$1,000.
8.08%.
Dividends are payments made to shareholders from a corporation's earnings.
5, 6, 7, and 8 years.
They are relatively liquid.
Discounting each cash flow back separately.
CyberDragon has higher leverage than the industry average.
Launching a new product line.
peerawicht@hotmail.com.
100%
The total resources owned by a company.
Begin Mode.
PVIFA = 1/i * (1 - 1/(1 + i)^n).
Within a year.
Uneven Cash Flows.
An Annuity Due has a higher present value because payments are received sooner.
Creating wealth and maintaining it.
Comparing a company’s financial ratios with its ratios in previous years.
By comparing a company’s financial ratios with those of its industry.
Total Assets = Outstanding Debt + Shareholders’ Equity.
An ordinary annuity is a series of equal payments made at the end of each period.
CF (A) = CF (S) + CF (B).
100 Marks.
Shareholder Wealth Maximization.
By maximizing firm value.
$106.
Maximizing stock price.
The interest rate.
Cash pays employees and creditors, while profit does not.
Maximize profits.
Profit maximization.
3%.
The ability to generate profit relative to revenue, assets, or equity.
Any asset that is not a current asset or fixed asset.
Uncertainty of returns.
0.0785.
Comparing 2M profit in the 1st year to 2M profit in the 2nd year.
2,000 in year 1, 4,000 in year 2, 6,000 in year 3, and 7,000 in year 4.
They include all available information.
Ordinary Annuity.
There is a trade-off between risk and return.
The ability to meet short-term obligations.
Only if rewarded with additional return.
Timing of returns.
Buying stocks.
Begin Mode calculates payments at the beginning of each period, while End Mode calculates payments at the end of each period.
The quarterly loan is more expensive than the 8% loan with annual compounding.
A tax incentive that reduces the amount of tax owed based on investment expenditures.
-10,000
80 - 100%.
It helps in calculating future values of investments and savings over time.
A financial statement that shows revenue and expenses over a specific period.
3 years.
Subtracting Income Taxes and Preferred Stock Dividends from Earnings After Taxes (EAT).
20 stocks.
3.65 times.
Assets that are relatively liquid and expected to be converted to cash within a year.
Accounting profit.
Maximize shareholders' wealth.
Aj. Peerawich Thoviriyavej.
Assets that are relatively liquid and expected to be converted to cash within a year.
Cash, marketable securities, accounts receivable, inventories, prepaid expenses.
Annual Percentage Yield.
It is essential for reinvestment, paying dividends, and covering taxes.
Compounding.
$100.
An annuity where payments are made at the end of each period.
The interest rate.
PV = C × [(1 - (1 + r)^-n) / r], where C is the cash flow per period, r is the interest rate, and n is the number of periods.
It indicates that the stock price accurately reflects the firm's value.
At the end of each period.
The interest we could have earned if we had received the $1 sooner.
Incremental cash flows count.
Equal semi-annual coupon interest payments.
Operating income divided by interest expense.
To determine the financial health of a company.
By opening new stores.
Translate $1 today into its equivalent in the future (compounding).
https://tinyurl.com/ecn - 213.
3 credits.
Debt instruments issued by the government to finance its operations.
The total amount of money borrowed by the company that is still owed.
CF (S) stands for cash flow to shareholders, and CF (B) stands for cash flow from creditors.
It refers to safety or security in financial transactions.
4 payments of $1000 each.
$1,000.
Earnings Before Taxes (EBT).
$10.
They help assess a company's ability to cover short-term liabilities.
Time Value of Money.
Because it takes up costly warehouse space.
No, it is below the industry average.
Taxes bias business decisions.
Investment in net operating working capital and investments in fixed and other assets.
The conflict of interest between managers (agents) and owners.
3 years.
It makes solving time value problems much easier.
Yes, higher leverage increases financial risk due to fixed debt obligations.
10%
Markets where investors buy and sell securities after the original issuance.
Machinery and equipment, buildings, and land.
Increase shareholder wealth.
Assets such as patents and copyrights.
End Mode.
Money available today is worth more than the same amount in the future due to its potential earning capacity.
The process of earning interest on both the initial principal and the accumulated interest from previous periods.
Some risk can be diversified away.
Future Value = Present Value × (1 + r)^n, where r is the interest rate and n is the number of periods.
No, there is no prerequisite.
The formula approaches 1/i.
The total income generated from sales before any expenses are deducted.
$1 now is worth more than $1 tomorrow.
2.4.
The market in which new issues of a security are sold to initial buyers.
45%
45%
Whether to prioritize profit now or later.
Taxes bias business decisions.
After-tax cash flow.
It becomes zero.
Speedy information dissemination.
Sales - Cost of Goods Sold.
Gross Profit.
An annuity where n equals infinity.
1. Balance Sheet 2. Income Statement 3. Cash Flow Statement.
A sequence of equal cash flows occurring at the end of each period.
The impact of using debt capital to finance assets.
A perpetuity can be thought of as an annuity that goes on forever.
Cash, marketable securities, accounts receivable, inventories, prepaid expenses.
Machinery and equipment, buildings, and land.
After-tax cash flow from operations less investment in net operating working capital less investments in fixed and other assets.
PV = PMT / i
Accounts payable, interest or taxes payable, accrued expenses, short-term notes.
8% per year.
FV (Future Value), PV (Present Value), i (interest rate), and n (number of periods).
Fixed dividends and higher priority than common stockholders in liquidation.
By breaking down return on equity into its components: profitability, efficiency, and leverage.
Common stockholders.
Pay employees and creditors.
The first time a firm's stock is sold to the general public.
A new stock offering by a firm that already has stock traded in the secondary market.
The use of borrowed funds to finance operations.
Cash flows generated through the firm’s assets.
Cash flows paid to or received from the firm’s investors (creditors & stockholders).
Financial management, financial analysis, financial planning and forecasting, profit planning, working capital management, cash management, debt management, and dividend payment policy.
Assets that are relatively liquid and expected to be converted to cash within a year.
4.
An annuity where payments are made at the beginning of each period.
Sales - Expenses = Profit.
Present Value Interest Factor of Annuity.
Cash flow that is free and available to be distributed to the firm’s investors (both debt and equity investors).
If the stock price is correct, then the firm's value must also be correct.
Maximizing Firm Value = Maximizing Stock Price.
Change in debt principal, dividends paid to stockholders, and change in stock.
58%.
The idea that money available today is worth more than the same amount in the future due to its potential earning capacity.
FV = PMT (FVIFA i, n)
$100.
8%.
$500.
3.1 times per year.
Because it uses a straightforward formula: PV = PMT / i.
Begin Mode assumes payments are made at the beginning of each period, while End Mode assumes payments are made at the end of each period.
After-tax cash flow from operations less investment in net operating working capital less investments in fixed and other assets.
An annuity where cash flows occur at the beginning of each period.
$1,000.
The market in which previously issued securities are traded.
CyberDragon is much less efficient than the industry average.
CyberDragon is less profitable due to being less efficient.
Cash Flows from Assets = Cash Flows from Financing.
APY = (1 + quoted rate/m)^m - 1, where m is the number of compounding periods.
Present Value.
They measure how efficiently the firm’s assets generate operating profits.
The residual interest in the assets of the company after deducting liabilities.
A designated area aimed at promoting industrial development through various incentives.
The process of determining the present value of a future sum of money or stream of cash flows given a specified rate of return.
Attendance & Participation (10 Marks), Midterm Exam (45 Marks), Final Exam (45 Marks).
8% or 0.08.
Shareholder Wealth = Stock Price.
$2,577.10 (calculated using the PV formula).
Time value of money.
The firm may have too much inventory.
59.3 days.
-10,000
Payment per period.
CyberDragon is below the industry average, suggesting it may not be utilizing its fixed assets as efficiently as competitors.
The emergence of new competitors.
It helps in evaluating investment opportunities and making informed financial decisions.
12%.
$2,800.
Whatever is left after creditors and preferred stockholders are paid.
Their own benefit.
6.16 times per year.
Risk and Return.
Cost of Goods Sold divided by Inventory.
$1,000.
There are 7 periods indicated (5, 6, 7 years).
How well the firm's managers are maximizing shareholder wealth.
Higher risk is associated with higher return.
How well a firm utilizes its assets to generate revenue.
Corporate Finance.
FV = PV (1 + i)^n.
Discounting.
15%.
CF from Asset = CF to Shareholders + CF from Creditors.
Cash, marketable securities, accounts receivable, inventories, prepaid expenses.
To help increase investment.
The number of periods.
Earnings Before Interest and Taxes.
PVIFA = (1 - (1 / (1 + i)^n)) / i.
$200.
1.97.
Pearson Prentice Hall.
CyberDragon has a higher leverage compared to the industry average.
Investment in net operating working capital and investments in fixed and other assets.
Present Value Interest Factor of Annuity.
0.92.
Interest rate (i) and number of periods (n).
ROE = Earnings / Equity.
$3,246.40.
An ordinary annuity is a series of equal payments made at the end of each period over a specified time.
BEGIN.
$1,000.
PV = PMT (PVIFA i, n) (1 + i)
Insider trading, conflicts of interest, and financial misreporting.
A strategy used to minimize risk without reducing return.
The interest rate.
Because of opportunity costs.
The firm uses more debt financing than average.
The conflict of interest between management and shareholders.
Payments received from a bond or payments made for a loan.
10.22%.
$15,000.
$125,000.
$3,246.40
To compare different nominal interest rates that have different compounding periods.
FV = PV × [(1 + r)^n - 1] / r.
Because they occur at different times and have different present values.
8%.
FV = PMT ((1 + i)^n - 1) / i
$2,166.40.
Earnings After Taxes (EAT) - Preferred Stock Dividends.
By discounting each cash flow back to the present using the formula PV = CF / (1 + r)^n, where CF is the cash flow, r is the discount rate, and n is the year.
FV = PV (FVIF i, n)
$20.
$81,890,000.
Annuity due.
$2,577.10
It establishes frameworks to guide ethical decision-making and accountability.
Peerawich Thoviriyavej.
$11,933
3 periods
$100.
Future time periods where cash flows occur.
It represents the number of payment periods per year, which is 1 in this case.
PV = PMT * (1 - (1 + i)^-n) / i
Future Value.
$3,160.
$50,000.
4,781.09
Present Value = Future Value / (1 + r)^n, where r is the discount rate and n is the number of periods.
Because its risk must be considered in the context of overall portfolio risk.
$8000.
They measure whether a company has enough liquid assets to meet approaching obligations.
To leverage (increase) returns on common equity.
6.7 times.
$1.03 million one year from now.
A stream of equal payments.
The firm takes longer to collect receivables than the industry average, which may suggest inefficiencies in credit management.
Profitability, Efficiency, and Leverage.
$1,000.
Loans from banks or other sources that lend money for longer than 12 months.
The interest rate or discount rate.
SALES - EXPENSES = PROFIT.
PV = FV / (1 + i)^n
9.6% compounded monthly.
Operating Expenses.
Total Sales divided by Total Assets.
$2,216.
No, it is below the industry average.
A situation in which a difficult choice must be made between two or more conflicting ethical principles.
PV = FV / (1 + i)^n
Expenses related to borrowing funds, such as interest payments.
PV = FV * PVIF(i, n).
The cash flow generated solely from selling chicken rice.
$1,000.
It helps in assessing the value of future cash flows in today's terms, allowing for better investment decisions.
Investment in net operating working capital and investments in fixed and other assets.
Working-capital management and short-term financing.
Costs incurred in the normal course of business operations.
$85,300.
Higher leverage typically increases ROE, but it also increases risk.
$27,460.
Annuity Due.
$7000.
Earnings After Taxes (EAT) minus Preferred Stock Dividends.
A financial instrument that provides a fixed payment every period forever.
Interest payments to creditors - change in debt principal - dividends paid to stockholders - change in stock.
$1 million now is more valuable.
The cash available after financing activities.
47 days.
3.56 times.
It represents a series of cash flows that start at zero, then increase over time.
No, all risk is not equal.
$3,259.71.
Ethical dilemmas are everywhere in finance.
$2,783.26.
The manager.
Sales minus Cost of Goods Sold.
The formula involves the present value, future value, interest rate, and compounding frequency.
PV = FV (PVIF i, n) or PV = FV / (1 + i)^n.
8% compounded annually.
Operating income, depreciation, and cash tax payments.
Differentiate their products or achieve cost advantages.
FV = PV * e^(rt), where PV is present value, r is the interest rate, and t is time.
7.85% compounded quarterly.
8%.
PV = PMT (PVIFA i, n)
$1,000
-10,000.
CyberDragon's ROE is lower than the industry average.
Investments in fixed assets and other assets on the balance sheet.
$1,000.
The payment amount per period, which is $1,000 in this case.
It fosters trust and accountability among stakeholders.
FV is typically higher in Begin Mode due to earlier cash flow compounding.
Cash, not profits, is king.
To evaluate a firm's financial performance.
It can be seen as a curse due to increased competition.
Financing provided by a creditor.
2,000 in year 1, 4,000 in year 2, 6,000 in year 3, and 7,000 in year 4.
Three variables are given, and you solve for the fourth.
Change in current assets minus change in non-interest bearing current liabilities.
Good profitable (value-creating) projects.
Course Introduction.
3.9 times.
Compound interest is calculated on both the principal and accumulated interest, while simple interest is calculated only on the principal.
Marketing and administrative expenses.
$2,577.10.
$362.45.
The cash generated from operations after accounting for taxes.
Begin Mode assumes cash flows occur at the beginning of the period, while End Mode assumes they occur at the end.
The process of determining the present value of a cash flow that will be received in the future.
$112,760.
3 periods.
$26.44.
Only the change in cash flow that results from adding chicken noodle soup matters.
Operating Income divided by Total Assets.
100 years.
$25,523,000.
To calculate: FV = 100 (1 + 0.06/4)^(4*5).
$47,523,000.
5 years.
The number of periods, which is 3 years in this case.
8% or 0.08.
It helps compare the value of money received at different times.
2005.
Prices reflect all available information.
Borrowed money that must be repaid within the next 12 months.
$10,000.
$100,000.
After-tax cash flow from operations minus investment in net operating working capital minus investments in fixed and other assets.
0.89.
Yes, leverage can increase profitability if the returns exceed the cost of debt.
Uneven Cash Flows.
Interest calculated on the initial principal and also on the accumulated interest from previous periods.
The direct costs attributable to the production of the goods sold by a company.
8%.
23 Sep 2024.
Earnings before interest and taxes.
After-tax cash flow from operations minus investment in net operating working capital minus investments in fixed and other assets.
Three cash flows of $1000 each.
Payments are made at the beginning of each period.
The number of years the investment is held.
The number of times interest is compounded per year.
It can hurt the firm's value.
Changes in current assets and current liabilities related to operations.
Present Value Interest Factor.
PV = FV / (1 + i)^n
8% (0.08)
2,000 (year 1), 4,000 (year 2), 6,000 (year 3), 7,000 (year 4).
FV = PV (1 + i/m)^(m x n)
An annuity where payments are made at the beginning of each period.
Product pricing and the firm's ability to keep costs down.
$2.15.
The payment amount per period, which is $1,000 in this case.
4,000
'Balance Sheet' in Thai.
$11,367,000.
Some items may become spoiled or obsolete.
47%.
The cash generated by a company after accounting for cash outflows to support operations and maintain its capital assets.
The payment amount received per period.
1.38 times.
The relationship between profitability, efficiency, and leverage.
Operating income divided by sales.
Sales - Cost of Goods Sold.
Squeeze more sales dollars out of its assets.
The firm has a lower liquidity position than the industry average.
FV = PV * (1 + i)^n
A market where not all information is available to all participants.
The concept that money available today is worth more than the same amount in the future due to its potential earning capacity.
No, because the cash flows are different each year.
Future Value = P(1 + r/n)^(nt), where P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.
The current worth of a future sum of money or stream of cash flows, discounted at a specific interest rate.
$3,259.71.
Taxes owed to the government based on profit.
-$94.34.
The combined cash flow from selling both chicken rice and chicken noodle soup.
3 years.
$11,933.
In an annuity due, payments are made at the beginning of each period instead of the end.
The present time or the initial cash flow.
$15,000.
$500.
6%.
202 months.
$8,360.
0.007968.
ROE = (Net Profit Margin) x (Total Asset Turnover) x (Equity Multiplier).
Future Value = Present Value × (1 + interest rate).
PV = PMT (PVIFA i, n)
4.6 times.
Shareholders’ investment in the firm.
1.82 times.
15%.
$2,577.10.
PV = PMT / i.
$94.34
Operating income: 11,520; Sales: 112,760.
Operating Income (EBIT) - Interest Expense.
19% (i = 0.19).
3.
The agency problem becomes bigger.
The payment amount per period, which is -$1,000.
$100,000.
At the beginning of each year.
Income Taxes.
Cost of Goods Sold: 85,300; Inventory: 27,530.
50%.
A series of cash flows that occur at different points in time.
Cash, Marketable Securities, Accounts Receivable, Inventories, Prepaid Expenses.
Future Value.
$3.86.
Credit sales: 112,760; Accounts receivable: 18,320.
$5,000
$2,783.26
An annuity where payments are made at the beginning of each period.
1,818.18
ROE = (Earnings - Interest) / Equity = (15,000 - 4,000) / 50,000.
$4,000.
$22,000,000.
It indicates how much profit a company makes for every dollar of sales.
Future Value Interest Factor of Annuity.
$3,506.11.
$1,080.
(Current Assets - Inventories) / Current Liabilities.
Present Value Interest Factor.
3 periods.
8%.
Net Income / Common Equity.
8.2 times.
$74.73
Cost of capital.
They likely represent cash flow amounts and the number of periods for annuity calculations.
Payments per year, which is 1.
$134.68
8%.
The rate of return that could be earned on an investment in the financial markets with similar risk.
Corporate Finance, 10th Edition by Stephen Ross, Randolph Westerfield, Jeffrey Jaffe.
2,000
TBA (To Be Announced).
e (Euler's number).
$11,520.
Future Value Interest Factor of Annuity.
3,305.79
'Liabilities' in Thai.
7,000
FV = PV (1 + i)^n.
Because they have different numbers of compounding periods per year.
14.6%.
Monthly.
It refers to the time period over which cash flows occur, often used in annuity calculations.
The process of earning interest on both the initial principal and the accumulated interest from previous periods.
-$1,000.
$134.89
17.54%.
They can lead to conflicts between personal gain and professional integrity.
The more frequently interest is compounded, the greater the future value will be.
7%.
$50,190,000.
$3,246.40.
You would need to calculate using the FV formula, but the answer is not provided in the text.
The difference in the value of fixed assets over a period.
10%.
An increase in the discount rate decreases the present value of future cash flows.
0.008 (or 0.8%).
Preferred Stock, Common Stock (Par value), Paid in Capital, Retained Earnings.
1.60944.
3 years.
It indicates the level of debt used to finance assets.
-$100.
Begin Mode calculates cash flows at the beginning of each period, while End Mode calculates them at the end of each period.
The additional cash flow generated from a specific decision or project.
FV = PV (FVIF i, n)
1,300,000 shares.
Operating Income minus Interest Expense.
Operating income + depreciation - cash tax payments.
8%.
Earnings After Taxes minus Preferred Stock Dividends.
Assets, Liabilities (Debt), and Equity.
PV is calculated considering cash flows at the beginning of each period.
PV = FV / (1 + r)^n, where PV is present value, FV is future value, r is the interest rate, and n is the number of periods.
PV = FV / (1 + i)^n
-10,000
Machinery & Equipment, Buildings and Land.
Present Value.
$34,367,000.
Four years (4, 5, 6, 7, 8).
$31,700,000.
The interest rate.
No, it is less efficient than the industry average.
14.07%.
A 3-year time line.
There are 4 years represented.
The amount of money an investment will grow to over a period of time at a given interest rate.
$3,506.11.
Net income after all expenses and taxes have been deducted.
The annual payment or investment amount.
Present Value Interest Factor of Annuity.
Accounts Payable, Accrued Expenses, Short-term notes.
Present Value.
Present Value Interest Factor of Annuity.
8% or 0.08.
Compound the FV of the ordinary annuity one more period.
$3,344.
$133.82.
$5,000.
FV = PV (1 + i/m)^(m x n)
8%.
By dividing credit sales by accounts receivable.
PV = FV * PVIF(i, n).
PV = 1000 / (1.07)^15.
To accurately assess the financial impact of a decision or project.
FV = PMT (FVIFA i, n) (1 + i).
22%.
5 years
Future Value Interest Factor.
Present Value Interest Factor.
6,000
$5,016.
Return on Equity.
It measures how efficiently a company uses its assets to generate sales.
FV = PV (FVIF i, n).
$2,980,957.99.
$15,940.
0.19 or 19%
Natural logarithm (ln).
Slightly below the industry average of 15%.
Long-term notes and Mortgages.
$13,000,000.
PVIF = (1 / (1 + i)^n)
4,507.89
$4,412.95
Future Value Interest Factor.
Net Profit Margin, Total Asset Turnover, and Equity Multiplier.
The number of periods (years).
