1. (Bond valuation) Michael Motors’ bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1000 par value and the coupon interest rate is 8 percent. The bonds have a yield to maturity of 9 percent. What is the current market price of these bonds?

Cash flow = 8% of 1,000 = 80 YTM or interest rate
n = 10 i = 9(%) PMT = 80 FV = 1000 PV = solve
PV=935.82

2. (Valuation a preferred stock) Susie’s Pet Supplies issued preferred stock with a state dividend of 10 percent at par. Preferred stock of this type currently yields 8 percent an the par value is $100. Assume dividends are paid annually. a) What is the value of Susie’s preferred stock?

b) Suppose interest rate levels rise to the point where the preferred stock now yields 12 percent. What would be the value of Susie’s preferred stock?
3. (Constant growth model) You are considering an investment in the common stock of Arizona Jake’s Corporation. The stock is expected to pay a dividend of $2 a share at the end of the year (D1 = $2.00) The stock has a beta equal to 0.9. The risk free rate is 5.6 percent and the market premium is 6 percent. The stock’s dividend is expected to grow at some constant rate g. The stock currently sells for $25 a share. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of three years? (That is, what is P3?)

4. (Bond valuation) Eagle Ventures has a bond issue outstanding with an annual coupon rate of 7 percent and 4 years remaining until maturity. The par value of the bond is $1,000. (a) Determine the current value of the bond if present market conditions justify a 14 percent required rate of return. Assume the bond pays interest annually. (b) Using the information above, what should be the current value if the bond had a semi-annual coupon instead of an annual coupon? (c) Assume an annual coupon but 20 years remaining to maturity. What is the current value under these...

...
3210AFE
ADVANCE CORPORATEFINANCE
Financial Analysis Report
New Hope Coal Corporation
(4780 words)
STUDENT NAME: Member 1: S2704148 zhiqi Liu
Member 2: S2682143 Sai Tie
Member 3: S2730145 Lingfeng Zhan
Member 4: S2594576 Xindan Chen
Member 5: S2700906 Yinghui Huang
TABLES
Executive summary............................................................................................3
Introduction........................................................................................................6
Firm structure and corporate governance.......................................................6
Remuneration….................................................................................................8
Capital structure.................................................................................................9
CAPM BETA AND FACTOR MODEL ANALYSIS……………………….9
WACC Analysis..................................................................................................11
Firm Estimation by FCF and PE ratio.............................................................12
Growth project analysis.....................................................................................13
Mergers and Acquisitions Targets Analysis…………………………………16
Cost of Debt & Equity Funding........................................................................19
Risk...

...of debt into the capital structure.
Year Forecast
1 2 3 4 5 6
Sales 22000 23210 24487 25344 26231 26755
Variable cost 13200 13926 14692 15206 15738 16053
Fixed cost 2000 2060 2122 2185 2251 2319
Dep'n 1000 1100 1200 1300 1400 1500
Operating income 5800 6124 6473 6652 6841 6884
Tax (30%) 1740 1837 1942 1996 2052 2065
Net income 4060 4287 4531 4656 4789 4818
Depreciation 1000 1100 1200 1300 1400 1500
Operating cash flow 5060 5387 5731 5956 6189 6318
Investment in fixed assets 1200 1200 1200 1200 1200 1200
Investment in WC 115 121 128 86 89 52
FCF 3745 4066 4403 4671 4900 5066
Complete Table 1, in accordance with the given assumptions, to show the derivation of free cash flow in year 1 to year 6.
($’000, rounded to the nearest dollar)
Calculate the horizon value as of year 5 using the constant-growth discounted cash flow formula.
Horizon value at year 5 = (FCF at year 6)/((WACC-g))= 5,066,015.74/(0.1408-0.02) = $41,937,216
Use an appropriate cost of capital and a presentation table similar to Table 2, show the discounted value of RV’s free cash flow in year 1 to year 5 plus that of the horizon value. What would be the present value of the RV Division on its own without expansion, rounded to the nearest thousand dollars?
After-tax cash flow projections for the RV division ($'000)
Year FCF Discounted value at RV Division WACC (14.08%)
t=1 3745 3282.784011
t=2 4066...

...Select a major industrial or commercial company based in the United States and listed on one of the major stock exchanges in the United States. Each student should select a different company. Avoid selecting an insurance company or a bank, because the financial ratios for these financial businesses are different. Write a seven-to-eight-page double-spaced paper answering and demonstrating with calculations and financial data the following questions.
1. What is the name of the company? What is the industry sector?
Starbucks Corporation is in the Food and Beverage industry
2. What are the operating risks of the company?
Economic conditions in the US and certain international markets could adversely affect Starbucks’ business and financial results. – as a retailer Starbucks is dependent upon the customer’s discretionary spending. Customers may have less money for discretionary purchases as a result of job losses, foreclosures, bankruptcies, increased fuel and energy costs, higher interest rates and taxes. Decreases in customer traffic will negatively impact financial performance.
Starbucks may not be successful in implementing important strategic initiatives or effectively managing growth, which may have an adverse impact on our business and financial results. – there is no assurance that Starbucks will be able to implement strategic initiatives and achieve the results that are within management’s expectations. These initiatives are designed to create...

...1. Which one of the following is a means by which shareholders can replace company management?
A. stock options
B. promotion
C. Sarbanes-Oxley Act
D. agency play
E. proxy fight
2. Decisions made by financial managers should primarily focus on increasing which one of the following?
A. size of the firm
B. growth rate of the firm
C. gross profit per unit produced
D. market value per share of outstanding stock
E. total sales
3. Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date?
A. income statement
B. creditor's statement
C. balance sheet
D. statement of cash flows
E. dividend statement
4. Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?
A. income statement
B. balance sheet
C. statement of cash flows
D. tax reconciliation statement
E. market value report
5. The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate.
A. mean
B. residual
C. total
D. average
E. marginal
EDCAE
6. The cash flow of a firm which is available for distribution to the firm's creditors and stockholders is called the:
A. operating cash flow.
B. net capital spending.
C. net working capital.
D. cash flow from assets.
E. cash flow to stockholders.
7. Canine Supply has sales of $2,200, total assets of $1,400, and a debt-equity ratio of 0.3. Its return on...

...000
$ 55,000
226,200
$ 55,000
320,750
Total
Net plant and equipment
$287,000
$352,750
Total
$281,200
$375,750
Total assets
$400,000
$500,000
Total liabilities and owners’ equity
$400,000
$500,000
Based on the balance sheets given for Just Dew It:
a. Calculate the current ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Current ratio
2011
1.64
times
2012
1.75
times
b. Calculate the quick ratio for each year. (Round your answers to2 decimal places. (e.g., 32.16))
Quick ratio
2011
0.55
times
2012
0.61
times
c. Calculate the cash ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Cash ratio
2011
0.16
times
2012
0.17
times
d. Calculate the NWC to total assets ratio for each year. (Round your answers to 2 decimal places.
(e.g., 32.16))
NWC ratio
2011
11.00
%
2012
12.60
%
e. Calculate the debt–equity ratio and equity multiplier for each year. (Round your answers to 2 decimal
places. (e.g., 32.16))
Debt-equity ratio
Equity multiplier
2011
0.42
1.42
times
2012
0.33
1.33
times
f. Calculate the total debt ratio and long-term debt ratio for each year. (Round your answers to 2
decimal places. (e.g., 32.16))
Total debt ratio
Long-term debt ratio
2011
0.30
times
0.15
times
2012
0.25
times
0.10
times
Learning Objective: 03-02 How to compute
and, more importantly, interpret some common
ratios.
Worksheet
Just Dew It...

...
“Case: Tianjin Plastics”
Vrije Universiteit Amsterdam
Course Advanced CorporateFinance
Students Fatin Azear
Jos Kusters
Maaike van der Steen
Case: Tianjin Plastics
This assignment considers the case of Tianjin Plastics. Pat Johnson, project finance analyst for Maple Energy (U.S.-based international power plant developer), has to make a recommendation regarding the financial viability of the Tianjin Plastics power plant project in China. The recommendation would require a final evaluation of all financing options, as well as reaching contract closure with his joint venture partners, Tianjin Plastics and Chinese Ministry of Power Industry (MOPI). The joint venture would be split 49% Maple, 46% Tianjin Plastics, 5% MOPI, with Maple holding the controlling interest.
Most power projects are project finance ventures. Project financing entails large stand-alone investments that are financed on the basis of their owns assets and cash flows. Project financing contains no substantial recourse to the assets of the equity holders themselves. Relating to project finance there are many conditions to deal with. To begin with many types of risks related to this project: construction risk, operating risk, credit risk and political risk.
The project starts with a construction phase of 4 years. The plan is to start the power flowing to Tianjin Plastic in the summer of 2000, as well as cash flows to Maple....

...Final Exam Practice Problems
1. Firm ABC’s only outstanding debt is $100,000 worth of coupon bond (market value). Its yield to maturity is 8%. Given that its tax rate is 40%, what is its effective cost of debt?
Effective cost of debt = cost of debt * (1-tax rate) =8%*(1-40%)=4.8%
2. Firm ABC has a stock currently traded at $20. The next year’s dividend will be $0.20. The dividend growth rate is forecasted to be 6% forever. Risk-free rate is 3%, and market risk premium is 4%. Assume that Constant Dividend Growth Model and CAPM give you the same estimate of the cost of capital for equity, what is the beta of its stock?
By the Constant Dividend Growth Model:
Cost of Equity = D/P+g = 0.2/20+6%=7%
By CAPM, cost of equity = R(f)+ beta * market risk premium = 3% + beta* 4%,
Set this to be equal to 7%, solve for beta: beta=1
3. Firm ABC has a cost of equity of 8%, a cost of debt of 5%. It stock is traded at $10/share, and has 10 million shares outstanding. Its debt value is $20 million. Tax rate is 40%. What is its after-tax WACC?
Equity Value = 10*10=$100 million, Debt Value=$20 million
So, equity weight = 100/120=83.3%, debt weight=20/120=16.7%
After-tax WACC= equity weight * cost of equity + debt weight * effective cost of debt
=83.3%*8%+16.7%*5%*(1-40%) = 7.2%
4. Suppose you are the founder of a private company ABC. Initially you raised $500,000 from an angel investor from the first-round financing. As a result, both you and...