巅峰密卷-五讲金融pass

CorporateACorporateAbankisconsideringbuildingabranchonapieceofpropertyitalreadyowns.WhichofthefollowingcashflowsshouldNOTbeconsideredinthecapitalbudgetinganalysis?The:$50,000thefirmwillforgoinlostrevenuefromthesaleofthepropertyifthecompanydecidestobuild.Severalhundredcustomersthatwillswitchfromalternativebranchestothenewbranchifthebankmakestheinvestment.$100,000spenttodeterminewhetherthereareanyenvironmentalissuesregardingtheproperty.CorporateAnswerCorporateAnswerThe$100,000spentonanenvironmentalanalysisisasunkcostandshouldnotbeconsideredintheanalysis.The$50,000lostfromthesaleofthepropertyisanopportunitycostandshouldbeconsidered.Thetransferredcustomersresultincashflowsthatareexternalities/cannibalizationforthebankandmustbeconsidered.Also,theshippingandinstallationchargesareaddedtothedepreciablebasisandareCorporateACorporateAlargecorporationacceptsaprojectwhichgeneratesnorevenueandhasanegativenetpresentvalue.Theprojectmostlikelyisclassifiedinwhichofthefollowingcategories?ReplacementNewproductorRegulatoryorenvironmentalCorporateAnswerCorporateAnswerRegulatory,safety,andenvironmentalprojectsareoftenmandatedbygovernmentalagencies.Theymaygeneratenorevenueandmightnotbeundertakenbyacompanymaximizingitsownprivateinterests.Forexample,acorporationmayberequiredtoinstallequipmenttomeetaregulatorystandard,andthecostofsatisfyingthestandardisbornbythecorporation.Inthiscase,thecorporationselectsthelowestcostalternativethatmeetstherequirement,i.e.,thealternativewiththeleastnegativenetpresentCorporate3.AnanalystdeterminedthefollowingCorporate3.AnanalystdeterminedthefollowingcashflowsforacapitalCashflow0-12345Therequiredrateofreturnfortheprojectis13%.Theinternalrateofreturn(IRR)andthediscountedpaybackperiodfortheproject,respectively,areclosestDiscountedpaybackCorporateAnswerCorporateAnswerUsingacalculator,theIRRis17.89%.Thediscountedpaybackperiodisthenumberofyears(andfractionalpartofayear)thatittakestorecovertheinitialinvestmentintermsofdiscountedcashflowsdiscountedattheproject’srequiredrateofreturn.Thediscountedcashflowsforthefouryearsare:$30.97,$23.44,$27.72,and$18.40.Thecumulativesumthroughyearthreeis$82.13.Theportionofyearfourrequiredtorecovertheinitialinvestmentis$17.87/$18.40=0.97.Therefore,thediscountedpaybackperiodis3.97years.CorporateWhichCorporateWhichofthefollowingstatementsaboutNetPresentValue(NPV)andInternalRateofReturn(IRR)isleastaccurate?theIRRisthediscountratethatcausestheproject'sNPVtogototheNPVmethodassumesthatallcashflowsarereinvestedatthecostofcapital.FormutuallyexclusiveprojectsyoushouldusetheIRRtorankandselectprojects.CorporateAnswerCorporateAnswerFormutuallyexclusiveprojectsyoushouldn’tusetheIRRtorankandselectprojects.FormutuallyexclusiveprojectsyoushoulduseNPVtorankandselectCorporateTwomutuallyexclusiveprojectshaveconventionalcashflows,butoneCorporateTwomutuallyexclusiveprojectshaveconventionalcashflows,butoneprojecthasalargerNPVwhiletheotherprojecthasahigherIRR.Whichofthefollowingisleastlikelyresponsibleforthisconflict?ReinvestmentrateSizeoftheprojects'initialRiskoftheprojectsasreflectedintherequiredrateofCorporateAnswerCorporateAnswerConflictingdecisionrulesbasedontheNPVandIRRmethodsarerelatedtothereinvestmentrateassumption,thetimingofthecashflows,orthescaleoftheprojects.DifferingrequiredratesofreturnarenotrelatedtoconflictingNPVandIRRCorporate6.AnanalystgatheredthefollowinginformationCorporate6.AnanalystgatheredthefollowinginformationaboutaTarget(optimal)capitalLong-termdebtPreferredstockCommonAfter-taxcomponentcosts:Long-termdebtPreferredstockNewcommonExpectedtotalearnings(netincome)fortheyearinTargetdividendpayoutIfthecompanyraises$150millioninnewcapital,thecompanymarginalcostofcapitalisclosestto:高顿财经A.B.高顿网CorporateAnswerCorporateAnswerGiventhecompanydividendpayoutratio,theamountoftheexpectedadditiontoretainedearningis$120m*(1-45%)=$66million;theamountofnewcapitalthatcouldberaisedwithoutissuingnewcommonstockis$66/0.4=$165million.But$150millionislessthanthebreakpointforretainedearnings,thecomponentcostofequityisthecostofretainedearnings.Themarginalcostofcapitalforthecompanyis9.6percent:(0.5*6%)+(0.1*10%)+(0.4*14%)Notes:fromanotherpointofview,weonlyhavetocomparetheR/EnewcapitalfromCorporateAssumeCorporateAssumeafirmusesaconstantWACCtoselectinvestmentprojectsratherthanadjustingtheprojectsforrisk.Ifso,thefirmwilltendto:acceptprofitable,low-riskprojectsandacceptunprofitable,high-riskacceptprofitable,low-riskprojectsandrejectunprofitable,high-riskrejectprofitable,low-riskprojectsandacceptunprofitable,high-riskCorporateAnswerCorporateAnswerThefirmwillrejectprofitable,low-riskprojectsbecauseitwilluseahurdleratethatistoohigh.Thefirmshouldlowertherequiredrateofreturnforlowerriskprojects.Thefirmwillacceptunprofitable,high-riskprojectsbecausethehurdlerateofreturnusedwillbetoolowrelativetotheriskoftheproject.Thefirmshouldincreasetherequiredrateofreturnforhigh-riskCorporateWhichCorporateWhichofthefollowingstatementsregardingtheweightedaveragecostofcapitalandthemarginalcostofcapitalisTRUE?Themarginalcostofcapitalislikelytofallasthecompanyraisesadditionalcapitalduetoeconomiesofscaleinfinancing.Thebreakevenpointwhereafirmrunsoutofretainedearningsandmustraiseoutsideequitycapitaltypicallyresultsinadecreaseinthemarginalcostofcapitalschedule.TheoptimalcapitalbudgetoccurswhentheInvestmentscheduleisequaltothemarginalcostofCorporateAnswerCorporateAnswerTheoptimalcapitalbudgetoccurswhenthemarginalcostofcapitalintersectswiththeinvestmentopportunityschedule.Corporate9.DegenCompanyisconsideringaprojectinthecommercialprintingbusiness.Itsdebtcurrentlyhasayieldof12%.Degenhasaleverageratioof2.3andamarginaltaxrateof30%.HodgkinsInc.,apubliclytradedCorporate9.DegenCompanyisconsideringaprojectinthecommercialprintingbusiness.Itsdebtcurrentlyhasayieldof12%.Degenhasaleverageratioof2.3andamarginaltaxrateof30%.HodgkinsInc.,apubliclytradedfirmthatoperatesonlyinthecommercialprintingbusiness,hasamarginaltaxrateof25%,adebt-to-equityratioof2.0,andanequitybetaof1.3.Therisk-freerateis3%andtheexpectedreturnonthemarketportfoliois9%.TheappropriateWACCtouseinevaluatingDegen’sprojectisclosestto:A.B.C.CorporateAnswerCorporateAnswerβasset=1.3*[1/[1+(1−0.25)*(2.0)]]=WearegivenDegen’sleverageratio(assets-to-equity)asequalto2.3.Ifweassignthevalueof1toequity(A/E=2.3/1),thendebt(andthedebt-to-ratio)mustbe2.3−1=1.3.Equitybetafortheproject:βPROJECT=0.52*[1+(1−0.3)*(1.3)]=Projectcostofequity=3%+0.9932*(9%−3%)=Degen’scapitalstructureweightfordebtis1.3/2.3=56.5%,anditsweightforequityis1/2.3=43.5%.TheappropriateWACCfortheprojectistherefore:0.565*(12%)*(1−0.3)+0.435*(8.96%)=8.64%.Corporate10.Corporate10.WhichofthefollowingstatementsaboutleverageismostIfthecompanyhasnodebtoutstanding,thenitsdegreeoftotalleverageequalsitsdegreeofoperatingleverage.Anincreaseinfixedcosts(holdingsalesandvariablecostsconstant)willreducethecompany'sdegreeofoperatingleverage.Adecreaseininterestexpensewillincreasethecompany'sdegreeoftotalleverage.CorporateAnswerCorporateAnswerIfdebt=0thenDFL=1becauseDFL=EBIT/(EBIT-Ifdebt=0thenI=0andDFL=EBIT/(EBIT-0)=EBIT/EBIT=1DTL=(DOL)(DFL)IfDFL=1thenDTL=(DOL)(1)whichcompliestoDTL=AdecreaseininterestexpensewilldecreaseDFL,whichwilldecreaseDTL.Anincreaseinfixedcostswillincreasethecompany’sDOL.Corporate11.GiventhefollowinginformationontheannualoperatingresultsforArtFrames,aCorporate11.GiventhefollowinginformationontheannualoperatingresultsforArtFrames,aproducerofqualitymetalpictureframes,whatisthedegreeofoperatingleverage(DOL)andthedegreeoffinancialleverage(DFL)?Salesof$3.5VariableCostsat45%ofsalesFixedCostsof$1.05millionDebtinterestpaymentson$750,000issuedatparwithanannual9.0%coupon(currentyieldis7.0%)Whichofthefollowingchoicesisclosesttothecorrectanswer?ArtFrame’sDOLandDFLare:CorporateAnswerFirst,CorporateAnswerFirst,calculatetheoperatingresults:VariableCostsMarginalprofitFixedCostsEarningsbeforeinterestandtaxes(EBIT)InterestExpenseEarningsbeforeSecond,calculate(0.45*(0.09*750,000DOL=(Sales-VariableCosts)/(Sales-VariableCosts-Fixed=(3,500,000-1,575,000)/(3,500,000-1,575,000-1,050,000)=Third,calculateDFL=EBIT/(EBIT-I)=875,000/807,500=Corporate12.Jayco,Inc.hasadivisionthatmakesredinkfortheaccountingindustry.Corporate12.Jayco,Inc.hasadivisionthatmakesredinkfortheaccountingindustry.Theunithasfixedcostsof$10,000permonth,andisexpectedtosell40,000bottlesofinkpermonth.Ifthevariablecostperbottleis$2.00whatpricemustthedivisionchargeinordertobreakeven?A.$2.25.B.C.CorporateAnswerCorporateAnswer40,000=$10,000/(P-40,000P-$80,000=$10,000P=$90,000/40,000=$2.25.Corporate13.Corporate13.SinclairConstructionCompany’sBoardofDirectorsisconsidering$30,000,000worthofcommonstock.Sinclairassumesthatthestockcanbeatthemarketpriceof$50pershare.AftermuchdiscussionSinclairdecidestoborrow$30millionthatitwillusetorepurchaseshares.Sinclair’sChiefExecutiveOfficer(CEO)hascompiledthefollowinginformationregardingtherepurchaseofthefirm’scommonstock:Sharepriceatthetimeofbuyback=Sharesoutstandingbeforebuyback=30,600,000EPSbeforebuyback=$3.33Earningsyield=$3.33/$50=6.7%After-taxcostofborrowing=8.0%Plannedbuyback=600,000sharesBasedontheinformationabove,Sinclair’searningspershare(EPS)aftertherepurchaseofitscommonstockwillbeclosestto:A.B.C.CorporateAnswerCorporateAnswer：Totalearnings=$3.33×30,600,000=EPSafterbuyback=[totalearnings-after-taxcostoffunds]/sharesoutstandingafterbuyback=[101,898,000-600,000*50*0.08]/[30,600,000-=Sincethe8.0%after-taxcostofborrowingisgreaterthanthe6.7%earningsyield(E/P)oftheshares,thesharerepurchasereducesSinclair’sCorporate14.Corporate14.ThesharepriceofSolarAutomotiveIndustriesis$50pershare.Ithasabookvalueof$500millionand50millionsharesoutstanding.Whatisthebookvaluepershare(BVPS)afterasharerepurchaseofA.$9.84.B.C.CorporateAnswerCorporateAnswerThesharebuybackis$10million/$50pershare=200,000shares.Remainingshares:50million−200,000=49.8millionshares.SolarAutomotiveIndustries’currentBVPS=$500million/50millionBookvalueafterrepurchase:$500million−$10million=$490million.BVPS=$490million/49.8million=$9.84.BVPSdecreasedbyBookvaluepershare(BVPS)decreasedbecausethesharepriceisgreaterthantheoriginalBVPS.IfthesharepriceswerelessthantheoriginalBVPS,thentheBVPSaftertherepurchasewouldhaveCorporate15.Comparedtotheprioryear,ChartIndustrieshasreportedthatitsoperatingcyclehasremainedrelativelystablewhileitscashCorporate15.Comparedtotheprioryear,ChartIndustrieshasreportedthatitsoperatingcyclehasremainedrelativelystablewhileitscashconversioncyclehasdecreased.Themostlikelyexplanationforthisisthatthefirm:isrelyingmoreonitssuppliersforshort-termhasimproveditsinventoryispayingitsbillsforrawmaterialsmoreCorporateAnswerCorporateAnswerThecashconversioncycleisitsoperatingcycleminusitsaveragedayspayablesoutstanding.Therefore,thefirm’saveragedayspayablesmusthaveincreased,aclearindicationthatthefirmisrelyingmoreheavilyoncreditfromitssuppliers.Improvedinventoryturnoverwouldtendtoincreaseboththeoperatingandcashconversioncycles.Relaxedcreditpolicieswouldtendtoincreasethefirm’soperatingcycleasreceivablesturnoverwouldtendtodecrease.Corporate16.Corporate16.Whichofthefollowingbestdescribesdual-classshareDual-classsharestructurescanbeeasilychangedoverCompanyinsiderscanmaintainsignificantpowerovertheConflictsofinterestbetweenmanagementandstakeholdergroupsarelesslikelythanwithsinglesharestructures.CorporateAnswerCorporateAnswerUnderdual-classsharesystems,companyfoundersorinsidersmayco