Accounting & Finance Management
1. Please find the COST OF CAPITAL for the following data
Debt pays $18,000 in interest and has a market value of $200,000
Preferred Stock pays $17,000 in dividends and has a market value of $150,000
Common Stock’s per share value is $100 and it pays a $4 a share DPS or dividend per share. It grows at 3% a year
Total Assets are $500,000
The tax rate is 35%
2. Find the NPV, IRR and Payback for the following CF’s
YEAR……………..CASH FLOW
1……………………….$20,000
2……………………….. 15,000
3……………………….. 10,000
4………………………… 8,000
Our Cost of Capital is 10% and the project costs $40,000
3. Find the NPV, IRR and Payback for an annuity of $10,000 a
Year for 5 years. We have a cost of capital of 8% and it has a cost of $36,000
4. Prepare a Bankruptcy schedule for the following
BALANCE SHEET
Current assets…… $20,000…………Accounts Payable 2,000
Fixed assets………. 30,000.……….Notes Payable 3,000
………………………………………………….Accrued wages 2,000
………………………………………………… Accrued taxes 2,000
………………………………………………… Subordinate debt 7,000
………………………………………………… first mortgage 15,000
………………………………………………… second mortgage 8,000
………………………………………………… preferred stock 3,000
………………………………………………… common stock 8,000
TOTAL ASSETS $50,000 TOTAL DEBT & OWN. 50,000
The subordinate debt is subordinate to the notes payable
The mortgages are secured by the fixed assets
The current assets are liquidated for $10,000
The fixed assets are liquidated for $20,000
5. Please find the TARGET PRICE of the following acquisition
……………………………YEAR 1………..YEAR 2………YEAR 3
sales…………………..$300,000…..$330,000….$350,000
Selling & Adm……. 70,000……. 70,000…….. 80,000
Depreciation………. 20,000…… 20,000…….. 25,000
Interest………………. 10,000…… 12,000…….. 10,000
Costs of Goods Sold (COGS) is 60% of sales
Taxes = 40%
Riskless Rate = 4%
Market Premium = 5%
Terminal Growth rate = 3%
Beta = 1.2