Fiance Homework
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Ch. 7 Exercise #11 ABC & D
Kareem Construction Company has the following amounts of interest-bearing debt and common equity capital:
FINANCING SOURCE DOLLAR AMOUNT INTEREST RATE COST OF CAPITAL
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Short-term Loan $200,000 12%
Long-term Loan $200,000 14%
Equity Capital $600,000 22%
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Kareem Construction is in the 30% average tax bracket.
A. Calculate the after-tax weighted average cost of capital (WACC) for Kareem B. Determine the after-tax dollar cost of financial capital used by Kareem C. Kareem’s earnings before interest and taxes (EBIT) was $300,000. Calculate Kareem’s net operating profit after taxes (NOPAT) D. Calculate Kareem’s economic value added (EVA). Did the venture build or destroy value
Ch. 8 Question #9
Identify and briefly describe two basic types of transactions that are exempt from registration with the SEC.
Ch. 9 Question #4
What is meant by capitalization (or cap) rate in reference to calculating a terminal value? What other types of terminal values might be appropriate (i.e., other than smooth growth procedures)?
Ch. 9 Exercise #2 A-D
The TecOne Corporation is about to begin producing and selling its prototype product. Annual cash flows for the next five years are forecasted as:
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Year Cashflow 1 -$50,000 2 -$20,000 3 $100,000 4 $400,000 5
Ch. 7 Exercise #11 ABC & D
Kareem Construction Company has the following amounts of interest-bearing debt and common equity capital:
FINANCING SOURCE DOLLAR AMOUNT INTEREST RATE COST OF CAPITAL
-----------------------------------------------------------------------------------------------------------------------------------
Short-term Loan $200,000 12%
Long-term Loan $200,000 14%
Equity Capital $600,000 22%
-------------------------------------------------
Kareem Construction is in the 30% average tax bracket.
A. Calculate the after-tax weighted average cost of capital (WACC) for Kareem B. Determine the after-tax dollar cost of financial capital used by Kareem C. Kareem’s earnings before interest and taxes (EBIT) was $300,000. Calculate Kareem’s net operating profit after taxes (NOPAT) D. Calculate Kareem’s economic value added (EVA). Did the venture build or destroy value
Ch. 8 Question #9
Identify and briefly describe two basic types of transactions that are exempt from registration with the SEC.
Ch. 9 Question #4
What is meant by capitalization (or cap) rate in reference to calculating a terminal value? What other types of terminal values might be appropriate (i.e., other than smooth growth procedures)?
Ch. 9 Exercise #2 A-D
The TecOne Corporation is about to begin producing and selling its prototype product. Annual cash flows for the next five years are forecasted as:
-------------------------------------------------
Year Cashflow 1 -$50,000 2 -$20,000 3 $100,000 4 $400,000 5