You have been asked by an investor to compute for the Economic Value Added of the companies he is considering to invest into as follows: E V A Net Investment 55,000,000 60,000,000 70,000,000 WACC 8% 9% 10% Net Income after Tax 3,510,000 2,750,000 5,230,0000 Net Operating Income After Tax 4,550,000 5,450,000 6,850,000 Which Company under consideration has the highest EVA Which companies would you recommend for investment, Why? What is the EVA of each companies under consideration?

You have been asked by an investor to compute for the Economic Value Added of the companies he is considering to invest into as follows: E V A Net Investment 55,000,000 60,000,000 70,000,000 WACC 8% 9% 10% Net Income after Tax 3,510,000 2,750,000 5,230,0000 Net Operating Income After Tax 4,550,000 5,450,000 6,850,000 Which Company under consideration has the highest EVA Which companies would you recommend for investment, Why? What is the EVA of each companies under consideration?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 3PB: The income statement comparison for Rush Delivery Company shows the income statement for the current...

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You have been asked by an investor to compute for the economic value added of the companies he is considering to invest into as follows: Net Investment WACC Net Income After Tax Samsung Group 54,805,555.00 11% 6,550,034.00 Apple Microsoft 66,703,403.00 75,230,820.00 10% 8% 7,350,308.00 6,829.019.00 Which company would you recommend first for investment? -
You are looking to purchase Company A. Your projections for the EBITDA of Company A are as follows: EBITDA $21.51 Year 1 $2.0 O $19.77 $21.78 Your cost of capital is 20%. Your investment banker shows you the EBITDA multiples for the following comparable companies: Company x 5.0x Company y 5.50x Company z 6.0x Year 2 $3.0 Given the above information what is the price that you would like to offer to Company A shareholders? Not enough information Year 3 $3.5 None of the above Year 4 $4.0 Year 5 $5.0
The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table. Source of capital Market value Individual cost Long-term debt $700,000 5.3% Preferred stock 50,000 12.0 Common stock equity 650,000 16.0 a. Calculate the firm’s WACC. b. Explain how the firm can use this cost in the investment decision-making process. Please show your work.
The income statement comparison for Rush Delivery Company shows the income statement for the current and prior year. A. Determine the operating income (loss) (dollars) for each year. B. Determine the operating income (percentage) for each year. C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the ROI. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the RI for each year. Explain how this compares to your findings in part C.
1. The president of the Martin Company is considering two alternative invest- ments, X and Y. If each investment is carried out, there are four possible outcomes. The present value of net profit and probability of each outcome follow: Investment X Investment Y Net Present Net Present Outcome Value Probability Outcome Value $12 million Probability 0.1 $20 million 0.2 A 8 million 10 million 2 0.3 B 9 million 0.3 3 0.4 6 million 0.1 3 million 0.1 D 11 million 0.5 a. What are the expected present value, standard deviation, and coefficient of variation of investment X? b. What are the expected present value, standard deviation, and coefficient of variation of investment Y? c. Which investment is riskier? d. The president of the Martin Company has the utility function
Based on the information below which projects will we choose based on weighted average profitabiltity Index if we only have OMR500,000 to invest? Project NPV Investment PI A 130,000 200,000 B 241,250 225,000 C 294,250 275,000 D 262,000 250,000 Select one: a. WAPI AD b. WAPI AB c. WAPI BD d. WAPI BC
As the general manager of a firm, you are presented with an investment proposal from one of your divisions. Its net present value, if discounted at the cost of capital for your firm (which is 15 percent), is $ 1 00,000, and its internal rate of return is 20 percent. (a) What are the economic interpretations of the net present value and internal rate of return figures? In other words, what do they mean? (b) What, if any, additional information would you like to have before approving the project?
(Ignore income taxes in this problem.) Your Corporation is considering the following three investment projects: N p $146,000 $175,000 $195,000 $207,000 $99,850 $108,250 $142,500 $189,000 Initial investment Present value of cash flows What it the profitability index for investment project P? O .91 .09 O .10 О.18
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment X Answer is complete but not entirely correct. a. Total value b. Laputa's equity 1 $ 82 12 70 21 11 $ $ Year 752 376 x 2 $ 102 22 80 24 14 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 50% by equity and 50% by debt. Its cost of equity is 13%, its debt yields 9%, and it pays corporate tax at 30%. 3 $ 117 27 90 27 17 a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest…
Shaylee Corporation has $2.00 million to invest in new projects. The company's managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Initial investment Present value of future cash flows Required: 1. Is Shaylee able to invest in all of these projects simultaneously? 2-a. Calculate the profitability index for each project. 2-b. What is Shaylee's order of preference based on the profitability index? Complete this question by entering your answers in the tabs below. Req 1 Project A $ 435,000 785,000 Req 2A and 2B Is Shaylee able to invest in all of these projects simultaneously? Is Shaylee able to invest in all of these projects simultaneously? Project C $ 740,000 1,220,000 Project D $ 965,000 1,580,000
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 40% Investment Total value million Laputa's equity $ Ask Jasper 1 DEBEH million 90 10 80 32 19 $ 2 129 3 N Year 110 20 90 36 22 $ 3 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 7%, and it pays corporate tax at 40%. 125 25 100 40 25 a. Estimate the company's total value. (Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.) $ 4 130 30 100 40 27 b. What is the value of Laputa's equity? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
As an Analyst you were tasked to compute for the Weighted Average Cost of Capital of variouscompanies given the following information. Income tax rate is 25% a. What is the cost of equity of each companies?b. What is the after tax cost of debt of each companies?c. What is the WACC of each companies? W Corp A Corp Co. Corp Ca Corp Risk Free rate 4.00% 3.00% 2.00% 3.50% Beta 1.25 % 1.50% 1.30% 1.40% Market Return 12.00% 11.00 % 10:00% 8:00% Debt to Equity Ratio 2.5 3 4 3.5 Credit Spread om BPS 200 300 250 150

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Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

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OpenStax

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OpenStax College

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

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	E	V	A
Net Investment	55,000,000	60,000,000	70,000,000
WACC	8%	9%	10%
Net Income after Tax	3,510,000	2,750,000	5,230,0000
Net Operating Income After Tax	4,550,000	5,450,000	6,850,000