Corporate Finance I: Measuring and Promoting Value Creation | Online Course Support

Consider the following data. The figures are in millions of dollars.Balance sheetCash 3000 Current liabilities 5000Other current assets 7000 Long-term debt 25000Non-current assets 50000 Equity 30000Income statementOperating income 6000Interest payment 2500Income before taxes 3500Taxes 1050Net income 2450If the required return on debt is 5%, the required return on equity is 12%, and the market value of equity is 80 billion dollars, the WACC is _________.

13. Question 13 Consider the following data. The figures are in millions of dollars. Balance sheet Cash 3000 Current liabilities 5000 Other current assets 7000 Long-term debt 25000 Non-current assets…

Corporate Finance I: Measuring and Promoting Value Creation | Online Course Support

Consider the following data. The figures are in millions of dollars. Balance sheet Cash 3000 Current liabilities 5000 Other current assets 7000 Long-term debt 25000 Non-current assets 50000 Equity 30000 Income statement Operating income 6000 Interest payment 2500 Income before taxes 3500 Taxes 1050 Net income 2450 The company’s operating assets are equal to __________.

12. Question 12 Consider the following data. The figures are in millions of dollars. Balance sheet Cash 3000 Current liabilities 5000 Other current assets 7000 Long-term debt 25000 Non-current assets…

Corporate Finance I: Measuring and Promoting Value Creation | Online Course Support

Consider the following data. The figures are in millions of dollars. Balance sheet Cash 3000 Current liabilities 5000 Other current assets 7000 Long-term debt 25000 Non-current assets 50000 Equity 30000 Income statement Operating income 6000 Interest payment 2500 Income before taxes 3500 Taxes 1050 Net income 2450 The company’s OPAT is equal to ________.

11. Question 11 Consider the following data. The figures are in millions of dollars. Balance sheet Cash 3000 Current liabilities 5000 Other current assets 7000 Long-term debt 25000 Non-current assets…

Corporate Finance I: Measuring and Promoting Value Creation | Online Course Support

Consider the example of sensitivity analysis that we discussed in class (in the spreadsheet Sensitivity.xls). What happens to the NPV and the IRR of the project when the cost per unit goes from 0.8 to 2 dollars?

7. Question 7 Consider the example of sensitivity analysis that we discussed in class (in the spreadsheet Sensitivity.xls). What happens to the NPV and the IRR of the project when…

Corporate Finance I: Measuring and Promoting Value Creation | Online Course Support

Almeida and partners (a private equity firm) is considering a LBO of Example Inc.,which has an equity value of 10B dollars. Example Inc. requires a 20% premium to complete the deal. Almeida and partners has 1.5B in cash to finance the deal and is planning to finance the rest with a new bank loan.

6. Question 6 Almeida and partners (a private equity firm) is considering a LBO of Example Inc.,which has an equity value of 10B dollars. Example Inc. requires a 20% premium…

Corporate Finance I: Measuring and Promoting Value Creation | Online Course Support

A company that has equity value of 75 billion dollars is proposing an acquisition of a competitor in the same industry whose equity is worth 41 billion dollars. The synergies associated with the merger have been estimated to be equal to 9 billion dollars.

5. Question 5 A company that has equity value of 75 billion dollars is proposing an acquisition of a competitor in the same industry whose equity is worth 41 billion…

Corporate Finance I: Measuring and Promoting Value Creation | Online Course Support

Your company’s required return on debt is 6%, its tax rate is 30%, and its required return on equity is 10%. The company has 20 billion dollars of debt, and book equity is 10 billion dollars. The stock price is 10 dollars a share, and the company has 5 billion shares outstanding. The company’s WACC is _________.

10. Question 10 Your company’s required return on debt is 6%, its tax rate is 30%, and its required return on equity is 10%. The company has 20 billion dollars…

Corporate Finance I: Measuring and Promoting Value Creation | Online Course Support

Suppose a company has a required return on equity equal to 9%. Calculate the company’s Beta if the 30-year government bond yield is 3% and the market risk premium is 5%.

9. Question 9 Suppose a company has a required return on equity equal to 9%. Calculate the company’s Beta if the 30-year government bond yield is 3% and the market…

Corporate Finance I: Measuring and Promoting Value Creation | Online Course Support

Is the following statement true or false? If there is a 10% chance that the cost per unit will be equal to 2 dollars, you should reject the project because there is a significant chance that the NPV will be negative.

8. Question 8 Is the following statement true or false? If there is a 10% chance that the cost per unit will be equal to 2 dollars, you should reject…

Corporate Finance I: Measuring and Promoting Value Creation | Online Course Support

A CFO is considering an acquisition of a target that is currently worth 3 billion dollars. The acquisition will produce annual after-tax cost savings of 70 million dollars. This annual cost savings is expected to begin in two years and to grow at the rate of inflation (assume it is 1%).

2. Question 2 A CFO is considering an acquisition of a target that is currently worth 3 billion dollars. The acquisition will produce annual after-tax cost savings of 70 million…