Business Finance Homework
Task
This task assesses the following learning outcomes:
o Develop sound analytical frameworks to grasp the process of decision making with respect to making investment in fixed assets and the methods used to evaluate new projects.
o Understand what free cash flow is and how to measure it.
o Demonstrate understanding of financial forecasting and planning.
o Critically analyze working capital management and managing firm liquidity.
o Analyze the sources of short-term credit and its estimated cost.
Each answer requires either written paragraph or detailed solution with formulas, explanations and computations.
• Explain the reasons why the net present value criterion is the best way to evaluate proposed investments.
• Discuss the relevant incremental cash flows for project evaluation.
• Contrast the differences between a flexible short-term financing policy and a restrictive one. What are the pros and cons of each?
• A company has sales of €46,200, costs of €23,100, depreciation expense of €2,200, and interest expense of €1,700. The tax rate is 22 percent. What is the operating cash flow (OCF)?
• Two mutually exclusive projects have an initial cost of €47,500 each. Project A produces cash inflows of €25,300, €37,100, and €22,000 for Years 1 through 3, respectively. Project B produces cash inflows of €43,600, €19,800 and €10,400 for Years 1 through 3, respectively. The required rate of return is 14.7 percent for Project A and 14.9 percent for Project B. Which project(s) should be accepted and why?
• A project has an initial cost of €7,900 and cash inflows of €2,100, €3,140, €3,800, and €4,500 a year over the next four years, respectively. What is the payback period?
• A company has beginning inventory of €11,062, accounts payable of €8,010, and accounts receivable of €7,844. The end of year values are €11,362 for inventory, €7,898 for accounts payable, and €8,029 for accounts receivable. Net sales are €109,100 and costs of goods sold are €56,220. How many days are in the cash cycle?
• As of the beginning of the quarter, a company had a cash balance of €710. During the quarter, the company collected €1,860 from customers and paid suppliers €1,520. The company also paid a loan payment of €320 and a tax payment of €510. What is company's cash balance at the end of the quarter?
• A company is considering a new three-year expansion project that requires an initial fixed asset investment of €2,320,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate €1,735,000 in annual sales, with costs of €650,000. The tax rate is 21 percent and the required return on the project is 12 percent. What is the project's NPV?
• A company has sales of €19,700, net income of €3,517, fixed assets of €18,282, current liabilities of €2,940, current assets of €3,018, long-term debt of €7,600, and equity of €10,760. Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 50 percent dividend payout ratio. Next year's sales are projected to increase by 7 percent. The firm is currently operating at full capacity. What is the amount of external financing needed?
Format your homework according to the give formatting requirements:
• The answer must be using Times New Roman font (size 12), double spaced, typed, with one-inch margins on all sides.
• The response also includes a cover page containing the student's name, the title of the homework, the course title, and the date. The cover page is not included in the required page length.
• Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.