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

Is the following statement true or false? The negative EVA shows that the company did not generate economic profits this year. However, there is no need to restructure operations if the EVA is expected to become positive in future years.

15. Question 15 Is the following statement true or false? The negative EVA shows that the company did not generate economic profits this year. However, there is no need to…

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.

4. Question 4 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

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%).

3. Question 3 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…

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

Consider the following situation in which firm A acquires firm B in a one-for-one stock deal: Firm A Firm B Merged Firm Earnings 120 120 230 # shares 100 50 150 Price/share 30 30 EPS 1.2 2.4 1.53 Is the following statement true or false?

1. Question 1 Consider the following situation in which firm A acquires firm B in a one-for-one stock deal:     Firm A Firm B Merged Firm Earnings 120 120…

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

Consider the gold mine problem we solved in Module 3 but assume that the parameters change such that the profits you make in each state of the world if the mine is open are now:

14. Question 14 Consider the gold mine problem we solved in Module 3 but assume that the parameters change such that the profits you make in each state of the…

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

You are the CFO of a drug company, and you must decide whether to invest 70M dollars in R&D for a new drug. If you conduct the R&D, you believe that there is a 10% chance that the research will produce a useful drug. If the research is successful,

12. Question 12 You are the CFO of a drug company, and you must decide whether to invest 70M dollars in R&D for a new drug. If you conduct the…

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

A company currently operates a machine that generates cash flows of 35,000 a year for the next five years (machine 1). You are considering whether to replace this machine today with another more powerful machine that will produce cash flows of 50,000 a year for the same period of five years (machine 2).

11. Question 11 A company currently operates a machine that generates cash flows of 35,000 a year for the next five years (machine 1). You are considering whether to replace…

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

Suppose I offer you an investment that requires 25,000 today and pays back 18,500 in a year’s time. What is the (IRR) rate of return on this investment?

5. Question 5 Suppose I offer you an investment that requires 25,000 today and pays back 18,500 in a year’s time. What is the (IRR) rate of return on this…

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

Consider the following data – A machine costs $1200 and is depreciated using the straight line method over 5 years. That is, depreciation is 240 every year.

10. Question 10 Consider the following data – A machine costs $1200 and is depreciated using the straight line method over 5 years. That is, depreciation is 240 every year….

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

Consider the following data – A machine costs $1200 and is depreciated using the straight line method over 5 years. That is, depreciation is 240 every year. – The machine will generate operating profits before depreciation of $500 per year for 5 years. The first cash flow happens at the end of the first year after the machine is put in place.

8. Question 8 Consider the following data – A machine costs $1200 and is depreciated using the straight line method over 5 years. That is, depreciation is 240 every year….