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43 views

IMP Questions

Uploaded by

ed21b014
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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9 Year Cash flow

0 42000
1 -15600
9. A financing project has an initial cash 2 -22200
inflow of $42,000 and cash flows of −$15,600, 3 -18000 15%
−$22,200, and −$18,000 for Years 1 to 3,
respectively. The required rate of return is 13
percent. What is the internal rate of return? Required rate 13.00%
Should the project be accepted?
IRR 15.26%

since it is a financing project a IRR which is


than the required rate of return will be re

Maud'Dib Intergalactic has a new project available on Arrakis. The cost of the project is $34,500 and it will provide c
over each of the next three years, respectively. Any cash earned in Arrakis is "blocked" and must be reinvested in th
percent. The project has a required return of 8.2 percent. What is the project's NPV?

Year Cash flows CF PV


0 -34500 -34500 -34500
1 18600 0 0
2 23800 19195.20 19195.2
3 22100 24561.60 24561.6
4 0 22807.20 22807.2
NPV 32064

Discoun ra 14%
Year Dividend PVIF PV
1 1.4 1.00 1.40
4. Differential Growth Martin's Yachts is
expected to pay annual dividends of $1.40, $1.75, 2 1.75 1.00 1.75
and $2.00 a share over the next three years, 3 rd year onwards 2 3.15
respectively. After that, the dividend is expected 14.29
to remain constant. What is the current value per 14.28571
share at a discount rate of 14 percent?
Current value per share 17.44

ROE 11.60%
Profit Margin 6.20%
Lester’s has a return on equity of 11.6 percent, a Payout ratio 35%
profit margin of 6.2 percent, and a payout ratio of
35 percent. What is the firm's growth rate?
Lester’s has a return on equity of 11.6 percent, a
profit margin of 6.2 percent, and a payout ratio of
35 percent. What is the firm's growth rate?
Growth rate 7.54%

Current value of shares 28.4


8. Price-earnings ratio - Rudy's stock is currently
valued at $28.40 a share. The firm had earnings Last years EPS 1.86
per share of $1.86 last year and projects earnings Projected EPS for next year 2.09
of $2.09 a share for next year. What is the trailing
twelve-month price-earnings ratio? What is the Trailing 12 months PE 15.27
forward price-earnings ratio?
Forward price-earnings ratio 13.59

annual revenue 387000


9. EV/EBITDA ratio - Russell's has annual annual costs 216400
revenue of $387,000 with costs of $216,400. Depreciation 48900
Depreciation is $48,900 and the tax rate is 21 Tax 21%
percent. The firm has debt outstanding with a
market value of $182,000 along with 9,500 shares market value ofdebt outstand 182000
of stock that is selling at $67 a share. The firm has Number of shares 9500
$48,000 of cash of which $29,500 is needed to run Price per shrae 67
the business. What is the firm's EV/EBITDA ratio? Cash balance 48000
Cash needed to run the busin 29500

Enterprise value 800000


EBITDA 170600
EV TO EBITDA 4.689332
ng project a IRR which is higher
rate of return will be rejected

00 and it will provide cash flows of $18,600, $23,800, and $22,100


ust be reinvested in the country for one year at an interest of 3.2

required return 8.20%

1.4
1.75
2
₹ 2.57
14.28571 0.769468 10.99239
₹ 13.57

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