CORPORATE VALUATION Scampini Technologies is expected to generate $25 million in free cash flow next year, and FCF is expected to grow at a constant rate of 4% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 10%. If Scampini has40 million shares of stock outstanding, what is the stock's value per share?9-5
) Briefly explain the purpose of the following:
1)Annual General Meeting
2)Annual Report and Financial Statements
3)Independent auditor's opinion
Briefly define and describe the following:
4) Capital employed
Briefly explain the main differences between the information requirements of investors and those of creditors.
English Airways plc is planning to acquire a new aircraft to meet rising demand for its flights. What are the relative advantages and disadvantages of using each of the following sources of finance to fund that investment?
(a) Using retained profits
(b) Issuing ordinary shares
(c) Increased borrowings (debt financing)
(d) Signing a finance lease(Tо
The following data has been extracted from the initial operating budgets of XYZ Ltd., anew business that is planning to start operations in April 2022. The company will manufacture electronic equipment for sale to large retailers, but also plans to sell directly to the public through its factory shop.
It is estimated that 20% of sales to retailers will be received in cash at the time of1)the sale, with the balance being received in the following month.
2)The factory shop will only accept cash.
3)40% of payments for raw materials are to be made in the month of purchase, and the balance will be paid in the following month.
Labour costs payable in full at the end of each month.
New equipment costing £360,000 is to arrive in May 2022, to be paid for in twelve equal instalments beginning in June.
April overheads include £4,000 of depreciation, which will increase by a further£2,000 per month starting in May due to the purchase of the new equipment. All other overhead costs are paid in the month after they are incurred.
The founding shareholders are planning to contribute £50,000 on 31st March 2022as initial share capital.
You have been hired as a consultant to advise XYZ Ltd. on its business planning.Produce a cash budget for the quarter ending June 2022.(15 markş)
Provide your feedback on that cash budget and advise the management of XYZLtd. on steps they could take to improve the company's cash flow.
The management of Bristol Ltd. a manufacturing company, is currently consideringwhether to accept one of two mutually exclusive investment projects, project A andproject B.
Each project requires an initial investment of £100,000, and it is estimated that they will produce the following net cash flows:
Calculate the payback period for each project, and based on that, suggest whichproject (if any) management should choose, giving your reasons.
Assuming that the company's cost of capital is 8%, calculate the Net Present Value (NPV) for both Project A and Project B. (Present Value tables are provided at the end of this examination paper).
Based on the NPV calculations in (b) above, advise Bristol Ltd.'s management on which project (if any) should be chosen, giving your reasons.
Using your own words, compare the advantages and disadvantages of both methods used above. Give your final opinion on which project Bristol Ltd. should choose (if any), and why.
Detector Ltd. is a UK company which manufactures a new generation of virus testingkits.
The company sells each kit for £6. The total variable cost of making each kit is estimated at £2. The fixed costs of operating the company for a year are estimated at£200,000. The company expects to sell 60,000 kits per year but has the capacity to make up to 100,000 kits per year.
What is the company's break-even level of sales, expressed in number of kits?
What is the margin of safety expressed in sales revenue? Briefly explain what this figure means.
How much profit or loss is made from selling 60,000 kits?
If the company wanted to earn a profit of £150,000 in a year, how many kits would it need to sell?
Management is considering the rental of a new machine for £10,000 per annum,which would reduce the variable cost of making each kit by £1. What is the impact of this decision on the break-even point in kits? Would you advise Detector Ltd. to go ahead with this option?
Explain who would normally carry out a break-even analysis such as the above,and with what objective. How would they obtain the necessary information? Who would receive and evaluate their report?
The statement of financial position and the income statement of Tussauds Ltd. for 2019and 2020 are set out below.
Calculate the following financial ratios for both 2019 and 2020 (rounded to onedecimal place):
1)Gross profit margin
3)Return on ordinary shareholders' funds
4)Return on capital employed
6)Acid test ratio
7)Inventories turnover period
8)Settlement period for trade receivables
9)Settlement period for trade payables
10) Gearing ratio
11) Earnings per share (EPS)
Using the ratios calculated in (a) above, comment on the performance and position of Tussauds Ltd. over the period from the viewpoint of a prospective equity investor.
5-55. The upturned wingtips on jet aircraft reduce drag and increase lift. Wingtips save on fuel consumption, averaging 4% of the total fuel bill. A single set of wingtips can annually save 45,000 gallons of jet fuel costing S3 per gallon. (Fuel is the biggest operating expense of an airline company.) Furthermore,100 metric tons of carbon dioxide emissions each year will be avoided, and maintenance expenses will be reduced.Wingtips cost $1 million to install. The airline company's MARR is 20%. Considering only the fuel savings, what is the simple payback period for the wingtips? What is the|discounted payback period? (5.8)
What discounts were applied?
What percent interest was valued?
What were some of the risk factors identified?
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