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8/16/2019 FIN 515 MART Expect Success Fin515martdotcom

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IN 515 MART EXPECT SUCCESS / IN

515MARTDOTCOM

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IN 515 ENTIRE COURSE

This tutorial does not ontain Final E!a" #uide FIN 515 $ee% 1 D& 1 Aountin' (ersus Finane FIN 515 $ee% 1 D& ) Finanial Anal*sis FIN 515 $ee% 1 &ui+

FIN 515 $ee% 1 &ui+ ,Ne-. FIN 515 $ee% 1 Prole" Set FIN 515 $ee% ) D& 1 T(M Pass0a0Prole" FIN 515 $ee% ) D& ) Assu"tions o2 the T(M Model FIN 515 $ee% ) &ui+ FIN 515 $ee% ) Prole" Set

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3/36

FIN 515 COURSE PRO3ECT 1 AND )

This Tutorial ontains $ee% 4 Course Proet ,4 Sets. $ee% 6 Course Pr oet ,) Sets.

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4/36

IN 515 INA7 EXAM ,A77 4 SETS.

FIN 515 Final E!a" Set 1 FIN 515 Final E!a" Set ) FIN 515 Final E!a" S et 4

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5/36

IN 515 INA7 EXAM SET 1

18 ,TCO A. In the United States9 -hih o2 the 2ollo-in' t*es o2 or'ani+a tion has the 'reatest re:enue in total; ,Points < 5.a8 Sole rorietorshi 8 C ororation8 S ororationd8 7i"ited artnershi 181. $hih o2 th e 2ollo-in' is not a ste in the $ACC :aluation "ethod;A. Co"ute the:alue o2 the in:est"ent9 inludin' the ta! ene2it o2 le:era'e9 * disou

ntin' the 2ree ash 2lo- o2 the in:est"ent usin' the $ACC8=. Co"utethe -ei'hted a:era'e ost o2 aital8C. Deter"ine the 2ree ash 2lo- o2the in:est"ent8D. Adust the $ACC 2or the 2ir">s urrent det/e?uit* r atio8 18 ,TCO @. er:os In8 had the 2ollo-in' data 2or )BB ,in "illions.8

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IN 515 INA7 EXAM SET )

&uestion 1818 ,TCO A. Doule ta!ation is a dra-a% 2or -hih o2 the 2o llo-in' t*es o2 usiness or'ani+ation e!et; &uestion )8)8 ,TCO A. So le rorietorshis ha:e all o2 the 2ollo-in' ad:anta'es e!et &uestion4848 ,TCO =. $hih o2 the 2ollo-in' -ould ause the resent :alue o2 anannuit* to derease; &uestion 88 ,TCO =. In a T(M alulation9 i2 ino

"in' ash 2lo-s are ositi:e9 out'oin' ash 2lo-s "ust e &uestion 585 8 ,TCO #. I2 net ino"e9 total assets9 and oo% :alue o2 e?uit* sta*ed th e sa"e9 -hat -ould e the e22et on the DuPont Identit* o2 an inreasein sales; &uestion 6868 ,TCO D. A sto% has ust aid a di:idend and -illa* a di:idend o2 48BB in a *ear8 The di:idend -ill sta* onstant 2or th

e rest o2 ti"e8 The return on e?uit* 2or si"ilar sto%s is 18 $hat is P B; &uestion G8G8



7/36

IN 515 INA7 EXAM SET 4

18 ,TCO A. In the United States9 -hih o2 the 2ollo-in' t*es o2 or'ani+a tion has the 'reatest re:enue in total; ,Points < 5. Sole rorietorshi Cororation S ororation 7i"ited artnershi &uestion )8)8 ,TCO A. Asole rorietorshi is o-ned * ,Points < 5. one erson8 one or t-o eo le9 ut i2 there are t-o o-ners9 the* "ust e "arried to eah other8 u

to 1BB o-ners8 u to 6 o-ners8 &uestion 4848 ,TCO =. $hih o2 the 2 ollo-in' -ould ause the resent :alue o2 an annuit* to derease; ,Poi nts < 5. Reduin' the nu"er o2 a*"ents8 Inreasin' the nu"er o2 a*"ents8 Dereasin' the interest rate8 Dereasin' the li?uidit* o2 the a*"ents8 &uestion 88



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IN 515 $EEH 1 D& 1 ACCOUNTIN# (ERSUS IN

ANCE

Aountin' (ersus Finane ,'raded. Muh o2 the anal*sis done * 2inan ial "ana'ers is ased on nu"ers that are di22erent 2ro" -hat -ouldsee" to the orresondin' nu"ers resented in the 2inanial state" ents8 This di22erene is not due to an* %ind o2 oo%in' the oo%s or oth er atte"ts to "islead an*one8 One e!a"le is the use o2 "ar%et :alu

e rather than historial ost in the :aluation o2 assets8 $hat are so"eother e!a"les o2 the di22erenes et-een 2inanial "ana'e"ent and2inanial aountin';

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9/36

IN 515 $EEH 1 D& ) INANCIA7 ANA

7SIS

Finanial Anal*sis ,'raded. In this disussion9 -e -ill e -or%in' -ith t he :ariet* o2 2inanial anal*sis tools a:ailale to us8 7et>s start -ith theDuPont Identit* introdued in Chater ) o2 the te!t8 For *our initial os t9 loate the 2inanial state"ents 2or t-o 2ir"s in one industr*8 Calulat e all 2our ter"s o2 the DuPont Identit* and resent the results ut do n

ot anal*+e the results8 For an additional ost9 anal*+e the results that a nother student has osted8 I2 *ou -ere the aroriate 2inanial "ana

'er o2 one o2 the 2ir"s that *ou anal*+ed9 -hat -ould e *our oser:at ions and reo""endations;

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10/36

IN 515 $EEH 1 PRO=7EM SET

Chater 1 The Cororation 1018 $hat is the "ost i"ortant di22ereneet-een a ororation and all other or'ani+ational 2or"s; 10)8 $hat d oes the hrase li"ited liailit* "ean in a ororate onte!t; 1048 $hihor'ani+ational 2or"s 'i:e their o-ners li"ited liailit*; 108 $hat are t he "ain ad:anta'es and disad:anta'es o2 or'ani+in' a 2ir" as a oror

ation; 1058 E!lain the di22erene et-een an S ororation and a C or oration8 1068 ou are a shareholder in a C ororation8 The ororatio n earns ) er share e2ore ta!es8 One it has aid ta!es it -ill distriu te the rest o2 its earnin's to *ou as a di:idend8 The ororate ta! rate i s B and the ersonal ta! rate on ,oth di:idend and non0di:idend. i

no"e is 4B8 @o- "uh is le2t 2or *ou a2ter all ta!es are aid; 10G8 Re eat Prole" 6 assu"in' the ororation is an S ororation8 Chater) Introdution to Finanial State"ent Anal*sis )08 In earl* )BBJ9 #ene ral Eletri ,#E. had a oo% :alue o2 e?uit* o2 1B5 illion8

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11/36

IN 515 $EEH 1 &UI,NE$.

&uestion 18 ,TCO #. The leture sa*s that so"e ratios t*iall* are etter-hen the* are hi'her and so"e o2 the ratios are etter -hen the* are lo- er8 Pi% a ratio 2or -hih a lo-er nu"er t*iall* -ould e re2erred anddesrie a situation9 in -hih a hi'her nu"er 2or that ratio -ould e re 2erred9 OR i% a ratio 2or -hih a hi'her nu"er t*iall* -ould e re2e

rred and desrie a situation in -hih a lo-er nu"er 2or that ratio -oul d e re2erred8 &uestion )8 ,TCO #. As o2 Dee"er 419 )BXX9 Da:id Cor >s aounts a*ale -ere 9BBB9BBB8 Its aounts reei:ale -ere )9)B B9BBB9 and its sales 2or )BXX -ere 4)9BBB9BBB8 $hat -as its da*s sales ou tstandin'; &uestion 48 ,TCO #. As o2 Dee"er 419 )B159 Mihael Cor>s

urrent assets -ere )9BBB9BBB8 Its urrent liailities -ere )9BBB9BBB8 Its s ales 2or )B15 -ere 5B9BBB9BBB8 As o2 Dee"er 419 )B169 Mihael Cor>surrent assets -ere 49BBB9BBB8 Its urrent liailities -ere 49BBB9BBB8 Itssales 2or )B16 -ere 659BBB9BBB8 Mana'e"ent has as%ed *ou to o""enton these nu"ers8

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12/36

IN 515 $EEH 1 &UI

&uestion 1 ,TCO #. $hih do *ou thin% ro:ides a "ore :alid "easureo2 ho- a o"an* is doin'9 o"arison o2 urrent results -ith histori al results or o"arison o2 urrent results -ith the urrent results o2 a nother o"an*; &uestion ) ,TCO #. =arnes CorKs total assets at theend o2 last *ear -ere 159BBB9BBB and its net ino"e a2ter ta!es -as

1G9G5B9BBB8 $hat -as its return on total assets; &uestion 4 ,TCO #. = et-een Dee"er 419 )B16 and Dee"er 419 )B1G9 ROE at =oat Ind ustries dereased e:en thou'h sales inreased8 Usin' the DuPont Ident it*9 e!lain -hat else ould ha:e haened to ause this8

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13/36

IN 515 $EEH 10G D&S

FIN 515 $ee% 1 D& 1 Aountin' (ersus Finane FIN 515 $ee% 1 D& )Finanial Anal*sis FIN 515 $ee% ) D& 1 T(M Pass0a0Prole" FIN 515 $ ee% ) D& ) Assu"tions o2 the T(M Model FIN 515 $ee% 4 D& 1 E!a" les o2 Caital E!enditure Fro" our Industr* FIN 515 $ee% 4 D& ) C aital =ud'etin' Ter"s and Considerations FIN 515 $ee% D& 1 Mar%

et (alue o2 a Sto% (ersus DDM (alue FIN 515 $ee% D& ) Di22erenesin TM o2 Real 7i2e =onds FIN 515 $ee% 5 D& 1 Calulatin' $ACC 2or aReal Fir" FIN 515 $ee% 5 D& ) Findin' Sto% (alues 2or Real Sto%s Usi n' =eta and the SM7 FIN 515 $ee% 6 D& 1 E!a"les o2 Real A'en* Pr ole"s and @o- The* Could @a:e =een Pre:ented FIN 515 $ee% 6 D&

) The Role o2 Finanial Mana'ers in Ethial Cororate #o:ernane FIN515 $ee% G D& 1 Industr* Aroahes to $or%in' Caital Finanin' FI N 515 $ee% G D& ) our Pre2erene 2or $or%in' Caital Mana'e"entPoli*

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14/36

IN 515 $EEH ) D& 1 T(M PASS0A0PRO=7EM

T(M Pass0a0Prole" ,'raded. L This -ee%9 the leture ro:ided so"e e !a"les o2 T(M role" senarios8 For *our 2irst ost9 ro:ide a stor*role" that an e sol:ed usin' one or "ore o2 the T(M alulations8L our seond ost an e a desrition o2 ho- the role" osed *another student an e sol:ed8 our ro2essor "a* ro:ide an e!a"l

e8

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15/36

IN 515 $EEH ) D& ) ASSUMPTIONS O T@E T(

M MODE7

Assu"tions o2 the T(M Model ,'raded. $hat are so"e o2 the assu" tions ehind the T(M alulations; @o- do these assu"tions li"it ou r aliation o2 these alulations;

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16/36

IN 515 $EEH ) PRO=7EM SET

48Calulate the 2uture :alue o2 )BBB in a8 2i:e *ears at an interest rateo2 5 er *ear 8 ten *ears at an interest rate o2 5 er *ear and 8 2i: e *ears at an interest rate o2 1B er *ear8 d8 $h* is the a"ount o2 int erest earned in art ,a. less than hal2 the a"ount o2 interest earned inart ,.; 8$hat is the resent :alue o2 1B9BBB reei:ed a8 t-el:e *ear

s 2ro" toda* -hen the interest rate is er *ear 8 t-ent* *ears 2ro " toda* -hen the interest rate is er *ear and 8 si! *ears 2ro" to da* -hen the interest rate is ) er *ear; 58our rother has o22ered t o 'i:e *ou either 59BBB toda* or 1B9BBB in 1B *ears8 I2 the interest rat e is G er *ear9 -hih otion is re2erale; 68Consider the 2ollo-in' a

lternati:es8 i8 1BB reei:ed in 1 *ear ii8 )BB reei:ed in 5 *ears iii8 4B B reei:ed in 1B *ears a8 Ran% the alternati:es 2ro" "ost :aluale to le ast :aluale i2 the interest rate is 1B er *ear8



17/36

IN 515 $EEH ) &UI

FIN 515 $ee% ) &ui+ &uestion 1 ,TCO =. ou are a trust 2und a*8 ou r trust 2und is urrentl* -orth 19)49BBB8 The role" is the ter"s o2the trust donKt allo- *ou to reei:e an* o2 the "one* until *ou are )G8ou are no- )18 The 2und is earnin' G8G er *ear8 @o- "uh -ill the2und e -orth -hen *ou are )G and too old to eno* it;I'nore ta!es8 Sh

o- *our -or%8 I2 *ou use E!el9 sho- the 2or"ula -ith the ara"eters9and the ans-er8 I2 *ou use a 2or"ula9 ro:ide the standard 2or"ula9 th e 2or"ula -ith ter"s sustituted9 and the ans-er8



18/36

IN 515 $EEH 4 COURSE PRO3ECT 1 ,4 PAPERS.

This Tutorial ontains 4 Di22erent Course Proets First Course ProetTheurose o2 this roet is to hel *ou de:elo s%ills not onl* in er2or"in'the alulations ehind 2inanial anal*sis ut interretin' the nu"ers as-ell8ou are to i% a o"an*8 ou should i% one either 2ro" the indus tr* in -hih *ou are urrentl* -or%in' or an industr* in -hih *ou are int

erested8 ou ould also i% a di:ision o2 a o"an*8 It is i"erati:e to us e that su22iient data aout *our o"an* and that it is a:ailale8 One -a * to do this is to i% a ulil* held o"an*8 I2 *ou i% a ri:atel* heldo"an* or a di:ision o2 a o"an*9 "a%e sure that the data neessar* t o do a si'ni2iant 2inanial anal*sis is a:ailale8I2 *ou use data that is notulil* a:ailale9 e sure to tal% to *our "ana'er and to "a%e asolutel*sure that re:ealin' that data is not a role"8ou -ill also need to 2ind a s tandard a'ainst -hih to o"are *our 2indin's8 This ould e a di22erento"an* in the sa"e industr*8 This ould also e the sa"e o"an* at adi22erent ti"e8

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19/36

IN 515 $EEH 4 D& 1 EXAMP7ES O CAPITA7 EXPENDITURE ROM OUR IND

USTR

FIN 515 $ee% 4 D& 1 E!a"les o2 Caital E!enditure Fro" our Indus tr* ,'raded. Desrie a otential aital e!enditure roet 2ro" the i ndustr* in -hih *ou no- -or% or an industr* in -hih *ou are interes ted8 $hat is the roet; Desrie and ro:ide an aro!i"ate :alue o2the initial ash 2lo-8 Desrie and ro:ide an aro!i"ate :alue o2 the

annual ash 2lo-s8 Pro:ide an esti"ation o2 the li2e o2 the roet9 as - ell as the e!it osts8

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20/36

IN 515 $EEH 4 D& ) CAPITA7 =UD#ETIN# TERMS AND CONSIDERATIONS

Caital =ud'etin' Ter"s and Considerations Our te!too% and leturedisuss so"e onsiderations that should e ta%en into aount -hen d oin' aital ud'etin'8 @o- -ill these onsiderations a22et the roet

*ou desried in the other toi; Inre"ental earnin's9 interest e!en ses9 ta!es9 oortunit* osts9 e!ternalities9 sun% osts9 anniali+ation

or erosion9 dereiation9 and sal:a'e :alue as -ell as others8

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21/36


$ee% 4 Prole" Set 18 our rother -ants to orro- 1B9BBB 2ro" *ou 8 @e has o22ered to a* *ou a% 1)9BBB in a *ear8 I2 the ost o2 aitalo2 this in:est"ent oortunit* is 1B9 -hat is its NP(; Should *ou und erta%e the in:est"ent oortunit*; Calulate the IRR and use it to dete r"ine the "a!i"u" de:iation allo-ale in the ost o2 aital esti"ate

to lea:e the deision unhan'ed8 8 ou are onsiderin' an in:est"entin a lothes distriutor8 The o"an* needs 1BB9BBB toda* and e!e ts to rea* *ou 1)B9BBB in a *ear 2ro" no-8 $hat is the IRR o2 this in: est"ent oortunit*; #i:en the ris%iness o2 the in:est"ent oortunit

*9 *our ost o2 aital is )B8



22/36

IN 515 $EEH 4 &UI

Co"an* A has a eta o2 )8GG8 Co"an* = has a eta o2 8G48 Co"an*C has a eta o2 8JB8 The ris% 2ree rate is 6 and the "ar%et ris% re"iu " is 8 $hat is the e!eted return o2 in:estin' in Co"an* =; sto%ort2olio onsists o2 onl* t-o sto%s8 ou ha:e 159BBB in Co"an* A a nd )59BBB in Co"an* =8 Co"an* A has an atual return o2 0 and

Co"an* = has a return o2 1)8 $hat is the return on *our ort2olio;A o"an* has a aital struture o2 B det and 6B e?uit*8 The T M on the o"an*Ks onds is J9 and the o"an*Ks e22eti:e ta! rateis B8 The CFO has esti"ated the o"an*Ks $ACC to e J8J68 $hatis the o"an*Ks ost o2 e?uit*;



23/36

IN 515 $EEH D& 1 MARHET (A7UE O A STOCH (ERSUS DDM (A7UE

Mar%et (alue o2 a Sto% (ersus DDM (alue ,'raded. Selet a sto% in -h ih *ou are interested8 Calulate its er share :alue usin' the DDM or a nother "ethod disussed in Chater J8 Then 2ind the urrent "ar%et : alue o2 a share o2 the sto%8 Co"are that t-o8 Can *ou e!lain the si "ilarit* or di22erene;

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24/36

IN 515 $EEH D& ) DI ERENCES IN TM O REA7 7I E =ONDS

Di22erenes in TM o2 Real 7i2e =onds ,'raded. Do so"e researh9 ro al* on the $e9 and 2ind so"e onds -ith di22erin' *ields to "aturit*,TM.8 @o- do *ou e!lain the di22erene; =oth the leture and the te! too% disuss so"e 2ators that "a* lead to this di22erene8

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25/36

IN 515 $EEH MIDTERM

&uestion 18 &uestion < ,TCO #. The 2ir">s asset turno:er "easures &ue stion )8 &uestion < ,TCO #. I2 Moon Cororation has an inrease in sale s9 -hih o2 the 2ollo-in' -ould result in no han'e in its E=IT "ar'in;&uestion 48 &uestion < ,TCO =. ou lan on retirin' in )B *ears8 ou ur rentl* ha:e )G59BBB and thin% *ou -ill need 19BBB9BBB to retire8 Assu

"in' *ou donKt deosit an* additional "one* into the aount9 -hat a nnual return -ill *ou need to earn to "eet this 'oal; &uestion 8 &uest ion < ,TCO =. ou ta%e out a *ear ar loan 2or 19BBB8

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26/36

IN 515 $EEH PRO=7EM SET

=onds018 Interest on a ertain issue o2 onds is aid annuall* -ith a o uon rate o2 8 The onds ha:e a ar :alue o2 19BBB8 The *ield to "a turit* is J8 $hat is the urrent "ar%et iee o2 these onds; The on ds -ill "ature in 5 *ears8 =onds0)8 A ertain ond has 1) *ears le2t to"aturit*8 Interest is aid annuall* at a ouon rate o2 1B8 The onds

are urrentl* sellin' 2or 5B8 $hat is their TM; =onds048 A ertain o nd a*s a se"iannual ouon rate at a 1B annual rate8 The ond hasa ar :alue o2 19BBB8 There are ei'ht *ears to "aturit*8 The *ield to " aturit* is J8 $hat is the urrent rie o2 the ond; =onds08 A artiul ar ororate ond has a ar :alue o2 19BBB8 Couon a*"ents are

B and are aid t-ie a *ear8 Se:en *ears are le2t on the li2e o2 the ond8The TM is J8 $hat is the rie o2 the ond; =ond058 A 'i:en ond ha s 5 *ears to "aturit*8



27/36

IN 515 $EEH 5 D& 1 CA7CU7ATIN# $ACC OR A REA7 IRM

Calulatin' $ACC 2or a Real Fir" ,'raded. The $ei'hted A:era'e Cost o 2 Caital ,$ACC. 2or a 2ir" an e alulated or 2ound throu'h researh 8 Selet t-o 2ir"s in the sa"e industr*8 The industr* "a* e that in -hi h *ou urrentl* -or% or it "a* e an industr* in -hih *ou are interes ted8 Calulate or 2ind the $ACC 2or the t-o 2ir"s8 @o- do the $ACCs

o"are; Are the $ACCs -hat *ou -ould e!et; $hat auses the di22e renes et-een the t-o 2ir"s> $ACCs;

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28/36

IN 515 $EEH 5 D& ) INDIN# STOCH (A7UES OR REA7 STOCHS USIN# =ET

A AND T@E SM7

Findin' Sto% (alues 2or Real Sto%s Usin' =eta and the SM7 ,'raded. O ur seond disussion toi onerns the alulation o2 sto% :alues usi n' the Caital Asset Priin' Model ,CAPM.8 $e -ill start -ith a disussi on o2 ris% and -or% to-ards ratial aliation o2 the "odel8 The te! too% ro:ides a list o2 etas 2or a seletion o2 sto%s8 Choose a 2e- 2ir

"s 2ro" that list and disuss -hether the etas are -hat *ou -ould e! et8 =e sure to e!lain -h* or -h* not8

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Chater 1B ,a'es 454.< 8 ou ou'ht a sto% one *ear a'o 2or 5 B er share and sold it toda* 2or 55 er share8 It aid a 1 er share d i:idend toda*8 $hat -as *our reali+ed return; @o- "uh o2 the returna"e 2ro" di:idend *ield and ho- "uh a"e 2ro" aital 'ain; )B8 C onsider t-o loal an%s8 =an% A has 1BB loans outstandin'9 eah 2or 1

"illion9 that it e!ets -ill e reaid toda*8 Eah loan has a 5 roai lit* o2 de2ault9 in -hih ase the an% is not reaid an*thin'8 The han e o2 de2ault is indeendent aross all the loans8 =an% = has onl* one lo an o2 1BB "illion outstandin'9 -hih it also e!ets -ill e reaid tod a*8 It also has a 5 roailit* o2 not ein' reaid8 E!lain the di22eren

e et-een the t*e o2 ris% eah an% 2aes8 $hih an% 2aes less ris% ; $h*;

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IN 515 $EEH 5 &UI

&uestion 1 ,TCO C. Co"an* A has a eta o2 )8GG8 Co"an* = has a e ta o2 8G48 Co"an* C has a eta o2 8JB8 The ris% 2ree rate is 6 and the"ar%et ris% re"iu" is 8 $hat is the e!eted return o2 in:estin' inCo"an* =; Sho- *our -or%8 &uestion )8 ,TCO C. our sto% ort2olioonsists o2 onl* t-o sto%s8 ou ha:e 4B9BBB in Co"an* A and 459B

BB in Co"an* =8 Co"an* A has an atual return o2 0 and Co"an * = has a return o2 1)8 $hat is the return on *our ort2olio; Sho- *o ur -or%8 &uestion 48 ,TCO E. A o"an* has a aital struture o2 Bdet and 6B e?uit*8 The TM on the o"an*Ks onds is J9 and theo"an*Ks e22eti:e ta! rate is B8 The CFO has esti"ated the o"a

n*Ks $ACC to e J8J68 $hat is the o"an*Ks ost o2 e?uit*; Sho- *o ur -or%8



31/36

IN 515 $EEH 6 COURSE PRO3ECT ) ,) DI ERENT PRO3ECTS.

This Tutorial ontains ) Di22erent Course Proets Seond Proet The uroseo2 this roet is 2or *ou to ha:e so"e ratie -or%in' -ith 2inanial onet s in the real -orld8 This -ill in:ol:e inte'ratin' so"e "aterial 2ro" throu'ho ut the ourse8 The roet -ill also in:ol:e the de:elo"ent o2 *our o-n ar oah to doin' the -or%8 The roet does not ro:ide a ste0*0ste roedur

e 2or *ou to 2ollo-8 our tas% is to deter"ine the $ACC 2or a 'i:en 2ir" usin'-hat *ou %no- aout $ACC as -ell as data *ou an 2ind throu'h researh8 o ur deli:erale is to e a rie2 reort in -hih *ou state *our deter"ination o2$ACC9 desrie and usti2* ho- *ou deter"ined the nu"er9 and ro:ide rel e:ant in2or"ation as to the soures o2 *our data8 Assu"tions As *ou reall9 t he 2or"ula 2or $ACC is r$ACC ,E/EQD. rE Q D/,EQD. rD ,10TC. The 2or"ula 2o

r the re?uired return on a 'i:en e?uit* in:est"ent is ri r2 Q i ,RM%t0r2. RM %t0r2 is the Mar%et Ris% Pre"iu"8 For this roet9 *ou "a* assu"e the Mar%e t Ris% Pre"iu" is unless *ou an de:elo a etter nu"er8 r2 is the ris% 2r ee rate8 The TM on 1B *ear US Treasur* seurities is a 'ood aro!i"ation8

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Chater )J ,a'es J40J.< 18$hat inherent harateristi o2 ororati ons reates the need 2or a s*ste" o2 he%s on "ana'er eha:ior; )8$hat are so"e e!a"les o2 a'en* role"s; 48$hat are the ad:anta

'es and disad:anta'es o2 the ororate or'ani+ational struture; 8$h at is the role o2 the oard o2 diretors in ororate 'o:ernane; 18$hat

inherent harateristi o2 ororations reates the need 2or a s*ste" o 2 he%s on "ana'er eha:ior; )8$hat are so"e e!a"les o2 a'en* role"s; 48$hat are the ad:anta'es and disad:anta'es o2 the ororat e or'ani+ational struture; Mana'in' A'en* Con2lit 8Suose #ood* ear Tire and Ruer Co"an* is onsiderin' di:estin' one o2 its "anu2

aturin' lants8 The lant is e!eted to 'enerate 2ree ash 2lo-s o2 185 "illion er *ear9 'ro-in' at a rate o2 )85 er *ear8



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IN 515 $EEH G D& 1 INDUSTR APPROAC@ES TO $ORHIN# CAPITA7 INAN

CIN#

Industr* Aroahes to $or%in' Caital Finanin' ,'raded. Do so"e re searh on t-o 2ir"s in *our industr* or an industr* in -hih *ou are in terested8 Can *ou 'et an idea o2 their -or%in' aital "ana'e"ent oli ies 2ro" ulil* a:ailale in2or"ation; @o- do the t-o o"anies di 22er in their aarent -or%in' aital "ana'e"ent oliies; $hih oli

* do *ou thin% is etter and -h*;

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IN 515 $EEH G D& ) OUR PRE ERENCE OR $ORHIN# CAPITA7 MANA#EME

NT PO7IC

our Pre2erene 2or $or%in' Caital Mana'e"ent Poli* ,'raded. Consi der the o"an* *ou -or% 2or or a o"an* in -hih *ou are intereste d8 Also9 do so"e researh to 2ind so"e urrent ost esti"ates 2or :ario us "eans o2 2inanin' -or%in' aital8 $hat -ould e *our reo""en dation to the o"an* 2or 2inanin' its -or%in' aital needs; I2 the in

2or"ation is ulil* a:ailale9 or i2 *ou ha:e aess to it AND ha:e er "ission to disuss it9 ho- does *our reo""endation o"are -hat t he 2ir" is atuall* doin';

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IN 515 $EEH G PRO=7EM SET

18 Ans-er the 2ollo-in' ?uestions< a8 $hat is the di22erene et-een a2ir"Ks ash *le and its oeratin' *le; )8 @o- -ill a 2ir"Ks ash *lee a22eted i2 a 2ir" inreases its in:entor*9 all else ein' e?ual; )8 @o - -ill a 2ir"Ks ash *le e a22eted i2 a 2ir" e'ins to ta%e the disoun ts o22ered * its suliers9 all else ein' e?ual; 8The #ree% Connetion

had sales o2 4) "illion in )B1)9 and a ost o2 'oods sold o2 )B "illio n8 A si"li2ied alane sheet 2or the 2ir" aears elo-< a0 Calulate T he #ree% ConnetionKs net -or%in' aital in )B1)8 )8 'reatest; $hen d oes it ha:e surlus ash;



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