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BUS 401 Week 3 Quiz
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1.) The appropriate cash flows for evaluating a corporate investment decision are: incremental additional cash flows. marginal after-tax cash flows. incremental after-tax cash flows. investment after-tax cash flows.
2.) The typical corporate investment requires a large cash outlay followed by several years of cash inflows. To make these cash flows comparable, we do which of the following?
Adjust both cash outflows and inflows for taxes.
Subtract interest charges to reflect the time value of money.
Adjust both outflows and inflows for the effects of depreciation.
Apply time value of money concepts and compare present values.
3.) If depreciation expense is a noncash charge, why do we consider it when determining cash flows?
because depreciation expense reduces taxable income, so reduces the amount of taxes paid
because depreciation expense offsets part of the initial cash outlay for depreciable assets
because depreciation expense reduces net income
because depreciation expense is a method for allocating costs
4.) The internal rate of return is:
the discount rate at which the NPV is maximized.
the discount rate used by people within the company to evaluate projects.
the rate of return that a project must exceed to be acceptable.
the discount rate that equates the present value of benefits to the present value of costs.
5.) Chapter 7 introduced three methods for evaluating a corporate investment decision. Which of the following is not one of those methods? payback period net present value (NPV) return on assets (ROA) internal rate of return (IRR)
6.) In perfect capital markets, the capital structure decision is:
important because it affects the cash flows to shareholders.
important because debt and equity are taxed differently.
irrelevant because the decision has no effect on cash flows.
important sometimes.
7.) The interplay of the tax advantages of debt and the threat of bankruptcy results in:
companies that have some optimal level of debt that maximizes firm value.
all companies having a debt-to-equity ratio close to 50%.
all companies having a debt-to-equity ratio close to 30%.
capital structure being irrelevant.
8.) Costs associated with bankruptcy include:
legal fees, managerial time shifted away from value creation, and loss of brand value.
legal fees, additional inventory costs from sales growth, and loss of brand value.
legal fees, managerial time shifted away from value creation, and increased market share.
legal fees, employees leaving the company, and cost savings from lower labor costs.
9.) All else being equal, as debt replaces equity in a profitable company’s capital structure, which of the following occurs?
Interest expense increases, reducing taxable income and reducing taxes.
Interest expense increases, reducing net income and earnings per share.
Interest expense increases, reducing cash flows available to shareholders.
Interest expense increases, reducing profitability and the wealth of shareholders.
10.) Two important aspects of debt financing are its tax advantages and the threat of bankruptcy. As a company shifts to more and more debt financing:
these factors reinforce one another, implying that more debt is always better.
the tax advantage always outweighs bankruptcy risk.
the threat of bankruptcy makes only very low levels of debt acceptable.
the threat of bankruptcy eventually completely offsets the tax advantage of debt.
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BUS 401 Week 5 Final Paper Evaluation of Corporate Performance PEPSIco NEW
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The Final Paper will involve applying the concepts learned in class to an analysis of a company using data from its annual report. Using the concepts from this course, you will analyze the strengths and weaknesses of the company and write a report either recommending or not recommending purchase of the company stock.
Research Tip: The “Mergent” database in the Ashford University Library contains company profiles and financial information for publicly traded companies and their competitors. To access this database enter the Ashford Library and select “Find Articles and More” in the top menu panel. Next, select “Databases A-Z” and go to section “M” for “Mergent”. For help with using Mergent, use Mergent Online Quick Tips.
For help with reading an annual report access this handy guide from Money Chimp.
The completed report should include:
An introduction to the company, including background information.
A complete and thorough financial statement review.
Pro Forma financial statements (Balance Sheet and Income Statement) for the next fiscal year, assuming a 10 percent growth rate in sales and Cost of Goods Sold (COGS) for the next year.
Complete ratio analysis for the last fiscal year using at least two ratios from each of the following categories:
Liquidity
Financial leverage
Asset management
Profitability
Market value
Debt
Per-Share
Measures of relative value (P/E, P/B)
Activity
Cash Flow
A calculation of Return on Equity (ROE) using the DuPont system.
Assessment of management performance by calculating Economic Value Added (EVA).
A synopsis of your findings, including your recommendations and rationale for whether or not to purchase stock from this company.
Evaluate the financial risks associated with operating internationally. If your chosen company does not operate internationally, evaluate what the financial risks could be if they were to expand internationally.
The paper
Must be eight to ten double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Ashford Writing Center.
Must include a separate title page with the following:
Title of paper
Student’s name
Course name and number
Instructor’s name
Date submitted
Must begin with an introductory paragraph that has a succinct thesis statement.
Must address the topic of the paper with critical thought.
Must end with a conclusion that reaffirms your thesis.
Must use at least five scholarly sources, such as the textbook, industry reports, and articles from the Ashford University library to support your findings and recommendations.
Must document all sources in APA style as outlined in the Ashford Writing Center.
Must include a separate references page that is formatted according to APA style as outlined in the Ashford Writing Center.
Carefully review the Grading Rubric forum.
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BUS 401 Week 5 DQ 1 Ratio Analysis
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Using the Ashford University Library as a resource, find two articles that discuss financial ratio analysis. Identify two advantages and two disadvantages to using ratios in financial analysis. Be sure to cite your sources using APA format as outlined in the Ashford Writing Center
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BUS 401 Week 4 Quiz
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1.) Investors will make an investment if:
the historical rate of return exceeds the expected rate of return.
the required rate of return exceeds the expected rate of return.
the expected rate of return exceeds the actual rate of return.
the expected rate of return exceeds the required rate of return.
2.) Which of the following is true regarding market risk? It is measured by beta. It is also called nondiversifiable risk. It is also called systematic risk. all of the above
3.) Which of the following statements regarding the cost of equity is true?
It can be estimated in three different ways.
It is always estimated using the present value of future dividends approach.
It is estimated by solving for the discount rate for a perpetuity.
It is generally lower than the cost of debt because equity holders are paid after taxes are paid.
4.) The weighted average cost of capital is:
the average return for the company’s stock over the past several years.
the average cost, including commissions, for raising capital for the firm.
an average required return for each of the sources of capital used by the firm to finance its projects, weighted by the amount contributed by each source.
interest payments and dividends, divided by the price of bonds and stock, respectively.
5.) In the Capital Asset Pricing Model, the risk-free rate:
links the CAPM to current market conditions.
is the historic long-term average rate of government bonds.
can be approximated by using yields on high-rated corporate bonds.
is always the current yield on 30-year US government Treasury bonds.
6.) In the Capital Asset Pricing Model, the market risk premium can be thought of as:
the return investors expect to earn for each unit of risk as measured by beta.
the risk premium that any asset must pay above the risk-free rate.
the expected return on the market portfolio (or a broad market index).
a measure of risk of an asset.
- ) A bond pays semiannual coupon payments of $30 each. It matures in 20 years and is selling for $1,200. What is the firm’s cost of debt if the bond’s par value is $1,000? (Don’t forget this is a semiannual coupon.)
- 23%
- 48%
- 80%
- 60%
8.) Which of the following is beta is used for?
estimating a regression line
estimating a firm’s total risk to be used in the WACC
estimating a firm’s market risk and used with the CAPM
estimating the amount of leverage used by the firm
9.) The discount rate used in project evaluation should:
be based on the firm’s overall risk.
be based on each project’s risk.
be estimated using the WACC for all projects.
All of the above are correct.
10.) The financing mix reflected in the WACC should:
reflect the desired mix and not necessarily the mix being used to finance a specific project.
vary from project to project, depending on how they are financed.
always reflect the firm’s current capital structure.
None of these answers is correct.
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BUS 401 Week 5 Final Paper Evaluation of Corporate Performance KROGER NEW
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The Final Paper will involve applying the concepts learned in class to an analysis of a company using data from its annual report. Using the concepts from this course, you will analyze the strengths and weaknesses of the company and write a report either recommending or not recommending purchase of the company stock.
Research Tip: The “Mergent” database in the Ashford University Library contains company profiles and financial information for publicly traded companies and their competitors. To access this database enter the Ashford Library and select “Find Articles and More” in the top menu panel. Next, select “Databases A-Z” and go to section “M” for “Mergent”. For help with using Mergent, use Mergent Online Quick Tips.
For help with reading an annual report access this handy guide from Money Chimp.
The completed report should include:
An introduction to the company, including background information.
A complete and thorough financial statement review.
Pro Forma financial statements (Balance Sheet and Income Statement) for the next fiscal year, assuming a 10 percent growth rate in sales and Cost of Goods Sold (COGS) for the next year.
Complete ratio analysis for the last fiscal year using at least two ratios from each of the following categories:
Liquidity
Financial leverage
Asset management
Profitability
Market value
Debt
Per-Share
Measures of relative value (P/E, P/B)
Activity
Cash Flow
A calculation of Return on Equity (ROE) using the DuPont system.
Assessment of management performance by calculating Economic Value Added (EVA).
A synopsis of your findings, including your recommendations and rationale for whether or not to purchase stock from this company.
Evaluate the financial risks associated with operating internationally. If your chosen company does not operate internationally, evaluate what the financial risks could be if they were to expand internationally.
The paper
Must be eight to ten double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Ashford Writing Center.
Must include a separate title page with the following:
Title of paper
Student’s name
Course name and number
Instructor’s name
Date submitted
Must begin with an introductory paragraph that has a succinct thesis statement.
Must address the topic of the paper with critical thought.
Must end with a conclusion that reaffirms your thesis.
Must use at least five scholarly sources, such as the textbook, industry reports, and articles from the Ashford University library to support your findings and recommendations.
Must document all sources in APA style as outlined in the Ashford Writing Center.
Must include a separate references page that is formatted according to APA style as outlined in the Ashford Writing Center.
Carefully review the Grading Rubric forum.
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BUS 401 Week 4 DQ 1 Interviewing Peter Lynch
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Interviewing Peter Lynch
Review the”Minimizing Risk” video segment below:
In the video segment, you will watch an interview with two great investors of the twentieth century. Imagine you are Harry Reasoner, and you are allowed to ask Peter Lynch one question about market risk, discount rates, or the weighted average cost of capital (WACC). What question would you ask? Why do you feel that is an important question?
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BUS 401 Week 5 DQ 2 Applying Ratios to a Business
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Applying Ratios to a Business
Review the following Evaluating Business Performance: Small Business Case Studies video:
The video focuses on profitability, liquidity, efficiency, and stability of business. Given what you have learned about ratio analysis, choose one of the businesses from the video (Rose Chong Costumes, Anro’s Floor Maintenance, or John Osborne’s Gym and Squash Center) and identify two ratios that would be helpful for the owner of the business to monitor. Be sure to explain what the ratio would tell the owner, and how it can be improved for the business.
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BUS 401 BUS 401 Week 4 Journal Risk And Return
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We examined two very important topics in finance this week: risk and return. To summarize our discussion of the tradeoffs involved with risk and return, view the Evaluating Business Performance: Small Business Case Studies video:
Critically reflect on the importance of the risk and return balance. Consider the following:
Can we ever have any return without some type of risk?
If you take on a large risk, are you guaranteed a large return? Why or why not?
What other factors play into risks that are not covered in the video?
When have you had to consider risk and return in personal or professional decision-making?
Carefully review the Grading Rubric for the criteria that will be used to evaluate your assignment.
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BUS 401 Week 4 DQ 2 Cost of Capital
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Cost of Capital
Corporations often use different costs of capital for different operating divisions. Using an example, calculate the weighted cost of capital (WACC). What are some potential issues in using varying techniques for cost of capital for different divisions? If the overall company weighted average cost of capital (WACC) were used as the hurdle rate for all divisions, would more conservative or riskier divisions get a greater share of capital? Explain your reasoning. What are two techniques that you could use to develop a rough estimate for each division’s cost of capital? Your initial response should be 200 to 250 words.
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BUS 401 Week 1 Quiz
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1.The financial goal of a for-profit business is: profit maximization. owner wealth maximization. cash flow maximization. utility maximization.
2.) Suppose two investments produce the same expected cash flows. We would assign a higher value to the investment with:
lower risk.
higher cash flow variability.
higher risk.
the highest possible cash flows under ideal conditions.
3.) Opportunity costs can vary over time and:
are almost always close to 10%.
represent the highest possible return you can earn on an investment.
are always based on the interest rate offered on bank savings accounts.
set a return that other investments must equal or exceed to be attractive.
4.) Time is a factor when determining the value of a possible investment. As investors, all else being equal, we value investments:
more the longer we have to wait for the payoff.
less the longer we have to wait for the payoff.
with predefined wait times for payoff.
regardless of time because a dollar is always a dollar.
5.) An investment, such as a bond, will have a higher expected return (or yield) if it:
has a higher purchase price.
holds a higher rating, such as AAA or AA.
carries greater risk.
has been issued by a well-known company.
6.) The value of an asset is based on four characteristics—cash flows, time, risk, and opportunity costs—but in many situations we can estimate an asset’s value by:
gnoring risk, which simplifies the calculation.
assigning our personal value to the asset.
adding a risk premium to the current return on US government bonds.
looking at its market price.
7.) Over the past 50 years, stocks listed on the NYSE (New York Stock Exchange) have:
returned a very steady 12% per year.
never had a single year with a negative return.
never been overpriced or underpriced.
had annual returns ranging from negative 30% to over positive 30%.
8.) The accounting method you use in your checkbook is best described as: cash accounting. accrual accounting. deficit reduction. balance sheet accounting.
9.) On the typical balance sheet, the right-hand side shows:
the book value of plant, property, and equipment.
the market value of liabilities.
the accounting value of liabilities and equity.
the market value of common stock
10.) To arrive at a more accurate estimate of cash flow we would add depreciation expense to net income. The next step would be to:
reduce our estimate by the increases in liabilities.
reduce our estimate by the decreases in assets
increase our estimate by the increases in liabilities.
do nothing more because we have an accurate estimate.
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BUS 401 Week 3 DQ 1 Cash Flows From Working
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For more classes visit http://www.assignmentcloud.com Provided in Chapter 6, construct a simple cash flow statement and payback calculation for when your job expenses will be covered for employment you currently have or have had in the past. Include the following in your cash flow statement: Expenses associated with working Any initial investments Taxes
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BUS 401 Week 3 Return on Investment Education Funding
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Return on Investment: Education Funding. Develop a three- to four-page analysis, excluding the title page and reference page(s), on the projected return on investment for your college education and projected future employment. This analysis will consist of two parts.
First, explain how you made the decision to pursue a degree in Business or Finance. In your explanation, include a summary of expenses related to that decision. Also, include things like cost of tuition, cost of books, and the interest that you may pay on any loans.
Next, conduct research on your desired occupation and identify how much compensation (return) you expect to earn. How long will it take to pay back the return on this investment? Be sure to consider the trade-off between the cost of education and the expected return on investment.
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BUS 401 Week 2 DQ 1 Dreams Do Come True
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Dreams Do Come True
Imagine that you have decided you need a new car, but not any car will do; you have decided to purchase the car of your dreams. Conduct some research as to the cost of this car. You have determined in this imagined scenario that you could afford to make a 10% down payment. You can borrow the balance either from your local bank using a four-year loan or from the dealership’s finance company. If you purchase from your dealership’s finance company, the APR will be 10% with your 10% down and monthly payments over three years. However, the dealership will give you a rebate of 5% of the car price after the three year term is complete. You want the best deal possible, so you consider the following questions:
• What type of car have you selected, and what will it cost?
• What is the interest rate from your local bank for a car loan for four years?
• What will your payment be to your local bank, assuming your 10% down payment? Be sure to use the formula provided in Chapter 4 and show your work. How much will that car have cost in four years?
• What will your payment be to the dealership finance company assuming your 10% down payment? Be sure to use the formula provided in Chapter 4 and show your work. How much will that car have cost in 3 years?
• Which is the better deal and why?
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BUS 401 Week 4 Assignment Identifying and Managing Risk
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In this assignment, you will compare and evaluate risk management techniques from experts in the field. Go to the Ashford University Library and find one article by Dr. James Kallman. Dr.Kallman, an expert in the field of risk management, has written many articles on managing financial risk. Find a second article in the Ashford University Library from another credible author of your choice who also provides recommendations for risk management.
Develop a three- to four-page analysis (excluding the title and reference pages), of the techniques Dr.Kallman has identified for managing risks. In this analysis, compare Dr.Kallman’s techniques to the techniques recommended in the second article you researched. Explain why you agree or disagree with each authors’ recommendations. Describe other factors you believe should be considered in risk management. The assignment should be comprehensive and include specific examples. The paper should be formatted according to APA.
You must cite at least two scholarly sources, in addition to the text, from the Ashford University Library, one being an article by Dr.Kallman. Cite your sources in-text and on the reference page. For information regarding APA samples and tutorials, visit the Ashford Writing Center.
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BUS 401 Week 1 Financial Management Challenges and Ethics
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Financial Management Challenges and Ethics. Find at least two articles from the ProQuest database that highlight and discuss two of the biggest challenges facing financial managers today. One of the articles should be about the challenge of maintaining ethical financial integrity. The other article can be on any other challenge that a financial manager may face (e.g., competition, foreign markets, government intervention, etc.).
Summarize your findings from the articles in a two- to three-page paper excluding title page and references page(s). The paper should be formatted according to APA style as outlined in the Ashford Writing Center.
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