Find Piano Bar's Cash Flow From Assets (CFFA), also known as Free Cash Flow to the Firm (FCFF), over the year ending 30th June 2013.
Piano Bar | ||
Income Statement for | ||
year ending 30th June 2013 | ||
$m | ||
Sales | 310 | |
COGS | 185 | |
Operating expense | 20 | |
Depreciation | 15 | |
Interest expense | 10 | |
Income before tax | 80 | |
Tax at 30% | 24 | |
Net income | 56 | |
Piano Bar | ||
Balance Sheet | ||
as at 30th June | 2013 | 2012 |
$m | $m | |
Assets | ||
Current assets | 240 | 230 |
PPE | ||
Cost | 420 | 400 |
Accumul. depr. | 50 | 35 |
Carrying amount | 370 | 365 |
Total assets | 610 | 595 |
Liabilities | ||
Current liabilities | 180 | 190 |
Non-current liabilities | 290 | 265 |
Owners' equity | ||
Retained earnings | 90 | 90 |
Contributed equity | 50 | 50 |
Total L and OE | 610 | 595 |
Note: all figures are given in millions of dollars ($m).
A student won $1m in a lottery. Currently the money is in a bank account which pays interest at 6% pa, given as an APR compounding per month.
She plans to spend $20,000 at the beginning of every month from now on (so the first withdrawal will be at t=0). After each withdrawal, she will check how much money is left in the account. When there is less than $500,000 left, she will donate that remaining amount to charity.
In how many months will she make her last withdrawal and donate the remainder to charity?
Question 295 inflation, real and nominal returns and cash flows, NPV
When valuing assets using discounted cash flow (net present value) methods, it is important to consider inflation. To properly deal with inflation:
(I) Discount nominal cash flows by nominal discount rates.
(II) Discount nominal cash flows by real discount rates.
(III) Discount real cash flows by nominal discount rates.
(IV) Discount real cash flows by real discount rates.
Which of the above statements is or are correct?
Which one of the following will decrease net income (NI) but increase cash flow from assets (CFFA) in this year for a tax-paying firm, all else remaining constant?
Remember:
###NI = (Rev-COGS-FC-Depr-IntExp).(1-t_c )### ###CFFA=NI+Depr-CapEx - \Delta NWC+IntExp###Question 397 financial distress, leverage, capital structure, NPV
A levered firm has a market value of assets of $10m. Its debt is all comprised of zero-coupon bonds which mature in one year and have a combined face value of $9.9m.
Investors are risk-neutral and therefore all debt and equity holders demand the same required return of 10% pa.
Therefore the current market capitalisation of debt ##(D_0)## is $9m and equity ##(E_0)## is $1m.
A new project presents itself which requires an investment of $2m and will provide a:
- $6.6m cash flow with probability 0.5 in the good state of the world, and a
- -$4.4m (notice the negative sign) cash flow with probability 0.5 in the bad state of the world.
The project can be funded using the company's excess cash, no debt or equity raisings are required.
What would be the new market capitalisation of equity ##(E_\text{0, with project})## if shareholders vote to proceed with the project, and therefore should shareholders proceed with the project?
Question 443 corporate financial decision theory, investment decision, financing decision, working capital decision, payout policy
Business people make lots of important decisions. Which of the following is the most important long term decision?
Question 513 stock split, reverse stock split, stock dividend, bonus issue, rights issue
Which of the following statements is NOT correct?
A firm wishes to raise $100 million now. The firm's current market value of equity is $300m and the market price per share is $5. They estimate that they'll be able to issue shares in a rights issue at a subscription price of $4. All answers are rounded to 6 decimal places. Ignore the time value of money and assume that all shareholders exercise their rights. Which of the following statements is NOT correct?
Question 862 yield curve, bond pricing, bill pricing, monetary policy, no explanation
Refer to the below graph when answering the questions.
Which of the following statements is NOT correct?
A Brazilian lady wishes to convert 1 million Brazilian Real (BRL) into Chinese Renminbi (RMB, also called the Yuan or CNY). The exchange rate is 3.42 BRL per USD and 6.27 RMB per USD. How much is the BRL 1 million worth in RMB?