Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN: 9781337395250
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Textbook Question
Chapter 17, Problem 2P
AFN EQUATION Refer to problem 17-1. What additional funds would be needed if the company's year-end 2018 assets had been $4 million? Assume that all other numbers are the same. Why is this AFN different from the one you found in problem 17-1? Is the company's "capital intensity" the same or different? Explain.
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Question 3: Study the following financial statements.
What was NOWC for 2017 and 2018? Show the calculation and circle your answer. Assume that all
cash is excess cash; i.e., this cash is not needed for operating purposes.
Calculate the Free Cash Flow in 2018. Show the calculation and circle your answer.
What was 2018 EVA? Show the calculation and circle your answer. Assume that its after-tax cost of
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What was MVA at the year-end 2018? Show the calculation and circle your answer. (Note: Share
Price is $25)
“By applying capital to investments with long-term benefits, the company is attempting to produce value. This value is dependent on expected future cash flows as well as on the cost of funds.”
1. Explain this statement with regards to the role of cost of capital in financial management decisions.
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included as part of free cash flows?
The lost revenue that could have been used if a
warehouse was leased out
The cost of an already completed marketing study
The interest that will be paid to debt holders to
finance the project
The salary paid to the firm's CEO
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Chapter 17 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 17 - Prob. 1QCh. 17 - Assume that an average firm in the office supply...Ch. 17 - Would you agree that computerized corporate...Ch. 17 - Certain liability and net worth items generally...Ch. 17 - Suppose a firm makes the following policy changes....Ch. 17 - AFN EQUATION Carlsbad Corporation's sales are...Ch. 17 - AFN EQUATION Refer to problem 17-1. What...Ch. 17 - AFN EQUATION Refer to problem 17-1 and assume that...Ch. 17 - PRO FORMA INCOME STATEMENT Austin Grocers recently...Ch. 17 - EXCESS CAPACITY Williamson Industries has 7...
Ch. 17 - REGRESSION AND INVENTORIES Jasper Furnishings has...Ch. 17 - PRO FORMA INCOME STATEMENT At the end of last...Ch. 17 - LONG-TERM FINANCING NEEDED At year-end 2018, total...Ch. 17 - SALES INCREASE Paladin Furnishings generated 4...Ch. 17 - REGRESSION AND RECEIVABLES Edwards Industries has...Ch. 17 - REGRESSION AND INVENTORIES Charlie's Cycles Inc....Ch. 17 - EXCESS CAPACITY Earleton Manufacturing Company has...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- AFN Equation Refer to Problem 9-1. What would be the additional funds needed if the companys year-end 2018 assets had been 7 million? Assume that all other numbers, including sales, are the same as in Problem 9-1 and that the company is operating at full capacity. Why is this AFN different from the one you found in Problem 9-1? Is the companys capital intensity ratio the same or different?arrow_forwardEfficiency Does CEB manage efficiently its working capital (current assets and current liabilities)? (Justify using cash conversion cycle). When comparing the two companies, which between the two is more efficient?arrow_forwardWhat does each of the following definitions refer to: The comparison of the expected future streams of earnings from a project, with the immediate and subsequent streams of expenditure. All aspects of the administration of cash, accounts receivables, inventory, accounts payable, short term debt, accrued expenses, etc. 3. The specific mixture of long-term debt and equity the firm uses to finance its operationsarrow_forward
- AFN Equation Refer to Problem 9-1. Return to the assumption that the company had 5 million in assets at the end of 2018, but now assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Why is this AFN different from the one you found in Problem 9-1?arrow_forwardDefine each of the following terms:c. Additional funds needed (AFN); AFN equation; capital intensity ratio;self-supporting growth ratearrow_forwardREQUIRED Study the information given below and answer the following questions: 1. Calculate the Payback Period (expressed in years, months and days). 2. Calculate the Accounting Rate of Return on average investment (expressed to two decimal places). 3. Identify TWO (2) reasons why Umdloti Limited should not use the accounting rate of return to evaluate capital investments. 4. Calculate the Net Present Value. 5. Calculate the Internal Rate of Return (expressed to two decimal places) if the net cash flows are R320 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.arrow_forward
- What refers to the way the company’s assets are financed and includes both long-term as well as short-term sources of funds Select one: a. Profit b. None of the option c. Capital structure d. Working Capital e. Capital Budgetingarrow_forwardUsing PROBLEM 1, how much is the projected net cash flows from operating activities for 2026 must be? Using PROBLEM 1, how much is the INTRINSIC Value of ABC Corporation? Using PROBLEM 1, how much is the total present value of Free Cash Flows to ordinary shareholders of ABC Corporation?arrow_forward1. Net Operating Capital for 2022 2. Amount of Total Investor-Supplied (Net Current Investment and Net Fixed Asset Investment) operating capital for 2022 3. Free Cash Flow for 2022 Net Operating Working Capital for 2022 4. Net Operating Profit After Taxes for 2022arrow_forward
- If the OCF is $500; Net Capital Spending = $450; and Additions to NWC = $200; Find the Cash Flow from Assets.arrow_forwardHow to solve a problem when they give you the liability amount $120000 and the equity $232k and they ask to fund the total assets?arrow_forwardWhat is the first step in preparing a financial plan? Group of answer choices A forecast of revenue over some future time period Estimate how many additional assets the company will need Estimate the funds needed to implement the strategies Determine the expected level of profits for future periodsarrow_forward
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