# Corporate Finance - Math Problem Example

Summary
Ans 1): After comparing the financial records of both years, we observe that the expansion didn't come up with a positive result because the company envisaged a big loss after it enjoyed profit a year before.
On the contrary, profit & loss account of Computron's company showed a net loss of \$(95136) FY 2007 as compared to a net profit a year before of \$87960, merely because of the increase in cost of good sold, which were \$2864000 in the year 2006, which increased by \$2.11 million or 73%, which suppressed the company to declare a net loss in the year 2007.

## Extract of sample "Corporate Finance"

Download file to see previous pages Liabilities on the other side also increased due to the expansion, while the equity deteriorated little bit in the year 2007 by 0.106 million because of the net loss of the company.
Ans-2): Cash flow statement shows that the account receivable head of the company was increased with a rapid pace in the year 2007, which showed that the company was involved in credit sales. Cash flow statement also showed that the company spent \$0.711 million to acquire the fixed assets during expansion of their network.
The cash flow available to be distributed among the shareholders after the company has made all the investment in working capital and fixed assets to enhance the ongoing operation is called free cash flow (FCF).
Ans-4): The assets which are used in the operation of the business like inventory, long term operation assets and plant & Equipment are known as operating current assets. By contrast, the fund which comes from the suppliers and reported as account payable, accrued wages and accrued taxes are referred to as operating current liabilities.
Since both the ...
o be distributed among the shareholders after the company has made all the investment in working capital and fixed assets to enhance the ongoing operation is called free cash flow (FCF).

USES OF FCF:
It is used to:
Pay interest to debt holders.
Pay dividends to shareholders.
Repurchase stocks from the shareholders.
Repay debt holders, which had been paid partially before.
Buy marketable securities or other non-operating assets.

Ans-4): The assets which are used in the operation of the business like inventory, long term operation assets and plant & Equipment are known as operating current assets. By contrast, the fund which comes from the suppliers and reported as account payable, accrued wages and accrued taxes are referred to as operating current liabilities.

Net Operating Working Capital 2007 \$

Operating Current Assets (Cash+Account Receivable inventories)
1926802

Operating Current Liability (Account Payables + Accruals)
608960

Net Operating Working Capital (Operating Current Assets - Operating Current Liabilities)
1317842

Net Operating Working Capital 2006 \$

Operating Current Assets (Cash+Account Receivable+ inventories)
1075400

Operating Current Liability (Account Payables + Accruals)
281600

Net Operating Working Capital (Operating Current Assets - Operating Current Liabilities)
793800

Total Net Operating Capital 2007 \$
Net Operating Working Capital (NOWC)
1317842
Operating Long Term Assets (OLTA)
939790
Total Net Operating Capital (NOWC - OLTA)
2257632

Total Net Operating Capital 2006 \$
Net Operating Working Capital
793800
Operating Long Term Assets
344800
Total Net Operating Capital
1138600

Ans-5)

Net Operating Profit After Tax (NOPAT) \$
2007
2006
Earning Before Interest and Taxes (EBIT)
(158560)
146600
Tax Rate = 40%
0.4
0.4
Cite this document
• APA
• MLA
• CHICAGO
(“Corporate Finance Math Problem Example | Topics and Well Written Essays - 2000 words”, n.d.)
(Corporate Finance Math Problem Example | Topics and Well Written Essays - 2000 Words)
https://studentshare.org/miscellaneous/1532833-corporate-finance-math-problem.
“Corporate Finance Math Problem Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.org/miscellaneous/1532833-corporate-finance-math-problem.
Click to create a comment or rate a document

## CHECK THESE SAMPLES OF Corporate Finance Math Problem

### Finance and Accounting Assignment

...of the period. Since in this case, the payment is done at the beginning of the period every time, hence it is a case of an immediate annuity as each yearly payment is allowable to compound for an additional year as compared to the normal annuity case. In this context, Future Value of Annuity = A [{(1+i) ^n -1} / i] (Finance Formulas., n.d.) Where, A= Annual payment, i= interest rate per year, n= number of periods As in this case, each annual payment is completed at the start of each period, the same is allowed to compound for one extra period and hence its future value would be the product of value of a matching normal annuity and (1+ interest rate). Future Value of Annuity Due = (1+i) * A [{(1+i)^n -1} / i ]...
3 Pages(750 words)Math Problem

### Finance and Accounting Math Problem on Cooperate Finance

.... In order to determine which project should be accepted, Net Present Value will be used. Net Present value discounts the future cash flows of the project and identifies its work in present (McLaney, 2009). After using the NPV following values have been identified of each of the project: Project M Project N Project O Project P Rate 6% 9% 15% 22% NPV \$100,171.60 \$306,230.05 \$285,765.03 (\$935,170.55) Ranking 3 1 2 The above table shows that the project N would be the most feasible one for Quark industries. Ranking has been made that is showing that the Quark industries should invest first in Project N and then in Project O and then in Project M. The company should not invest in Project P as it has a negative NPV. References McLaney, E....
4 Pages(1000 words)Math Problem

### Project Evaluation

...or not. This report discusses and analyzes two projects that Salsbury has been evaluating; opening a retail store or health and fitness complex. After using the Net Present Value method, the report reveals that a new retail store should be opened instead of health and fitness complex as it has a higher NPV. Moreover, NPV is compared with other methods like ARR and PI and justifications have been presented about using of NPV. Ultimately, other factors that the management needs to consider are discussed as well. Reference List Gitman, L. (2003). Principles of Managerial Finance. Boston: Addison-Wesley Publishing. Jensen, M. C. (2001). ‘Value Maximization, Stakeholder Theory, And The Corporate Objective...
5 Pages(1250 words)Math Problem

### Controller Suggestions for ABC Company

...from operations can be boosted. iii. Can this project be financed with current cash flow from the company? Why or why not? This project cannot get financing from the current cash flow from the company because it is not adequate. For instance, the current year’s cash flow statement revealed only \$5,000 was left as the net balance. The anticipated project needs fiance to be sourced from outside, for example by borrowing from a bank or issuing new shares among other sources (Leary and Roberts 2575). iv. If the company needs additional financing beyond what the ABC Company can provide internally (either now or sometime throughout the life of the project), how would you suggest the company...
5 Pages(1250 words)Math Problem

### Managing Finance Math Problem

...QUESTION Part (a Fixed Costs = Rate + Advertising + Maintenance + Salaries & wages + Heat & Light + Administration + depreciation of hotel andrenovation per year = 400,000 + 300,000 + 59,000+ 1,500,000 + 250,000 + 291,000 + 2,800,000 = '5,600,000 annual or '15,385 per day Number of Estimated Sales = (100 rooms * 70%) = 70 rooms Contribution Margin per unit = Fixed costs/number of estimated sales = 15,385/70 = '219.785 Variable Costs per guest per night = Breakfast + Evening Meal = 2 + 6 = '8 The price charged by hotel per guest night should be = 219.785 + 8 = '228 Part (b): Suppose the sales of the consortium at breakeven is = (228 * 70)*364 = '5,809,440... Part (a Fixed...
4 Pages(1000 words)Math Problem

### Personal Finance Concepts Math Problem

... Review your tax return for last year and answer the following questions: Let's assume that the tax rate in my is 9% and my incomeis roughly \$50,000 a year. Could any income have been deferred to this year If so, how much tax could have been saved Multiply the amount deferred by 15% or 28%, depending on your tax bracket. Yes, about \$5000 could have been deferred. The amount of tax saved thus could have been 450 dollars multiplied by 15% according to my tax bracket. (45000*.09=4050 4500-4050=450 450+(450*.15)=517.5) Could you have reduced taxes on dividend income by moving part of your investments to tax-free municipal bonds If so, how much tax could you have saved If I had moved \$5000 of my investments to tax... Review...
2 Pages(500 words)Math Problem

### Fundementals of finance

...industry, operations, as well as management policies that affect the profitability of the business. Therefore, the risk that is inherent in the company is unique to it and can be minimized by diversifying investments to some other companies. Unsystematic risk is also known as diversifiable risk as it can be minimized by scattering the investments in many different companies. iv Standard deviation (5 marks) According to Brealey, Myers and Marcus in the book "Fundamentals of Corporate Finance" standard deviation is the square root of variance, where variance is the average squared variation around the average from the expected returns (2004, 276-277). Standard deviation measures the dispersion of the...
8 Pages(2000 words)Math Problem

### Math Finance

... Hedging and Arbitrage Hedging is an investment strategy employed by investors to avoid certain potential business risk. It is basically a position taken by an investor in one market to neutralize the risk related to a contrasting position taken in another market. In incomplete markets, perfect risk cannot be transferred. As a result, investors cannot come up with a perfect hedging portfolio that does away with all the associated risks (Mishken et al. 2009). Some of the causes of incomplete markets are transactional costs, market resistances and portfolio constraints. Due to these reasons, investors are forced to take up cross-hedging in this market. This normally involves hedging a position in one asset by taking a balancing... Hedging and...
1 Pages(250 words)Math Problem

### Foundations of finance

...January 30 Finance Foundations Question1 Table Rectangle Computation The above table shows how to maximize the rectangular courtyard. The above table shows how the perimeter of the rectangular lawn’s perimeter is computed. Six alternatives were chosen. All alternatives generated to a 200 sq. meter rectangle area (Adler, 2012). Of the different alternatives, Alternative B, 100 meters length by 2 meters wide, generates the largest rectangular lawn perimeter, 198.5 meters, contributing to the largest surface area. All the other alternatives generated lesser rectangular lawn perimeters. Alternative B is the best solution. The perimeter formula is: Perimeter = L +L +W W. The formula for Area is: L x W. The above...
2 Pages(500 words)Math Problem

### FINANCIAL DATA ANALYSIS

... that constantly changes depending on economic trends. This will result into fluctuation on value of the firm making it risky to potential investors. References Brigham, E F, & Ehrhardt, m 2010, Financial management Theory and practice , Mason, Ohio, South-Western. Top of Form Gilbertson, C, B & Lehman, M,W, (2013). Century 21 accounting. Mason,Ohio: South-Western. Graham, J,R, Smart, S, B, & Megginson, W, L, (2012). Introduction to corporate finance. Australia: South-Western/Cengage Learning.Bottom of Form Warren, C, S, Reeve, J,M , & Duchac, J (2012). Financial accounting. Mason, OH: South-Western Cengage Learning.... Finance and accounting al affiliation Question SUMMARY OUTPUT Regression Statistics Multiple R 0.988679R...
3 Pages(750 words)Math Problem