of time require d for an investment to generat e cash flows sufficient to recover the initial cost o f the investment is called the: a. net present value. b. internal rate of return. c. payback perio d. d. profitability index. e. discounted cash period. Difficulty level: Easy
Chapter 02 Financial Statements and Cash Flow Answer Key Multiple Choice Questions 1.The financial statement showing a firm's accounting value on a particular date is the: A.income statement. B.balance sheet. C.statement of cash flows. D.tax reconciliation statement. E.shareholders' equity sheet. Difficulty level: Easy Topic: BALANCE SHEET Type: DEFINITIONS 2.A current asset is: A.an item currently owned by the firm. B.an item that the firm expects to own within the next year. C.an item currently owned by the firm that will convert to cash within the next 12 months. D.the amount of cash on hand the firm currently shows on its balance sheet. E.the market value of all items currently owned by the firm. Difficulty level: Easy Topic: CURRENT ASSETS Type: DEFINITIONS
Chapter 8: Strategy and Analysis in Using Net Present Value Concept Questions - Chapter 8 8.1 ?What are the ways a firm can create positive NPV. 1.Be first to introduce a new product. 2.Further develop a core competency to product goods or services at lower costs than competitors. 3.Create a barrier that makes it difficult for the other firms to compete effectively. 4.Introduce variation on existing products to take advantage of unsatisfied demand 5.Create product differentiation by aggressive advertising and marketing networks. https://www.doczj.com/doc/ad5634523.html,e innovation in organizational processes to do all of the above. ?How can managers use the market to help them screen out negative NPV projects? 8.2 ?What is a decision tree? It is a method to help capital budgeting decision-makers evaluating projects involving sequential decisions. At every point in the tree, there are different alternatives that should be analyzed. ?What are potential problems in using a decision tree? Potential problems 1) that a different discount rate should be used for different branches in the tree and 2) it is difficult for decision trees to capture managerial options.