Reference no: EM132739406

Problems 1 - 3 you can only include the final answer number. There is no explanation needed

Problems 4 - 12 make sure you include explanation to your bottom line answer

1) Bleems has total sales of KD _________________, net income of KD__________________, EBIT of KD_________________, current liabilities of KD______________________, and total liabilities of KD_____________________, current assets of KD___________________, total assets of KD__________________. What are the values of the three components of the DuPont identity?

2) Bayan Co. has total assets of KD___________________, current liabilities of KD____________________, dividends paid of KD____________________, net sales of KD____________________, and net income of KD____________________. Assume that all costs, assets, and current liabilities change spontaneously with sales. The tax rate and dividend payout ratios remain constant. If the firm's managers project a firm growth rate of _________% for next year, what will be the amount of external financing needed to support this level of growth? Assume the firm is currently operating at full capacity.

3) KIPCO has a profit margin of ______________% and a dividend payout ratio of ___________%. The capital intensity is 1.08 and the debt-equity ratio is .54. What is the sustainable rate of growth?

4) Project A has an initial cost of KD____________________ and annual cash flows of KD____________________ for three years. Project B costs KD____________________ and has cash flows of KD____________________, KD____________________, and KD____________________ for Years 1 to 3, respectively. Projects A and B are mutually exclusive. The incremental IRR is ________ and if the required rate is higher than the crossover rate. Which project should be accepted and why?

5) You are considering two independent projects with the same discount rate of ________%. Project A costs KD____________________ and has cash flows of KD____________________, KD____________________, and KD____________________ for Years 1 to 3, respectively. Project B costs KD____________________, and has a cash flow of KD____________________ a year for Years 1 to 3. You have sufficient funds to finance any decision you make. Which project or projects, if either, should you accept and why?

6) Bader is considering two independent projects. Project A costs KD____________________ and has projected cash flows of KD____________________, KD____________________, and KD____________________ for Years 1 to 3, respectively. Project B costs KD____________________ and has cash flows of KD____________________, KD____________________, and KD____________________ for Years 1 to 3, respectively. Bader assigns a discount rate of ________% to Project A and ________% to Project B. Which project or projects, if either, should he accept based on the profitability index rule?
A) Accept both projects.
B) Accept Project A and reject Project B.
C) Accept either A or B, but not both.
D) Reject both project
E) Accept Project B and reject Project A.

7) A proposed new venture will cost KD____________________ and should produce annual cash flows of KD____________________, KD____________________, KD____________________, and KD____________________ for Years 1 to 4, respectively. The required payback period is 3 years and the discounted payback period is 3.5 years. The required rate of return is _____%. Which methods indicate project acceptance and which indicate project rejection? (use: NPV, IRR, PI, payback, discounted payback)

8) AlBoum currently produces boat sails and is considering expanding its operations to include awnings. The expansion would require the use of land the firm purchased three years ago at a cost of KD____________________ that is currently valued at KD____________________. The expansion could use some equipment that is currently sitting idle if KD____________________ of modifications were made to it. The equipment originally cost KD____________________ five years ago, has a current book value of KD____________________, and a current market value of KD____________________. Other capital purchases costing KD____________________ will also be required. What is the value of the opportunity costs that should be included in the initial cash outflow for the expansion project?

9) Urban Cafe is considering a project that will not produce any sales but will decrease annual cash expenses by KD____________________. If the project is implemented, annual taxes will increase from KD____________________ to KD____________________, and depreciation will increase from KD 4,000 to KD 5,500 per year. What is the amount of the annual operating cash flow using the top-down approach?

10) You are working on a bid for a contract. Thus far, you have determined that you will need KD____________________ for fixed assets and another KD____________________ for net working capital at Time 0. You have also determined that you can recover KD____________________ aftertax for the combined fixed assets and net working capital at the end of the 4-year project. What operating cash flow will be required each year for the project to return ___________% in nominal terms?

11) You plan to bid on a project with a life of 5 years that will require KD____________________ of fixed assets. These assets will be depreciated straight-line to zero over the project's life. Ignore bonus depreciation. The relevant discount rate is ________%, the tax rate is __________%, there is no interest expense, net working capital is unaffected, and there is no salvage value. What is the minimal required amount of annual sales revenue given annual cash costs of KD______________?

12) Tamdeen has a new project with projected real cash flows of KD_________________, KD___________________, and KD____________________ for Years 1 to 3, respectively. The nominal discount rate is _______% percent and the inflation rate is _____%. What is the net present value of the project if the initial cost is KD____________________?
Short Answer Questions 1 - 2

1) Most financial experts will agree that net present value is the best capital budgeting method. However, even NPV can be unreliable when projecting project results. Explain why this is so.

2) Dabdoob App has days' sales in inventory of 78 days and an average collection period of 42 days. The firm pays its suppliers in an average of 42 days, on average. Taken together, what do these average values imply about the firm's operations and its cash flows?