Week 3 FINC 300: Working Capital & Financing Week 3 Assignment: Working Capital & Financing Course Name FINC 300: Foundations of Financial Management A

Week 3 FINC 300: Working Capital & Financing Week 3 Assignment: Working Capital & Financing

Course Name FINC 300: Foundations of Financial Management

A

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Week 3 FINC 300: Working Capital & Financing Week 3 Assignment: Working Capital & Financing

Course Name FINC 300: Foundations of Financial Management

Analysis the following:

Exercise 1 and from Chapter 11 on page 198 of the textbook.
Exercise 1 from Chapter 12 on page 213 of the textbook

The detailed solutions for the exercises above are in the Excel file (FINC300 Student Homework Solutions) attached. You will be analyzing each exercise in 300-350 words.

Your part in completing the assignment is to demonstrate an understanding and application of the concepts covered.

For example, assess the purpose of the calculations and results. How does it help the company’s financial strategy? What changes could be made? Discuss anything else pertinent to the exercise.

Integrate 2-3 external references (in addition to the book) to support your thoughts.

Format according to APA 7.0. Organize with level headings. Use templates (7th APA Reference 2020 & Student template APA 7th) attached for APA guidance.

Assignment will automatically be submitted to Turnitin Week 1 Ch 2-1

Company Boomwichers NV

Period n n+1 n+2 n+3 n+4 n+5

Operating inflows 165 200 240 280 320 360

Operating outflows 165 175 180 185 180 190

Operating cash flows 0 25 60 95 140 170

Investments -200

Free cash flows -200 25 60 95 140 170

Flows to creditors -100 5 5 5 5 105 25

Flows to shareholders -100 20 55 90 135 65 265

Company Ellingham plc – Cash Forecast

Year 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016

Period Total Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Operating inflows 384.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0

Operating outflows 350.0 4.0 6.0 6.0 14.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0

Purchases of raw materials 136.0 8.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0

Shipping 70.0 0.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Payroll costs 144.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0

Operating cash flows 34.0 -4.0 -6.0 -6.0 -14.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Investments -30.0 -30.0

Free cash flows 4.0 -34.0 -6.0 -6.0 -14.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Flows to creditors -3.5 -18.0 0.0 0.0 0.0 0.0 1.0 2.0 0.0 0.0 0.0 0.0 0.9 2.0 0.0 0.0 0.0 0.0 0.8 2.0 0.0 0.0 0.0 0.0 0.7 2.0 0.0 0.0 0.0 0.0 0.6 2.0 0.0 0.0 0.0 0.0 0.5

Credit -8.0 -18.0 2.0 2.0 2.0 2.0 2.0

Interest 4.5 1.0 0.9 0.8 0.7 0.6 0.5

Flows to shareholders 7.5 -16.0 -6.0 -6.0 -14.0 2.0 1.0 0.0 2.0 2.0 2.0 2.0 1.1 0.0 2.0 2.0 2.0 2.0 1.2 0.0 2.0 2.0 2.0 2.0 1.3 0.0 2.0 2.0 2.0 2.0 1.4 0.0 2.0 2.0 2.0 2.0 1.5

Year Total 2014 2015 2016

Operating inflows 384.0 96.0 144.0 144.0

Operating outflows 350.0 110.0 120.0 120.0

Purchases of raw materials 40.0 48.0 48.0

Shipping 22.0 24.0 24.0

Payroll costs 48.0 48.0 48.0

Operating cash flows 34.0 -14.0 24.0 24.0

Investments -30.0 -30.0 0.0 0.0

Free cash flows 4.0 -44.0 24.0 24.0

Flows to creditors -3.5 -14.1 5.5 5.1

Credit -16.0 4.0 4.0

Interest 1.9 1.5 1.1

Flows to shareholders 7.5 -29.9 18.5 18.9

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Week 1 Ch 3-1

Exercise 1: Starjö AB

By-nature income statement By-destination income statement

Sales 340,500 Turnover 340,500

Change in finished goods and in-progress inventory 19,175

Finished goods 14,300

Associated labor costs 4,875

Production 359,675

Operating outflows 354,000 Cost of sales 339,825

Personnel expenses 90,000 Personnel expenses 85,125

Purchases of raw materials and goods for resale 267,050 Raw materials 249,700

Change in raw materials and goods for resale -3,050 Premises amortisation 5,000

Premises rental 0

EBITDA 5,675

Depreciation and amortisation 5,000

Premises amortisation 5,000

Change in impairment losses on fixed assets 0

EBIT 675 EBIT 675

Net interest and other financial charges 600

Loan interest 600

Profit before tax and non-recurring items 75 ;’;

Exceptional gains 45,000

Capital gains on premises sales 45,000

Tax 15,776

Net earnings 29,299

Dividends 0

Retained earnings 29,299

Inventory Price Opening inventory Opening balance Closing inventory Closing balance Variation Sold

Finished products 1,100 14 15,400 27 29,700 13 14,300 227 340,500

Parts 5,400 8,450 3,050 Purchase 267,050

Case 50 5 250 13 650 8 400 248 12,400

Mother board 200 8 1,600 2 400 -6 -1,200 234 46,800

Processor 300 4 1,200 11 3,300 7 2,100 247 74,100

Memory 100 6 600 4 400 -2 -200 238 23,800

Graphic card 50 1 50 13 650 12 600 252 12,600

Hard disk 150 5 750 10 1,500 5 750 245 36,750

Screen 200 3 600 3 600 0 0 240 48,000

DVD combo 50 7 350 19 950 12 600 252 12,600

Number of PC Produced 240

Retail price 1,500

Labor cost 90,000

Wages 60,000

Payroll taxes 30,000

Purchase of premise 200,000

Depreciated value 185,000

Sale of premise 230,000

Length of depreciation 40

Length already depreciated 3

Capital gain 45,000

Premises rental 0

Number of months 0 12

Loan 12,000

Annual rate 5%

Number of the months of th year before reimbursement 12 0

Tax rate 35%

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Week 2 Ch 8-3

See Chapter 8, Exercise 3, page 140.

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Week 2 Ch 9-1

Exercise 1

Company 1 2 3 4 5

Sales 100.0 100.0 100.0 100.0 100.0

Production 100.0 100.0 104.0 99.0 0.0

Trading profit 23.0 24.8 0.0 0.0 0.0

Raw materials used 0.0 0.0 46.6 23.6 0.0

Other external charges 7.8 7.0 46.9 14.1

Personnel costs 9.3 11.7 21.5 24.1 88.2

EBITDA 6.8 6.7 28.1 3.7 4.6

Depreciation and amortisation 2.6 0.9 14.4 1.2 0.7

Operating income 4.2 5.8 7.1 2.9 3.1

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Week 2 Ch 10-3

Exercise 3: Schmidheiny Group

Projected 0 1 2 3

Production 70.2 106.0 132.0 161.0

Raw materials used 29.4 35.4 44.3 53.8

Personnel cost 22.2 29.4 36.7 41.1

Taxes 0.5 0.7 0.7 0.8

Other external services 13.7 19.8 24.6 30.5

Outsourcing 2.5 8.9 11.2 11.3

Depreciation and amortisation 1.4 2.7 3.6 5.0

Variable costs 38.8 54.2 67.8 80.4

Personnel costs 29.4 35.4 44.3 53.8

Taxes 2.5 8.9 11.2 11.3

Other external services (50%) 6.9 9.9 12.3 15.3

Fixed costs 31.0 42.7 53.3 62.2

Personnel costs 22.2 29.4 36.7 41.1

Taxes 0.5 0.7 0.7 0.8

Other external services (50%) 6.9 9.9 12.3 15.3

Depreciation and amortisation 1.4 2.7 3.6 5.0

Operating breakeven 69.1 87.4 109.6 124.1

Sales/Breakeven 102% 121% 120% 130%

Financial costs 1.6 4.6 4.6 4.6

Total breakeven 72.7 96.8 119.0 133.3

Sales/Breakeven 97% 110% 111% 121%

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Week 3 Ch 11-1

Exercise 1: Van de Putte Group Exercise 1

M€

Sales

Raw materials used in the business 100

Direct production costs 30

Administrative costs 40

20

Operating

Raw materials inventories

Length of production cycle 15 days Days by months

Raw materials 1 months 30

Production costs 1 months

Finished products inventories 15 days

15 days

Payments terms

Suppliers

Customers 2 months

1 months

Raw materials inventories % of sales Time taken to shift goods or payment period Value in days of sales

Work in progress 30% 15.0 4.5

Raw materials

Production costs 30% 30 9

Finished products inventories 40% 15 6

Trade receivables 90% 15 13.5

Trade payables 100% 30 30

Total -30% 60.0 -18.0

45.0

Exercise 2: Spalton plc

Permanent working capital

Sales year 1

Sales year 2

EBITDA year 2

Operating cash flow (before taxes and financial expense)

Exercise 3: Moretti Spa

Balance sheet

Inventories of finished goods

Trade and notes receivable

Trade and notes payable

Income statement

Sales (excl. VAT)

Sales (incl. VAT)

Purchases (incl. VAT)

Ratios

Working capital

Working capital turnover

Days/Receivables

Days’ inventories

Days/Payables

Exercise 4

Resale rotate

Cost of goods sold

Customer pay

Suppliers paid on

Salaries paid at the end of the month

Payroll taxes

VAT 19,6

Working capital component

Accounts payable

Personnel costs

Social security contributions payable

Inventories of goods for resale

Trade receivable

VAT payable

Total

Exercise 5

Resale rotate

Supplier credit

Customer credit

Purchases in % of sales

No VAT

Working capital

Inventories of goods for resale

Trade receivables

Accounts payable

Total

Exercise 5

See answer in the book

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Week 3 Ch 12-1

Exercise 1

1 2 3 4 5

Fixed assets 100.0 110.0 120.0 130.0 140.0

Working capital 200.0 225.0 250.0 280.0 315.0

EBITDA 38.0 40.0 44.0 48.0 52.0

Depreciation and amortization 10.0 10.0 11.0 12.0 13.0

Financial expense 14.0 15.0 17.0 19.0 22.0

Income tax expense 7.0 7.5 8.0 8.0 8.5

Dividends 5.0 5.0 5.0 6.0 6.0

Cash flow statement 2 3 4 5

Cash flow 17.5 19.0 21.0 21.5

Change in working capital 25.0 25.0 30.0 35.0

Cash flow from operating activities (A) -7.5 -6.0 -9.0 -13.5

Capital expenditures (B) 20.0 21.0 22.0 23.0

Capital increase (C)

Dividends (D) 5.0 5.0 5.0 6.0

(A)-(B)+(C)-(D)=Net decrease in debt -32.5 -32.0 -36.0 -42.5

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Week 5 Ch 18-1 & 2

Exercise 1: ENI

Period Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11

Share ENI 16.93 16.57 17.37 16.86 15.20 15.19 15.69 15.67 15.83 16.19 15.50 16.34 17.30

Italian index 21896 21068 22847 21562 19543 19311 21021 19734 20505 21450 19105 20173 22050

Return ENI 2.2%

Return index 0.7%

Periodic return

ENI -2.13% 4.83% -2.94% -9.85% -0.07% 3.29% -0.13% 1.02% 2.27% -4.26% 5.42% 5.88%

Index -3.78% 8.44% -5.62% -9.36% -1.19% 8.86% -6.12% 3.91% 4.61% -10.93% 5.59% 9.30%

Total risk of ENI 4.59%

β 0.56

more detailed

0.0009836594 0.003701177 0.0019072622 0.0097923776 0.00005153 0.0025750203 0.0002612739 0.0002671148 0.0008580893 0.0051040193 0.0027152288 0.0050346562

0.001672538 0.0066193373 0.0035194861 0.0093544687 0.0002235864 0.0073049531 0.0041352666 0.0012951417 0.0018494104 0.0126350094 0.0027899575 0.0080934513

β 0.56

Standard deviation return index

7.35%

Mkt risk ENI 4.11%

Specific risk ENI 2.04%

Portion of the total risk explained by mkt risk 89.58%

Exercise 2

Return 10.0%

Standard deviation 18.0%

Objective standard dev. 14%

% of added risk-free assets 22.2%

Standard deviation 14.0%

Objective standard dev. 23%

% of risk-free assets using debt 27.8%

Standard deviation 23%

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Ambiguité sur la date du versement du 2eme paiement. Si au bout de 2 ans, alors résultat légèrement différent

Standard deviation

Expected return

Le résultat du corrigé mentionne 2 sommes qui ne semblent pas correspondre à la question (somme + coef)
E*

Week 5 Ch 19-1

Exercise 1

β Bharti Airtel 0.7

β Rio Tinto 1.1

r Rio Tinto 10.0%

r risk-free 5.0%

r Bharti Airtel 8.2%

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Ambiguité sur la date du versement du 2eme paiement. Si au bout de 2 ans, alors résultat légèrement différent
Portefeuille B,S
1 1 #REF! σ B,S

E(r B,S)

1 1 #REF! Ecart-type

Rentabilité attendue

Le résultat du corrigé mentionne 2 sommes qui ne semblent pas correspondre à la question (somme + coef)
Page 407: Cov(rb,rs)=…pbs*ecartype(rb)*ecartyp(rs)

Week 6 Ch 20-1

Exercise 1: Withoubones bond issue

Amount 125 MEUR

Issue price 99.731%

Date of issue 2/20/10

Settlement date 2/20/10

Maturity 7 years

Coupon 5.5%

Cash flows

Date 2/20/10 2/20/11 2/20/12 2/20/13 2/20/14 2/20/15 2/20/16 2/20/17

0 1 2 3 4 5 6 7

Cash flows -99.731% 5.500% 5.500% 5.500% 5.500% 5.500% 5.500% 105.500%

Discounted cash flows -99.731% 5.211% 4.937% 4.678% 4.432% 4.199% 3.978% 72.299%

Yield to maturity 5.547%

PV 99.733%

NPV 0%

0.00 0.05 0.09 0.13 0.17 0.20 0.23 4.79

Modified duration 5.68

0.00 0.05 0.10 0.14 0.18 0.21 0.24 5.06

Duration 6.0

6.0

As at 21 February 2011

Discounted cash flows 5.238% 4.989% 4.751% 4.525% 4.309% 78.726%

Required yield to maturity 5.0%

PV 102.5%

0 0.0498866213 0.0950221358 0.1357459083 0.1723757566 0.2052092341 4.4986128197

Modified duration 5.029

0 0.0523809524 0.0997732426 0.1425332038 0.1809945445 0.2154696958 4.7235434607

Duration 5.281

5.281

Week 6 Ch 22-1

Exercice 1

Share price 500 EUR

EPS 33.3 EUR

Payout ratio 25%

Projected EPS growth 15%

Date 0 1 2 3 3

Schedule of cash flows -500.00 9.57 11.01 12.66 665.46

Discount rate 12%

Discounted xash flows -500.00 8.55 8.78 9.01 473.66

NPV 0

Value of share (year 3) 665.46

Net EPS (year 3) 50.65

P/E ratio (year 3) 13.14

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Ambiguité sur la date du versement du 2eme paiement. Si au bout de 2 ans, alors résultat légèrement différent
Portefeuille B,S
0 0 #REF!

0 0 #REF!

Le résultat du corrigé mentionne 2 sommes qui ne semblent pas correspondre à la question (somme + coef)
Page 407: Cov(rb,rs)=…pbs*ecartype(rb)*ecartyp(rs)
Note: attention, il s’agit de le déduire des impôts et non du revenu avant impôt… (ce qui a encore moins de chance d’être voté !)
Léger écart

Chapter 25

Exercise Billabong

Capital increase

Share price before issuance 0.73

Price of share issued 0.28

a)

Subscription ratio 4.50

Value of 9 shares – 9 PSR 9 x 0.73 – 9 PSR

= =

Price of 9 shares issued + 2 PSR 9 x 0.28 + 2 PSR

PSR 0.0818

b)

Share price before issuance 0.7300

PSR 0.0818

Theoretical ex-right price 0.6482

c)

Assets before the operation

Shares Price Value

9000 0.73 6570

Transaction

– Sale

PSR Price

3888 0.08 318.1090909091

– Purchase

Shares Price Using Remaining PSR

1136 0.28 -318.08 5112 PSR 0

Assets after the operation

– Shares

Number Price Value

10136 0.65 6570.0

– Cash from the operation 0.0

Total 6570

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Ambiguité sur la date du versement du 2eme paiement. Si au bout de 2 ans, alors résultat légèrement différent
Portefeuille B,S
1 1 #REF!

1 1 #REF!

Le résultat du corrigé mentionne 2 sommes qui ne semblent pas correspondre à la question (somme + coef)
Page 407: Cov(rb,rs)=…pbs*ecartype(rb)*ecartyp(rs)

Week 7 Ch 26-1

Exercise Rawhajpoutalah Intl.

Division A B

Capital employed 1,000 1,000

Expected return 15%

Net operating income 50 300

Payout 50

a)

Market value 333.3 2,000

b)

Investment in … 0 300

Return on capital employed 5% 30%

Operating income today 50 300

Operating income with the new investment 0 90

Total 50 390

Value of the division 333 2,600

Initial value 333 2,300

Value created 0 300 300

c)

Investment in … 300 0

Return on capital employed 5% 30%

Operating income today 50 300

Operating income with the new investment 15 0

Total 65 300

Value of the division 433 2,000

Expected value 633 2,000

Value created -200 0 -200

d)

Investment in … 150 150

Return on capital employed 5% 30%

Operating income today 50 300

Operating income with the new investment 8 45

Total 58 345

Value of the division 383 2,300

Expected value 483 2,150

Value created -100 150 50

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Ambiguité sur la date du versement du 2eme paiement. Si au bout de 2 ans, alors résultat légèrement différent
Portefeuille B,S
1 1 #REF!

1 1 #REF!

Le résultat du corrigé mentionne 2 sommes qui ne semblent pas correspondre à la question (somme + coef)
Page 407: Cov(rb,rs)=…pbs*ecartype(rb)*ecartyp(rs)

Chapter 27

Exercise 1

C D

P/E ratio 10 18

Net profit 140 55

Value of the shareholders’equity 1400 990

Price (transaction) 1400 990

Net profit C 140

Net profit D 55

Synergies industrielles 27.5

New net profit 222.5

Increase in net profit 59%

Increase in number of shares 71%

Growth of the EPS -7%

Exercise 2

€m

2013

WACC 8.70%

Market cap. 1034

Operating profit 68

Tax rate 40%

Capital employed 904

Book value of shareholders’ equity, group share 904

EVA -38

MVA 130

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Ambiguité sur la date du versement du 2eme paiement. Si au bout de 2 ans, alors résultat légèrement différent
Portefeuille B,S
0 0 #REF!

0 0 #REF!

Le résultat du corrigé mentionne 2 sommes qui ne semblent pas correspondre à la question (somme + coef)
Page 407: Cov(rb,rs)=…pbs*ecartype(rb)*ecartyp(rs)

Chapter 28

Exercise 1

Purchase of equipment 20.00 M EUR

Depreciation over 5 years

Setup costs 1.50 M EUR

Useful life 8 years

Residual value 0.00

Increase of working capital 2.50 M EUR

Annual increase of EBITDA 3.00 M EUR

Tax rate 40%

Cash flow schedule

Year 0 1 2 3 4 5 6 7 8

Investments -21.50 0.00

Δ EBITDA 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00

Δ Working Capital -2.50 2.50

Δ tax 0.40 0.40 0.40 0.40 0.40 -1.20 -1.20 -1.20

Cash flows -21.50 0.90 3.40 3.40 3.40 3.40 1.80 1.80 4.30

Depreciation 4.00 4.00 4.00 4.00 4.00

NPV calculation

Discount rate 10.0%

NPV -6.94

Yield to maturity calculation

IRR 0.9%

NPV 0.00

Exercise 2

Purchase of new machine

Cost 2.00 M EUR

Useful life 5 years Linear depreciation over 5 years

Residual value 0.00 M EUR

Saving on charges per year 0.80 M EUR

Sale of second-hand machine

Purchase cost (previous year) 1.50 M EUR

Useful life 5 years Linear depreciation over 5 years

Residual value 0.00 M EUR

Net book value 1.20 M EUR

Potential sale price 1.00 M EUR

Tax rate 40%

Required rate of return 12%

Cash flows schedule of the new machine in comparison with the old one

Date 0 1 2 3 4 5

Purchase of new machine -2.00 0.00

Tax credit on capital losses 0.08

Δ EBITDA 0.80 0.80 0.80 0.80 0.80

Δ tax -0.28 -0.28 -0.28 -0.28 -0.16

Sale of old machine 1.00

Cash flows to be discounted -0.92 0.52 0.52 0.52 0.52 0.64

Capital loss -0.20

Δ depreciation 0.10 0.10 0.10 0.10 0.40

NPV 1.02 M EUR

IRR 50%

Exercise 3

Period 0 1 2 3 4 5

Cash flows -100.00 110.00 -30.00 25.00 50.00 100.00

Discount rate 0%

Cumulated and discounted cash flows -100.00 10.00 -20.00 5.00 55.00 155.00

Required rate of return 10.0%

NPV 90.23

IRR 42.64%

NPV 0.00

Exercise 4

Subvention 2 M EUR

Length 10 years

Initial outlay 0.8 M EUR

Δ EBITDA -0.2 M EUR

Schedule of cash flows

date 0 1 2 3 4 5 6 7 8 9 10

subvention 2.00

investments -0.80

Δ EBITDA -0.20 -0.20 -0.20 -0.20 -0.20 -0.20 -0.20 -0.20 -0.20 -0.20

Cash flows 1.20 -0.20 -0.20 -0.20 -0.20 -0.20 -0.20 -0.20 -0.20 -0.20 -0.20

Required rate of return 10% 11% 12% 13% 14% 15%

NPV -0.03 0.02 0.07 0.11 0.16 0.20

Exercise 5

Purchase of the new machine 78,000.00

Price per unit 3.00 EUR

Tax rate 35%

Required rate of return 10%

Subcontractor offer 5.00 EUR

Nbre de pièces/an 7000

Schedule of cash flows – own production in comparison with the subcontractor offer

date 0 1 2 3 4 5 6 7 8 9 10

Investment -78,000.00

Gain sur achat extérieur 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00

Δ Tax -2,170.00 -2,170.00 -2,170.00 -2,170.00 -2,170.00 -2,170.00 -2,170.00 -2,170.00 -2,170.00 -2,170.00

Cash flows -78,000.00 11,830.00 11,830.00 11,830.00 11,830.00 11,830.00 11,830.00 11,830.00 11,830.00 11,830.00 11,830.00

Depreciation 7,800.00 7,800.00 7,800.00 7,800.00 7,800.00 7,800.00 7,800.00 7,800.00 7,800.00 7,800.00

NPV -5,309.77 -> Indeed, it depends of the number of units produced (cf. below)

Number of units/year 7000 8000 9000 10000

NPV -5,310 2,678 10,666 18,654

Exercise 6

Capital expenditure 8,400.00

Revenues

Parking 1,680.00

Garage 770.00

Petrol station 800.00

Costs

Operating 670.00

Depreciation and amortisation 280.00

Income tax expense 1,000.00

Net profits 1,300.00

Schedule of cash flows

date 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Capital expenditure -8,400.00

Net income 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00

Depreciation 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00 280.00

Cash flows -8,400.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00 1,580.00

Calculation of the accounting return of the project

Net income 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00 1,300.00

Net book value of the fixed assets 8,400.00 8,120.00 7,840.00 7,560.00 7,280.00 7,000.00 6,720.00 6,440.00 6,160.00 5,880.00 5,600.00 5,320.00 5,040.00 4,760.00 4,480.00 4,200.00 3,920.00 3,640.00 3,360.00 3,080.00 2,800.00 2,520.00 2,240.00 1,960.00 1,680.00 1,400.00 1,120.00 840.00 560.00 280.00

Average working capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Accounting return 0 15.5% 16.0% 16.6% 17.2% 17.9% 18.6% 19.3% 20.2% 21.1% 22.1% 23.2% 24.4% 25.8% 27.3% 29.0% 31.0% 33.2% 35.7% 38.7% 42.2% 46.4% 51.6% 58.0% 66.3% 77.4% 92.9% 116.1% 154.8% 232.1% 464.3%

Average of the acc. return 59.8%

Payback ratio & NPV at 10%

Discount rate 10%

Cumulated and discounted cash flows -8,400.00 -6,963.64 -5,657.85 -4,470.77 -3,391.61 -2,410.56 -1,518.69 -707.90 29.18 699.26 1,308.42 1,862.20 2,365.63 2,823.30 3,239.37 3,617.61 3,961.46 4,274.05 4,558.23 4,816.57 5,051.43 5,264.94 5,459.03 5,635.49 5,795.90 5,941.72 6,074.29 6,194.81 6,304.38 6,403.98 6,494.52

Payback ratio 7.9

NPV at 10% 6,494.52

Calculation of the IRR

IRR 18.7%

NPV -0.15

Exercise 7

Machine cost 8,000

Length of depreciation 7

Total length of depreciation 8

Capital loss 2,000

Tax credit on the capital loss 40%

Tax credit 800

Nominal value of depreciation 10,500

Length 7

Sale back of the machine 500.00

Annual production 100,000 units

Initial machine cost 0.38

direct labor cost/unit 0.14

raw material/unit 0.10

general costs/unité 0.14

Cost of the new machine 0.35

direct labor cost/unit 0.12

raw material/unit 0.09

general costs/unité 0.14

Cash flow schedule (new machine)

Δ depreciation 500.00 500.00 500.00 500.00 500.00 500.00 500.00

date 0 1 2 3 4 5 6 7 8

Sale back of the old machine 5,000.00

Purchase of the new machine -11,000.00 500.00

Savings on operating costs 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00

Δ Tax (excl. Tax credit) -1,000.00 -1,000.00 -1,000.00 -1,000.00 -1,000.00 -1,000.00 -1,000.00

Tax credit 800.00

Cash Flows -5,200.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 500.00

-3200.00 -1200.00 800.00 2800.00 4800.00 6800.00 8800.00 9300.00

Required rate of return 10%

NPV 9,970.09

Payback ratio 2.60 years

Discounted cash flows -5,200.00 1818.18 1652.89 1502.63 1366.03 1241.84 1128.95 1026.32 233.25

Cumulated and discounted cash flows -5,200.00 -3,381.82 -1,728.93 -226.30 1,139.73 2,381.57 3,510.52 4,536.84

Discunted payback ratio 3.05 years

Exercise 8

Note: Figures describing the increase in sales provided in the book were multiplied by 10 by mistake… Please find below the correct version of the exercise!

Annual sales 1,000

Sale price/unit 4.00

Cost price 3.20

Fixed costs 1.00

Required return on capital invested (before tax) 20%

Extension of payment period (days) 0 15 30 45 60

Increase in sales 0 40 60 70 75

Increase in sales

Sales 1,000 1,040 1,060 1,070 1,075

Number of units produced (in thousands) 250 260 265 268 269

Production cost 800 822 833 839 841

Operating profit 200 218 227 232 234

Δ operating profit 0 18 27 32 34

Bad debt 1.2% 2.0% 2.5% 3.0% 4.0%

Customer credit 82.19 101.34 136.93 172.29 207.43

Additional customer credit 19.15 54.74 90.10 125.24

Bad debts 12.00 20.80 26.50 32.10 43.00

Additional bad debts 8.80 5.70 5.60 10.90

Net additional profit 9.20 21.30 25.90 22.85

Required additional profit on additional investment 3.83 10.95 18.02 25.05

NPV 5.37 10.35 7.88 -2.20

Optimum extension period 30 days which would yield an increase of the NPV of € 10352.05

Increase in bad debts

Extension of payment period (days) 0 15 30 45 60

Bad debts/sales 1.20% 2.00% 4.50% 7.00% 12.00%

Sales 1,000.00 1,040.00 1,060.00 1,070.00 1,075.00

Number of units produced (in thousands) 250.00 260.00 265.00 267.50 268.75

Production cost 809.72 838.78 872.25 901.61 955.97

Operating profit 190.28 201.22 187.75 168.39 119.03

Δ operating profit 0.00 10.94 -2.53 -21.90 -71.25

Schedule of incremental and discounted cash flows

Production cost 0.00 -29.06 -62.53 -91.90 -146.25

Customer payment discounted at the date of payment 0.00 32.13 44.02 45.89 42.83

NPV 0.00 3.07 -18.52 -46.01 -103.42

Optimum extension period 15.0 days

&”Verdana,Italique”&9&F – &A &P / &N &”Verdana,Italique”&9&D – &T

Ambiguité sur la date du versement du 2eme paiement. Si au bout de 2 ans, alors résultat légèrement différent
Portefeuille B,S
0 0 #REF!

0 0 #REF!

Cumulated and discounted cash flows 0 1 2 3 4 5 6 7 -5200 -3381.8181818181802 -1728.925619834708 -226.29601803155174 1139.7308926985904 2381.5735388169014 3510.5213989244567 4536.8376353858703 Years

Cumulated and discounted cash flows

NPV 0 15 30 45 60 5.3698630136986303 10.352054794520546 7.8794520547945162 -2.1979452054794599 Added days of credit

NPV

NPV 0 15 30 45 60 0 3.0704217164450256 -18.518051933697961 -46.006035988831968 -103.42393579639008 Added days of credit

NPV

Le résultat du corrigé mentionne 2 sommes qui ne semblent pas correspondre à la question (somme + coef)
Page 407: Cov(rb,rs)=…pbs*ecartype(rb)*ecartyp(rs)
Note: As the building of the parking facility lasted 1 year, the operating activity only started the second year. Thus, this annual income statement is considered as a reference for the following years of activity.

Week 7 Ch 29-1,2,3

Exercise 1

Trading price 30.2

Dividends 5 the 1st years 5

Dividends after 6

Schedule of discounted cash flows

date 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 …

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