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Question 1

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Answer 1

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Multiple Choice Question 55

Planning models that are more sophisticated than the percent of sales method have

working capital accounts like inventory, accounts receivables, and accounts payables vary directly with sales.

fixed assets that do not always vary directly with sales.

all of these are true.

all variable costs change directly with sales.

Multiple Choice Question 66

Firms that achieve higher growth rates without seeking external financing

have less equity and/or are able to generate high net income leading to a high ROE.

are not highly leveraged.

all of these are true.

have a high plowback ratio.

Multiple Choice Question 85

External financing needed: Triumph Company has total assets worth $6,413,228. Next year it expects a net income of $3,145,778 and will pay out 70 percent as dividends. If the firm wants to limit its external financing to $1 million, what is the growth rate it can support?

6. 4%
7. 3%
8. 5%
9. 9%

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Question 2

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Answer 2

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Complete the following in WileyPLUS:

• Problem 10.14
• Problem 11.20
• Problem 11.24
• Problem 12.24
• Problem 13.11

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Question 3

FIN 571 Week 6 Learning Team Reflection NEW
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Answer 3

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Watch the “Corporate Finance Video: Stable Money Makers” located in the WileyPLUS Assignment: Week 6 Videos Activity.

Identify a capital improvement that could help Betty with her Alpaca business.

Write a summary of no more than 700 words explaining how the capital improvement you identified could help the business.

Click the Assignment Files tab to submit your assignment.

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Question 4

FIN 571 Week 6 DQ 2 NEW
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Answer 4

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On additional thought regarding international financial management considerations is the risk involving the exchange rate. Financial managers have to deal with foreign exchange rate risk on international capital investments.

To convert the project’s future cash flows into another currency, we need to come up with projected or forecast exchange rates. One of the problems with obtaining currency rate forecasts for use in analysis of capital projects is that many projects have lives of 20 years or more.

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Question 5

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Answer 5

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Explain what a financial plan is and why financial planning is so important.

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Question 6

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Answer 6

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Multiple Choice Question 55

Genaro needs to capture a return of 40 percent for his one-year investment in a property. He believes that he can sell the property at the end of the year for $150,000 and that the property will provide him with rental income of $25,000. What is the maximum amount that Genaro should be willing to pay for the property?

$137,500

$125,000

$112,500

$150,000

Multiple Choice Question 54

The process of identifying the bundle of projects that creates the greatest total value and allocating the available capital to the projects is known as

risk analysis.

rationing.

capital rationing.

budgeting.

Multiple Choice Question 78

Capital rationing. You are considering a project that has an initial cost of $1,200,000. If you take the project, it will produce net cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the project is 10 percent, what is the profitability index of the project?

2. 09
3. 09
4. 09
5. 18

Multiple Choice Question 89

What might cause a firm to face capital rationing?

If a firm rejects some capital investments that are expected to generate positive NPV’s.

If investors require returns for their capital that are too high.

If a firm has more than one project with a positive NPV.

If a firm has several projects that are expected to generate negative IRR’s.

Multiple Choice Question 59

How firms estimate their cost of capital: The WACC for a firm is 19.75 percent. You know that the firm is financed with $75 million of equity and $25 million of debt. The cost of debt capital is 7 percent. What is the cost of equity for the firm?

19. 75%
20. 50%
21. 00%
22. 00%

Multiple Choice Question 61

The cost of debt: Bellamee, Inc., has semiannual bonds outstanding with five years to maturity and are priced at $920.87. If the bonds have a coupon rate of 7 percent, then what is the YTM for the bonds?

4. 5%
5. 0%
6. 0%
7. 2%

Multiple Choice Question 63

The cost of debt: Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are currently priced at $746.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 35%? Assume that your calculation is made as on Wall Street

8. 125%
9. 890%
10. 250%
11. 500%

Multiple Choice Question 67

The cost of equity: RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent. If the risk-free rate of return is 10 percent and the expected return on the market is 18 percent, then what is the firm’s beta if the firm’s marginal tax rate is 35 percent?

4. 10
5. 0
6. 28
7. 60

Multiple Choice Question 83

Which type of project do financial managers typically use the highest cost of capital when evaluating?

New product projects

Efficiency projects

Market expansion projects

Extension projects

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Question 7

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Answer 7

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Complete the following in WileyPLUS:

• Problem 5.17
• Problem 5.21
• Problem 6.19
• Problem 6.27
• Problem 7.16
• Problem 8.24
• Problem 9.15

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Question 8

FIN 571 Week 5 Learning Team Reflection NEW
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Answer 8

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Watch the “Concept Review Video: Cost of Capital” video located in the WileyPLUS Assignment: Week 5 Videos Activity.

Discuss some of the corporate finance challenges faced by this company.

Write a 350-700 word summary of your discussion.

Click the Assignment Files tab to submit your assignment.

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Question 9

FIN 571 Week 5 DQ 4 NEW
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Answer 9

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Describe how distinguishing between variable and fixed costs can be useful in forecasting operating expenses.

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Question 10

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Answer 10

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The text discusses general rules for estimating incremental after-tax free cash flows. One rule is to include cash flows and only cash flows in your calculations. In other words, do not include allocated costs or overhead unless they reflect cash flows.

What are some other rules to ensure the proper estimation of after-tax cash flows?

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Question 11

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Answer 11

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Discuss why capital budgeting decisions are the most important investment decisions made by a firm’s management.

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Question 12

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Answer 12

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A postaudit review enables managers to determine whether a project’s goals were met and to quantify the actual benefits or costs of the project.

What are some other benefits of a post audit and ongoing reviews of capital projects?

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Question 13

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Answer 13

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Multiple Choice Question 66

Present value: Tommie Harris is considering an investment that pays 6.5 percent annually. How much must he invest today such that he will have $25,000 in seven years? (Round to the nearest dollar.)

$38,850

$23,474

$16,088

$26,625

Multiple Choice Question 61

PV of multiple cash flows: Jack Stuart has loaned money to his brother at an interest rate of 5.75 percent. He expects to receive $625, $650, $700, and $800 at the end of the next four years as complete repayment of the loan with interest. How much did he loan out to his brother? (Round to the nearest dollar.)

$2,250

$2,545

$2,713

$2,404

Multiple Choice Question 63

PV of multiple cash flows: Hassan Ali has made an investment that will pay him $11,455, $16,376, and $19,812 at the end of the next three years. His investment was to fetch him a return of 14 percent. What is the present value of these cash flows? (Round to the nearest dollar.)

$33,124

$36,022

$41,675

$39,208

Multiple Choice Question 65

PV of multiple cash flows: Pam Gregg is expecting cash flows of $50,000, $75,000, $125,000, and $250,000 from an inheritance over the next four years. If she can earn 11 percent on any investment that she makes, what is the present value of her inheritance? (Round to the nearest dollar.)

$361,998

$309,432

$434,599

$412,372

Multiple Choice Question 66

Present value of an annuity: Transit Insurance Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? (Round to the nearest dollar.)

$186,250

$101,766

$124,868

$251,154

Multiple Choice Question 71

Future value of an annuity: Carlos Menendez is planning to invest $3,500 every year for the next six years in an investment paying 12 percent annually. What will be the amount he will have at the end of the six years? (Round to the nearest dollar.)

$28,403

$24,670

$26,124

$21,000

Multiple Choice Question 61

Bond price: Briar Corp is issuing a 10-year bond with a coupon rate of 7 percent. The interest rate for similar bonds is currently 9 percent. Assuming annual payments, what is the present value of the bond? (Round to the nearest dollar.)

$990

$872

$1,066

$945

Multiple Choice Question 56

PV of dividends: Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent?

$10.76

$11.50

$9.80

$11.88

Multiple Choice Question 59

PV of dividends: Givens, Inc., is a fast growing technology company that paid a $1.25 dividend last week. The company’s expected growth rates over the next four years are as follows: 25 percent, 30 percent, 35 percent, and 30 percent. The company then expects to settle down to a constant-growth rate of 8 percent annually. If the required rate of return is 12 percent, what is the present value of the dividends over the fast growth phase?

$6.46

$7.24

$8.37

$1.25

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Question 14

FIN 571 Week 4 Learning Team Reflection NEW
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Answer 14

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Watch the “Concept Review Video: Stock Valuation” video located in the WileyPLUS Assignment: Week 4 Videos Activity.

Discuss how markets and investors value a stock.

Write a 350-700 word summary of your discussion.

Click the Assignment Files tab to submit your assignment.

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Question 15

FIN 571 Week 4 Individual Analyzing Pro Forma Statements NEW
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Answer 15

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Decide upon an initiative you want to implement that would increase sales over the next five years, (for example, market another product, corporate expansion, and so on).

Using the sample financial statements, create pro forma statements of five year projections that are clear, concise, and easy to read. Be sure to double check the calculations in your pro forma statements. Make assumptions that support each line item increase or decrease for your forecasted statements.

Discuss and interpret the financials in relation to the initiative. Make recommendations on potential discretionary financing needs.

Write a 350 – 700 word analysis of the company’s short term and long term financing needs and determine strategies for the company to manage working capital.

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Question 16

FIN 571 Week 4 DQ 2 NEW
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Answer 16

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Explain what the time value of money is and why it is important in the field of finance.

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Question 17

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We can determine the value of an investment at the end of one period (whether it is a month, quarter or year) if we know the interest rate to be earned by the investment. If you invest for one period (single period investment) at an interest rate of i, your investment, or principal, will grow by (1 + i) per dollar invested. The term (1+ i) is the future value interest factor–often called simply the future value factor.

How can we determine the value of a two period investment what components are included in the calculation?

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Question 18

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Answer 18

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Multiple Choice Question 32

The operating cycle

ends not with the finished goods being sold to customers and the cash collected on the sales; but when you take into account the time taken by the firm to pay for its purchases.

To measure operating cycle we need another measure called the days’ payables outstanding.

begins when the firm receives the raw materials it purchased that would be used to produce the goods that the firm manufactures.

begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.

Multiple Choice Question 57

You are provided the following working capital information for the Ridge Company:

Ridge Company

Account
$

Inventory
$12,890

Accounts receivable
12,800

Accounts payable
12,670

Net sales
$124,589

Cost of goods sold
99,630

Operating cycle: What is the operating cycle for Ridge Company?

51 days

47 days

85 days

36 days

Multiple Choice Question 80

Ticktock Clocks sells 10,000 alarm clocks each year. If the total cost of placing an order is $65 and it costs $85 per year to carry the alarm clock in inventory, use the EOQ formula to calculate the optimal order size.

26,154 clocks

24 clocks

15,294 clocks

161 clocks

Multiple Choice Question 49

The asset substitution problem occurs when

managers substitute less risky assets for riskier ones to the detriment of equity holders.

managers substitute riskier assets for less risky ones to the detriment of bondholders.

managers substitute less risky assets for riskier ones to the detriment of bondholders.

managers substitute riskier assets for less risky ones to the detriment of equity holders.

Multiple Choice Question 53

M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock.

How much are your cash flows today?

$4.50

$12.38

$150

$15

Multiple Choice Question 62

M&M Proposition 2: Melba’s Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of debt is 6%, and its cost of equity is 10%. The firm’s marginal corporate income tax rate is 35%. What is the appropriate WACC?

6. 35%
7. 44%
8. 80%
9. 17%

Multiple Choice Question 39

According to the text, the financial plan covers a period of

ten years.

none of these.

one year.

three to five years.

Multiple Choice Question 45

The financing plan of a firm will indicate

the firm’s dividend policy, the desired capital structure for the firm, and the firm’s working capital policy.

the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the desired capital structure for the firm, and the firm’s dividend policy.

the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the desired capital structure for the firm, and the firm’s working capital policy.

the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the firm’s dividend policy, and the firm’s working capital policy.

Multiple Choice Question 74

Payout and retention ratio: Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest payment of $511,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders. Find the firm’s dividend payout ratio and retention ratio.

25%, 75%

66%, 34%

34%, 66%

69%, 31%

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Question 19

FIN 571 Week 3 Learning Team Reflection NEW
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Answer 19

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Watch the “Concept Review Video: Working Capital Management” video located in theWileyPLUS Assignment: Week 3 Videos Activity.

Discuss strategies these business owners used to manage their working capital.

Write a 350-700 word summary of your discussion.

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Question 20

FIN 571 Week 3 Individual Interpreting Financial Results NEW
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Answer 20

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Resource: Financial Statements for the company assigned by your instructor in Week 2.

Review the assigned company’s financial statements from the past three years.

Calculate the financial ratios for the assigned company’s financial statements, and then interpret those results against company historical data as well as industry benchmarks:

Compare the financial ratios with each of the preceding three (3) years (e.g. 2014 with 2013; 2013 with 2012; and 2012 with 2011).
Compare the calculated financial ratios against the industry benchmarks for the industry of your assigned company.

Write a 500 to 750 word summary of your analysis.

Show financial calculations where appropriate.

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Question 21

FIN 571 Week 3 DQ 3 NEW
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Answer 21

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Short term funding strategy involves various sources of short-term financing such as:

Accounts payable (trade credit), bank loans, and commercial paper are common sources of short-term financing.

Accounts payable constituted about 35 percent of total current liabilities for all publicly traded manufacturing firms. ◾The buyer needs to figure out whether it makes financial sense to pay early and take advantage of the discount or to wait and pay in full when the account is due.

Short-term bank loans accounted for about 20 percent of total current liabilities for all publicly traded manufacturing firms. ◾An informal line of credit is a verbal agreement between the firm and the bank, allowing the firm to borrow up to an agreed-upon upper limit.

In exchange for providing the line of credit, a bank may require that the firm holds acompensating balance with them.

What are some other sources of short-term financing used with this strategy?

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Managers must think not only in terms of a trade-off or a pecking order theories but remain concerned with how their financing decisions will influence the practical issues that they must deal with when managing a business.

Financial flexibility is an important consideration in many capital structure decisions. As you pointed out, managers must ensure that they retain sufficient financial resources in the firm to take advantage of unexpected opportunities as well as unforeseen problems. They try to manage their firms’ capital structures in a way that limits the risk to a reasonable level.

How can managers use leverage and control to support their capital structure decisions?

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Question 23

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Answer 23

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The Long-Term funding strategy relies on long-term debt to finance both capital assets and working capital. As a result, this strategy reduces risk since there is no need to consider refinancing assets since all funding is long term.

How would a ‘changing rate environment’ impact the use of this strategy?

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Question 24

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Answer 24

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Multiple Choice Question 53

Which one of the following statements about trend analysis is NOT correct?

It allows management to examine each ratio over time and determine whether the trend is good or bad for the firm.

This benchmark is based on a firm’s historical performance.

The Standard Industrial Classification (SIC) System is used to identify benchmark firms.

All of these are true statements.

Multiple Choice Question 68

Coverage ratios: Sectors, Inc., has an EBIT of $7,221,643 and interest expense of $611,800. Its depreciation for the year is $1,434,500. What is its cash coverage ratio?

None of these

14. 15 times
15. 42 times
16. 34 times

Multiple Choice Question 68

Multiples analysis: Turner Corp. has debt of $230 million and generated a net income of $121 million in the last fiscal year. In attempting to determine the total value of the firm, an investor identified a similar firm in Jacobs, Inc., an all-equity firm. This firm had 150 million shares outstanding, a share price of $14.25, and net income of $182 million. What is the total value of Turner Corp.? Round to the nearest million dollars.

$1,715 million

$1,651 million

$1,421 million

$1,191 million

Multiple Choice Question 46

Coverage ratios, like times interest earned and cash coverage ratio, allow

a firm’s creditors to assess how well the firm will meet its interest obligations.

a firm’s creditors to assess how well the firm will meet its short-term liabilities other than interest expense.

a firm’s management to assess how well they meet short-term liabilities.

a firm’s shareholders to assess how well the firm will meet its short-term liabilities.

Multiple Choice Question 54

Peer group analysis can be performed by

a) management choosing a set of firms that are similar in size or sales, or who compete in the same market.
b) using the average ratios of this peer group, which would then be used as the benchmark.
c) identifying firms in the same industry that are grouped by size, sales, and product lines, in order to establish benchmark ratios.
d) Only a and b relate to peer group analysis.

Multiple Choice Question 61

Efficiency ratio: If Viera, Inc., has an accounts receivable turnover of 3.9 times and net sales of $3,436,812, what is its level of receivables?

$13,403,567

$881,234

$1,340,357

$81,234

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Question 25

FIN 571 Week 2 Learning Team Reflection NEW
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Answer 25

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Read the Ethics case, “A Sad Tale: The Demise of Arthur Anderson” located in the WileyPLUS Week Fundamentals of Corporate Finance Chapter readings.

Discuss the mistakes made by Arthur Anderson and potential actions that leadership could have taken to prevent the organizational failure.

Write a 350- to 700-word summary of your discussion.

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Question 26

FIN 571 Week 2 Individual Business Structure Advice NEW
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Answer 26

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Write a 350 to 700 word response to the following e-mail:

Dear Consultant,

I am currently starting a business and developing my business plan. I’m in need of some advice on how to start forming my business. I am not sure exactly how it will be financed and whether or not I want to take on partners. I am interested and willing to learn the intricacies of my options to determine how to best proceed with my plan.

Please advise on what my options are, the advantages and disadvantages of each, and possible tax consequences for each scenario?
Respectfully,

John Owner

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Question 27

FIN 571 Week 2 DQ 3 NEW
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Answer 27

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The DuPont System

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Question 28

FIN 571 Week 2 DQ 2 NEW
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Financial Ratios and Firm Performance

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Answer 28

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Financial Ratios and Firm Performance

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FIN 571 Week 2 DQ 1 NEW
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Answer 29

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Explain what benchmarks are, describe how they are prepared, and discuss why they are important in financial statement analysis.

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Question 30

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Answer 30

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Multiple Choice Question 42
Which of the following business organizational forms subjects the owner(s) to unlimited liability?

a) sole proprietorship
b) partnership
c) corporation
d) a and b

Multiple Choice Question 44

Which of the following business organizational forms is easiest to raise capital?

a) sole proprietorship
b) partnership
c) corporation
d) a and b

Multiple Choice Question 50

Which organizational form best enables the owners of the firm to monitor the actions of other owners of the same firm?

private corporation

sole proprietorship

partnership

public corporation

Multiple Choice Question 81

Which of the following factors or activities can be controlled by the management of the firm?

Stock market conditions.

Capital budgeting.

The level of economic activity.

The level of interest rates.

Multiple Choice Question 82

The legal system and market forces impose substantial costs on individuals and institutions that engage in unethical behavior. Which of the following would not be an example of the above?

Agency conflicts.

Jail time.

Financial losses.

Legal fines.

Multiple Choice Question 48

The most common reason that corporate firms use the futures and options markets is

to make deposits.

none of these.

to hedge risk.

to take risk.

Multiple Choice Question 55

Galan Associates prepared its financial statement for 2008 based on the information given here. The company had cash worth $1,234, inventory worth $13,480, and accounts receivables of $7,789. The company’s net fixed assets are $42,331, and other assets are $1,822. It had accounts payables of $9,558, notes payables of $2,756, common stock of $22,000, and retained earnings of $14,008. How much long-term debt does the firm have?

$76,342

$18,334

$54,342

$12,314

Multiple Choice Question 59

Tre-Bien Bakeries generated net income of $233,412 this year. At year end, the company had accounts receivables of $47,199, inventory of $63,781, and cash of $21,461. It also had accounts payables of $51,369, short-term notes payables of $11,417, and accrued taxes of $6,145. The net working capital of the firm is

None of these

$68,931

$63,510

$69,655

Multiple Choice Question 81

Which of the following best represents cash flows to investors?

Net income, minus dividends paid to preferred stockholders.

Earnings before interest and taxes times 1 minus the firm’s tax rate.

Cash flow from operating activity, plus cash flow generated from net working capital.

Cash flow from operating activity, minus cash flow invested in net working capital, minus cash flow invested in long-term assets.

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FIN 571 Week 1 Individual Assignment Business Structures
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Watch the “Your Business Structure” and “Corporate Business Structures” videos on the Electronics Reserve Readings page.

Identify the different business structures.

Write a 350 to 700 word explanation of how each business structure might and might not be advantageous.

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Answer 32

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What is ethics? If you follow all applicable rules and regulations, are you an ethical person? Why?

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Minimizing risk is essential in the pursuit of maximizing profits. Why shouldn’t a firm focus purely on maximizing profits without regard to risk? How does the management of risk play a role in the success of an organization?

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Answer 34

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Multiple Choice Question 51

Which of the following is considered a hybrid organizational form?

partnership

limited liability partnership

sole proprietorship

corporation

Multiple Choice Question 59

Which of the following is a principal within the agency relationship?

the board of directors

a company engineer

the CEO of the firm

a shareholder

Multiple Choice Question 57

Teakap, Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. How much long-term debt does the firm have?

$2,303,010

$2,123,612

$803,010

$1,844,022

Multiple Choice Question 78

Which of the following presents a summary of the changes in a firm’s balance sheet from the beginning of an accounting period to the end of that accounting period?

The statement of net worth.

The statement of retained earnings.

The statement of cash flows.

The statement of working capital.

Multiple Choice Question 63

Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm’s days’s sales in inventory?

65. 2 days
66. 7 days
67. 9 days
68. 3 days

Multiple Choice Question 70

Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?

1.47

0

0. 60
1. 74

Multiple Choice Question 84

Which of the following is not a method of “benchmarking”?

Evaluating a single firm’s performance over time.

Conduct an industry group analysis.

Identify a group of firms that compete with the company being analyzed.

Utilize the DuPont system to analyze a firm’s performance.

Multiple Choice Question 67

Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)

$22,680

$19,444

$16,670

$26,454

Multiple Choice Question 62

PV of multiple cash flows: Ferris, Inc., has borrowed from their bank at a rate of 8 percent and will repay the loan with interest over the next five years. Their scheduled payments, starting at the end of the year are as follows—$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.)

$2,735,200

$2,815,885

$2,615,432

$2,431,224

Multiple Choice Question 64

PV of multiple cash flows: Ajax Corp. is expecting the following cash flows—$79,000, $112,000, $164,000, $84,000, and $242,000—over the next five years. If the company’s opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)

$414,322

$480,906

$429,560

$477,235

Multiple Choice Question 72

Future value of an annuity: Jayadev Athreya has started on his first job. He plans to start saving for retirement early. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years? (Round to the nearest dollar.)

$1,745,600

$2,667,904

$3,594,524

$5,233,442

Multiple Choice Question 57

Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)

12%

32%

16%

40%

Multiple Choice Question 62

Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company’s bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)

$1,014

$1,066

$923

$972

Multiple Choice Question 57

PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 percent, what is the present value of their dividends over the next four years?

$13.50

$9.72

$12.50

$11.63

Multiple Choice Question 79

Capital rationing. TuleTime Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows, then what is the profitability index for the project?

1. 11
2. 11
3. 90
4. 90

Multiple Choice Question 88

What decision criteria should managers use in selecting projects when there is not enough capital to invest in all available positive NPV projects?

The modified internal rate of return.

The profitability index.

The internal rate of return.

The discounted payback.

Multiple Choice Question 60

How firms estimate their cost of capital: The WACC for a firm is 13.00 percent. You know that the firm’s cost of debt capital is 10 percent and the cost of equity capital is 20%. What proportion of the firm is financed with debt?

50%

70%

30%

33%

Multiple Choice Question 68

The cost of equity: Gangland Water Guns, Inc., is expected to pay a dividend of $2.10 one year from today. If the firm’s growth in dividends is expected to remain at a flat 3 percent forever, then what is the cost of equity capital for Gangland if the price of its common shares is currently $17.50?

15. 00%
16. 00%
17. 36%
18. 65%

Multiple Choice Question 85

If a company’s weighted average cost of capital is less than the required return on equity, then the firm:

Is financed with more than 50% debt

Is perceived to be safe

Has debt in its capital structure

Must have preferred stock in its capital structure

Multiple Choice Question 32

A firm’s capital structure is the mix of financial securities used to finance its activities and can include all of the following except

stock.

bonds.

equity options.

preferred stock.

Multiple Choice Question 54

M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock.

If Dynamo wishes to change its capital structure from 75 percent to 60 percent equity and use the debt proceeds to pay a special dividend to shareholders, how much debt should they issue?

$600

$225

$321

$375

Multiple Choice Question 69

Multiple Analysis: Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.

What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars.

$1,334 million

$1,787 million

$1,315 million

$453.6 million

Multiple Choice Question 86

External financing needed: Jockey Company has total assets worth $4,417,665. At year-end it will have net income of $2,771,342 and pay out 60 percent as dividends. If the firm wants no external financing, what is the growth rate it can support?

25. 1%
26. 9%
27. 3%
28. 3%

Multiple Choice Question 46

Which of the following cannot be engaged in managing the business?

none of these

a sole proprietor

a general partner

a limited partner

Multiple Choice Question 80

Which of the following does maximizing shareholder wealth not usually account for?

Amount of Cash flows.

The timing of cash flows.

Risk.

Government regulation.

Multiple Choice Question 41

The strategic plan does NOT identify

major areas of investment in real assets.

future mergers, alliances, and divestitures.

working capital strategies.

the lines of business a firm will compete in.

Multiple Choice Question 67

Firms that achieve higher growth rates without seeking external financing

are highly leveraged.

none of these.

have less equity and/or are able to generate high net income leading to a high ROE.

have a low plowback ratio.

Multiple Choice Question 75

Payout and retention ratio: Drekker, Inc., has revenues of $312,766, costs of $220,222, interest payment of $31,477, and a tax rate of 34 percent. It paid dividends of $34,125 to shareholders. Find the firm’s dividend payout ratio and retention ratio.

85%, 15%

15%, 85%

55%, 45%

45%, 55%

Multiple Choice Question 30

The cash conversion cycle

hows how long the firm keeps its inventory before selling it.

estimates how long it takes on average for the firm to collect its outstanding accounts receivable balance.

begins when the firm invests cash to purchase the raw materials that would be used to produce the goods that the firm manufactures.

begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.

Multiple Choice Question 58

Ridge Company

Account
$

Inventory
$12,890

Accounts receivable
12,800

Accounts payable
12,670

Net sales
$124,589

Cost of goods sold
99,630

You are provided the following working capital information for the Ridge Company:

Cash conversion cycle: What is the cash conversion cycle for Ridge Company?

46. 4 days
47. 5 days
48. 3 days
49. 9 days

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Answer 35

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FIN 571 Week 5 DQ 1 NEW

A postaudit review enables managers to determine whether a project’s goals were met and to quantify the actual benefits or costs of the project.

What are some other benefits of a post audit and ongoing reviews of capital projects?

FIN 571 Week 5 DQ 2 NEW

Discuss why capital budgeting decisions are the most important investment decisions made by a firm’s management.

FIN 571 Week 5 DQ 3 NEW

The text discusses general rules for estimating incremental after-tax free cash flows. One rule is to include cash flows and only cash flows in your calculations. In other words, do not include allocated costs or overhead unless they reflect cash flows.

What are some other rules to ensure the proper estimation of after-tax cash flows?

FIN 571 Week 5 DQ 4 NEW

Describe how distinguishing between variable and fixed costs can be useful in forecasting operating expenses.

FIN 571 Week 5 Learning Team Reflection NEW

Watch the “Concept Review Video: Cost of Capital” video located in the WileyPLUS Assignment: Week 5 Videos Activity.

Discuss some of the corporate finance challenges faced by this company.

Write a 350-700 word summary of your discussion.

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FIN 571 Week 5 WileyPLUS Assignment NEW

Complete the following in WileyPLUS:

• Problem 5.17
• Problem 5.21
• Problem 6.19
• Problem 6.27
• Problem 7.16
• Problem 8.24
• Problem 9.15

FIN 571 Week 5 WileyPLUS Practice Quiz NEW

Multiple Choice Question 55

Genaro needs to capture a return of 40 percent for his one-year investment in a property. He believes that he can sell the property at the end of the year for $150,000 and that the property will provide him with rental income of $25,000. What is the maximum amount that Genaro should be willing to pay for the property?

$137,500

$125,000

$112,500

$150,000

Multiple Choice Question 54

The process of identifying the bundle of projects that creates the greatest total value and allocating the available capital to the projects is known as

risk analysis.

rationing.

capital rationing.

budgeting.

Multiple Choice Question 78

Capital rationing. You are considering a project that has an initial cost of $1,200,000. If you take the project, it will produce net cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the project is 10 percent, what is the profitability index of the project?

2. 09
3. 09
4. 09
5. 18

Multiple Choice Question 89

What might cause a firm to face capital rationing?

If a firm rejects some capital investments that are expected to generate positive NPV’s.

If investors require returns for their capital that are too high.

If a firm has more than one project with a positive NPV.

If a firm has several projects that are expected to generate negative IRR’s.

Multiple Choice Question 59

How firms estimate their cost of capital: The WACC for a firm is 19.75 percent. You know that the firm is financed with $75 million of equity and $25 million of debt. The cost of debt capital is 7 percent. What is the cost of equity for the firm?

19. 75%
20. 50%
21. 00%
22. 00%

Multiple Choice Question 61

The cost of debt: Bellamee, Inc., has semiannual bonds outstanding with five years to maturity and are priced at $920.87. If the bonds have a coupon rate of 7 percent, then what is the YTM for the bonds?

4. 5%
5. 0%
6. 0%
7. 2%

Multiple Choice Question 63

The cost of debt: Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are currently priced at $746.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 35%? Assume that your calculation is made as on Wall Street

8. 125%
9. 890%
10. 250%
11. 500%

Multiple Choice Question 67

The cost of equity: RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent. If the risk-free rate of return is 10 percent and the expected return on the market is 18 percent, then what is the firm’s beta if the firm’s marginal tax rate is 35 percent?

4. 10
5. 0
6. 28
7. 60

Multiple Choice Question 83

Which type of project do financial managers typically use the highest cost of capital when evaluating?

New product projects

Efficiency projects

Market expansion projects

Extension projects

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Answer 36

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FIN 571 Week 4 DQ 1 NEW

We can determine the value of an investment at the end of one period (whether it is a month, quarter or year) if we know the interest rate to be earned by the investment. If you invest for one period (single period investment) at an interest rate of i, your investment, or principal, will grow by (1 + i) per dollar invested. The term (1+ i) is the future value interest factor–often called simply the future value factor.

How can we determine the value of a two period investment what components are included in the calculation?

FIN 571 Week 4 DQ 2 NEW

Explain what the time value of money is and why it is important in the field of finance.

FIN 571 Week 4 Individual Analyzing Pro Forma Statements NEW

Decide upon an initiative you want to implement that would increase sales over the next five years, (for example, market another product, corporate expansion, and so on).

Using the sample financial statements, create pro forma statements of five year projections that are clear, concise, and easy to read. Be sure to double check the calculations in your pro forma statements. Make assumptions that support each line item increase or decrease for your forecasted statements.

Discuss and interpret the financials in relation to the initiative. Make recommendations on potential discretionary financing needs.

Write a 350 – 700 word analysis of the company’s short term and long term financing needs and determine strategies for the company to manage working capital.

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FIN 571 Week 4 Learning Team Reflection NEW

Watch the “Concept Review Video: Stock Valuation” video located in the WileyPLUS Assignment: Week 4 Videos Activity.

Discuss how markets and investors value a stock.

Write a 350-700 word summary of your discussion.

Click the Assignment Files tab to submit your assignment.

FIN 571 Week 4 WileyPLUS Practice Quiz NEW

Multiple Choice Question 66

Present value: Tommie Harris is considering an investment that pays 6.5 percent annually. How much must he invest today such that he will have $25,000 in seven years? (Round to the nearest dollar.)

$38,850

$23,474

$16,088

$26,625

Multiple Choice Question 61

PV of multiple cash flows: Jack Stuart has loaned money to his brother at an interest rate of 5.75 percent. He expects to receive $625, $650, $700, and $800 at the end of the next four years as complete repayment of the loan with interest. How much did he loan out to his brother? (Round to the nearest dollar.)

$2,250

$2,545

$2,713

$2,404

Multiple Choice Question 63

PV of multiple cash flows: Hassan Ali has made an investment that will pay him $11,455, $16,376, and $19,812 at the end of the next three years. His investment was to fetch him a return of 14 percent. What is the present value of these cash flows? (Round to the nearest dollar.)

$33,124

$36,022

$41,675

$39,208

Multiple Choice Question 65

PV of multiple cash flows: Pam Gregg is expecting cash flows of $50,000, $75,000, $125,000, and $250,000 from an inheritance over the next four years. If she can earn 11 percent on any investment that she makes, what is the present value of her inheritance? (Round to the nearest dollar.)

$361,998

$309,432

$434,599

$412,372

Multiple Choice Question 66

Present value of an annuity: Transit Insurance Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? (Round to the nearest dollar.)

$186,250

$101,766

$124,868

$251,154

Multiple Choice Question 71

Future value of an annuity: Carlos Menendez is planning to invest $3,500 every year for the next six years in an investment paying 12 percent annually. What will be the amount he will have at the end of the six years? (Round to the nearest dollar.)

$28,403

$24,670

$26,124

$21,000

Multiple Choice Question 61

Bond price: Briar Corp is issuing a 10-year bond with a coupon rate of 7 percent. The interest rate for similar bonds is currently 9 percent. Assuming annual payments, what is the present value of the bond? (Round to the nearest dollar.)

$990

$872

$1,066

$945

Multiple Choice Question 56

PV of dividends: Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent?

$10.76

$11.50

$9.80

$11.88

Multiple Choice Question 59

PV of dividends: Givens, Inc., is a fast growing technology company that paid a $1.25 dividend last week. The company’s expected growth rates over the next four years are as follows: 25 percent, 30 percent, 35 percent, and 30 percent. The company then expects to settle down to a constant-growth rate of 8 percent annually. If the required rate of return is 12 percent, what is the present value of the dividends over the fast growth phase?

$6.46

$7.24

$8.37

$1.25

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Answer 37

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FIN 571 Week 3 DQ 1 NEW

The Long-Term funding strategy relies on long-term debt to finance both capital assets and working capital. As a result, this strategy reduces risk since there is no need to consider refinancing assets since all funding is long term.

How would a ‘changing rate environment’ impact the use of this strategy?

FIN 571 Week 3 DQ 2 NEW

Managers must think not only in terms of a trade-off or a pecking order theories but remain concerned with how their financing decisions will influence the practical issues that they must deal with when managing a business.

Financial flexibility is an important consideration in many capital structure decisions. As you pointed out, managers must ensure that they retain sufficient financial resources in the firm to take advantage of unexpected opportunities as well as unforeseen problems. They try to manage their firms’ capital structures in a way that limits the risk to a reasonable level.

How can managers use leverage and control to support their capital structure decisions?

FIN 571 Week 3 DQ 3 NEW

Short term funding strategy involves various sources of short-term financing such as:

Accounts payable (trade credit), bank loans, and commercial paper are common sources of short-term financing.

Accounts payable constituted about 35 percent of total current liabilities for all publicly traded manufacturing firms. The buyer needs to figure out whether it makes financial sense to pay early and take advantage of the discount or to wait and pay in full when the account is due.

Short-term bank loans accounted for about 20 percent of total current liabilities for all publicly traded manufacturing firms. An informal line of credit is a verbal agreement between the firm and the bank, allowing the firm to borrow up to an agreed-upon upper limit.

In exchange for providing the line of credit, a bank may require that the firm holds acompensating balance with them.

What are some other sources of short-term financing used with this strategy?

FIN 571 Week 3 Individual Interpreting Financial Results NEW

Resource: Financial Statements for the company assigned by your instructor in Week 2.

Review the assigned company’s financial statements from the past three years.

Calculate the financial ratios for the assigned company’s financial statements, and then interpret those results against company historical data as well as industry benchmarks:

Compare the financial ratios with each of the preceding three (3) years (e.g. 2014 with 2013; 2013 with 2012; and 2012 with 2011).
Compare the calculated financial ratios against the industry benchmarks for the industry of your assigned company.

Write a 500 to 750 word summary of your analysis.

Show financial calculations where appropriate.

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FIN 571 Week 3 Learning Team Reflection NEW

Watch the “Concept Review Video: Working Capital Management” video located in theWileyPLUS Assignment: Week 3 Videos Activity.

Discuss strategies these business owners used to manage their working capital.

Write a 350-700 word summary of your discussion.

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FIN 571 Week 3 WileyPLUS Practice Quiz NEW

Multiple Choice Question 32

The operating cycle

ends not with the finished goods being sold to customers and the cash collected on the sales; but when you take into account the time taken by the firm to pay for its purchases.

To measure operating cycle we need another measure called the days’ payables outstanding.

begins when the firm receives the raw materials it purchased that would be used to produce the goods that the firm manufactures.

begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.

Multiple Choice Question 57

You are provided the following working capital information for the Ridge Company:

Ridge Company

Account
$

Inventory
$12,890

Accounts receivable
12,800

Accounts payable
12,670

Net sales
$124,589

Cost of goods sold
99,630

Operating cycle: What is the operating cycle for Ridge Company?

51 days

47 days

85 days

36 days

Multiple Choice Question 80

Ticktock Clocks sells 10,000 alarm clocks each year. If the total cost of placing an order is $65 and it costs $85 per year to carry the alarm clock in inventory, use the EOQ formula to calculate the optimal order size.

26,154 clocks

24 clocks

15,294 clocks

161 clocks

Multiple Choice Question 49

The asset substitution problem occurs when

managers substitute less risky assets for riskier ones to the detriment of equity holders.

managers substitute riskier assets for less risky ones to the detriment of bondholders.

managers substitute less risky assets for riskier ones to the detriment of bondholders.

managers substitute riskier assets for less risky ones to the detriment of equity holders.

Multiple Choice Question 53

M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock.

How much are your cash flows today?

$4.50

$12.38

$150

$15

Multiple Choice Question 62

M&M Proposition 2: Melba’s Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of debt is 6%, and its cost of equity is 10%. The firm’s marginal corporate income tax rate is 35%. What is the appropriate WACC?

6. 35%
7. 44%
8. 80%
9. 17%

Multiple Choice Question 39

According to the text, the financial plan covers a period of

ten years.

none of these.

one year.

three to five years.

Multiple Choice Question 45

The financing plan of a firm will indicate

the firm’s dividend policy, the desired capital structure for the firm, and the firm’s working capital policy.

the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the desired capital structure for the firm, and the firm’s dividend policy.

the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the desired capital structure for the firm, and the firm’s working capital policy.

the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the firm’s dividend policy, and the firm’s working capital policy.

Multiple Choice Question 74

Payout and retention ratio: Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest payment of $511,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders. Find the firm’s dividend payout ratio and retention ratio.

25%, 75%

66%, 34%

34%, 66%

69%, 31%

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Question 38

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FIN 571 Week 2 DQ 1 NEW

Explain what benchmarks are, describe how they are prepared, and discuss why they are important in financial statement analysis.

FIN 571 Week 2 DQ 2 NEW

Financial Ratios and Firm Performance

FIN 571 Week 2 DQ 3 NEW

The DuPont System

FIN 571 Week 2 Learning Team Reflection NEW

Read the Ethics case, “A Sad Tale: The Demise of Arthur Anderson” located in the WileyPLUS Week Fundamentals of Corporate Finance Chapter readings.

Discuss the mistakes made by Arthur Anderson and potential actions that leadership could have taken to prevent the organizational failure.

Write a 350- to 700-word summary of your discussion.

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FIN 571 Week 2 Individual Business Structure Advice NEW

Write a 350 to 700 word response to the following e-mail:

Dear Consultant,

I am currently starting a business and developing my business plan. I’m in need of some advice on how to start forming my business. I am not sure exactly how it will be financed and whether or not I want to take on partners. I am interested and willing to learn the intricacies of my options to determine how to best proceed with my plan.

Please advise on what my options are, the advantages and disadvantages of each, and possible tax consequences for each scenario?
Respectfully,

John Owner

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FIN 571 Week 2 WileyPLUS Practice Quiz NEW​

Multiple Choice Question 53

Which one of the following statements about trend analysis is NOT correct?

It allows management to examine each ratio over time and determine whether the trend is good or bad for the firm.

This benchmark is based on a firm’s historical performance.

The Standard Industrial Classification (SIC) System is used to identify benchmark firms.

All of these are true statements.

Multiple Choice Question 68

Coverage ratios: Sectors, Inc., has an EBIT of $7,221,643 and interest expense of $611,800. Its depreciation for the year is $1,434,500. What is its cash coverage ratio?

None of these

14. 15 times
15. 42 times
16. 34 times

Multiple Choice Question 68

Multiples analysis: Turner Corp. has debt of $230 million and generated a net income of $121 million in the last fiscal year. In attempting to determine the total value of the firm, an investor identified a similar firm in Jacobs, Inc., an all-equity firm. This firm had 150 million shares outstanding, a share price of $14.25, and net income of $182 million. What is the total value of Turner Corp.? Round to the nearest million dollars.

$1,715 million

$1,651 million

$1,421 million

$1,191 million

Multiple Choice Question 46

Coverage ratios, like times interest earned and cash coverage ratio, allow

a firm’s creditors to assess how well the firm will meet its interest obligations.

a firm’s creditors to assess how well the firm will meet its short-term liabilities other than interest expense.

a firm’s management to assess how well they meet short-term liabilities.

a firm’s shareholders to assess how well the firm will meet its short-term liabilities.

Multiple Choice Question 54

Peer group analysis can be performed by

a) management choosing a set of firms that are similar in size or sales, or who compete in the same market.
b) using the average ratios of this peer group, which would then be used as the benchmark.
c) identifying firms in the same industry that are grouped by size, sales, and product lines, in order to establish benchmark ratios.
d) Only a and b relate to peer group analysis.

Multiple Choice Question 61

Efficiency ratio: If Viera, Inc., has an accounts receivable turnover of 3.9 times and net sales of $3,436,812, what is its level of receivables?

$13,403,567

$881,234

$1,340,357

$81,234

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FIN 571 Week 1 DQ 1 NEW

Minimizing risk is essential in the pursuit of maximizing profits. Why shouldn’t a firm focus purely on maximizing profits without regard to risk? How does the management of risk play a role in the success of an organization?

FIN 571 Week 1 DQ 2

What is ethics? If you follow all applicable rules and regulations, are you an ethical person? Why?

FIN 571 Week 1 Individual Assignment Business Structures

Watch the “Your Business Structure” and “Corporate Business Structures” videos on the Electronics Reserve Readings page.

Identify the different business structures.

Write a 350 to 700 word explanation of how each business structure might and might not be advantageous.

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FIN 571 Week 1 WileyPLUS Assignment Practice Quiz

Multiple Choice Question 42
Which of the following business organizational forms subjects the owner(s) to unlimited liability?

a) sole proprietorship
b) partnership
c) corporation
d) a and b

Multiple Choice Question 44

Which of the following business organizational forms is easiest to raise capital?

a) sole proprietorship
b) partnership
c) corporation
d) a and b

Multiple Choice Question 50

Which organizational form best enables the owners of the firm to monitor the actions of other owners of the same firm?

private corporation

sole proprietorship

partnership

public corporation

Multiple Choice Question 81

Which of the following factors or activities can be controlled by the management of the firm?

Stock market conditions.

Capital budgeting.

The level of economic activity.

The level of interest rates.

Multiple Choice Question 82

The legal system and market forces impose substantial costs on individuals and institutions that engage in unethical behavior. Which of the following would not be an example of the above?

Agency conflicts.

Jail time.

Financial losses.

Legal fines.

Multiple Choice Question 48

The most common reason that corporate firms use the futures and options markets is

to make deposits.

none of these.

to hedge risk.

to take risk.

Multiple Choice Question 55

Galan Associates prepared its financial statement for 2008 based on the information given here. The company had cash worth $1,234, inventory worth $13,480, and accounts receivables of $7,789. The company’s net fixed assets are $42,331, and other assets are $1,822. It had accounts payables of $9,558, notes payables of $2,756, common stock of $22,000, and retained earnings of $14,008. How much long-term debt does the firm have?

$76,342

$18,334

$54,342

$12,314

Multiple Choice Question 59

Tre-Bien Bakeries generated net income of $233,412 this year. At year end, the company had accounts receivables of $47,199, inventory of $63,781, and cash of $21,461. It also had accounts payables of $51,369, short-term notes payables of $11,417, and accrued taxes of $6,145. The net working capital of the firm is

None of these

$68,931

$63,510

$69,655

Multiple Choice Question 81

Which of the following best represents cash flows to investors?

Net income, minus dividends paid to preferred stockholders.

Earnings before interest and taxes times 1 minus the firm’s tax rate.

Cash flow from operating activity, plus cash flow generated from net working capital.

Cash flow from operating activity, minus cash flow invested in net working capital, minus cash flow invested in long-term assets.

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