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Homework answers / question archive / 1) At the start of the most recent financial year a company had assets of $156 million and liabilities of $60 million
1) At the start of the most recent financial year a company had assets of $156 million and liabilities of $60 million. At the end of the financial year the company had assets of $231 million and liabilities of $137 million. During the year, shareholders contributed additional capital of $46 million and the company paid a dividend of $17 million. What was the company’s profit for the year.
2.At the end of the financial year a company had a share price of $31 and 90 million shares outstanding. In addition, the company had $153 million in short-term debt, $687 in long-term debt, cash of $112 million and reported $263 million in net income for the year. What is the company's enterprise value
3.
A capital budgeting project that calls for a replacement decision: Select one: a. results in total cash flows that are equal to incremental cash flows. b. has no initial period cash flows. O C. normally does not increase the volume of a firm's operations. d. None of the above
1.
Equity at the beginning of year = Asset - liabilities
= 156 - 60 = 96 Million
Equity at end of year = 231 - 137 = 94 Million
Ending equity = Beginning equity + Net Income + Owner contribution - Dividend paid
94 = 96 + Net Income + 46 - 17
Net Income = 94 - 96 -46 +17
= -31 Million
2.
Enterprise value is calculated using the below formula:
Enterprise value= Market capitalization + Total debt – Cash and cash equivalents
Market capitalization= Stock price * Total shares outstanding
= $31*90 million
= $2,790 million
Enterprise value= $2,790 million + 153 million + 687 million - 112 million
= $3,518 million.
3.
Answer : Correct Option is (a.) Results in total cashflows that are equal to incremental cashflows.
Reason :
While taking Capital Budgeting decision that calls for replacement decisions ,the relevant total Cash flows are incremental cash flows resulting from replacing the existing system by new system.
