Questions and Answers of Case Studies Finance

What is whitespace? Give some examples.
What are the two essential properties that determine a valid C string?
Can an array that holds a C string have more elements than characters? Can it have fewer array elements than characters?
What is the difference between 'x' and "x"?
What is the difference between an empty string and a NULL string?
Is the "Hello" literal string modifiable? If so, when?
Describe the composition of each of the structures given in carddeck.c:A. Card B. Hand C. Deck
What is another name for the method of developing a program from a last-known good state to the next?
What are magic numbers and why should they be avoided? How do we avoid them?
We used two naming conventions for enumerated constants in carddeck.c. Why?
We have seen that variables have three characteristics: an identifier, a data type, and a value.What are three additional characteristics that they have?
What are the four storage classes?
What is the lifetime of the static and external storage classes?
What is the visibility of a static variable?
What is the visibility of an external variable?
What happens to automatic variables when execution leaves the block where they are declared?
What is the difference between malloc() and calloc()?
What is the lifetime of memory allocated on the heap?
Describe several reasons to create test code that verifies the code you create.
1. Question for the student who won the coin-tossing game: The case mentions that Burton Malkiel suggests this example. What concept is he trying to illustrate, and how does this exercise illustrate
1. What decision does Morgan face?2. How did Ben & Jerry’s become a takeover target? Hasn’t Ben & Jerry’s been successful in fulfilling its mission statement? Would you support a
1. What is the business model for Genzyme? What does Termeer want for his company going forward?2. What is the business model for Relational Investors?3. Should Termeer fight Whitworth, or can he
1. What are the definition and purpose of an income statement, as shown in case Exhibit 1? What are the definition and purpose of a balance sheet as shown in case Exhibit 2? How are the two
1. Who deserves the “Management of the Year” award in the retail building-supply industry?2. How does the Home Depot forecasting model work? Why do we use ratios to forecast financial
1. What is the current situation? Why did the company run out of cash? What are the consequences for the company?2. What does Malik’s financial forecast show? How was the forecast constructed?3.
1. Why is it important to estimate a firm’s cost of capital? What does it represent? Is the WACC set by investors or by managers?2. What was your estimate of WACC? What mistakes did Joanna Cohen
1. What are Rick Phillips’s arguments for the use of the risk-adjusted hurdle-rate system? What are Buono’s arguments against the system?2. What are the implications of Phillips’s graph for
1. Why is Boeing contemplating the launch of the 7E7 project? Is this a good time to do so?2. Should Boeing’s Board approve the 7E7?3. How would we know if the 7E7 project will create value?4.
1. What is the nature of the investment that is under consideration, and what are the sources of value (cost savings and revenue increases)?2. Itemize the cash flows for each of the six years of the
1. How does Target’s business model compare with Wal-Mart’s and Costco’s?2. What is Target’s capital-budgeting process? Is it consistent with the company’s business and financial
1. Do you endorse Eustace’s analysis of the project at Rotterdam? How would you improve on it?2. After eliminating the right-of-way cash flows at Rotterdam, how do the Merseyside and Rotterdam
1. What is going on at CPK? What decisions does Susan Collyns face? What do you recommend?2. Maybe we can all be right, is there a case for that?3. How does debt add value to CPK?4. What is the case
1. What is the value of Medfield as a company? Assume the reformulation is not pursued.2. What is the value that would be created from a reformulation?3. What factors explain the value created from
1. What went wrong with Horizon?2. Which of these problems was bad luck and which was bad management?3. Discuss what’s going right with Horizon.4. Is this an operating problem or a financing
1. What is going on at Carrefour? 2. Is the Swiss-franc issue, at 3⅝%, a “no-brainer”?3. What can a firm do to manage the exchange-rate risk of foreign-currency
1. What are the problems here, and what do you recommend?2. What are the implications of different payout levels for Gainesboro’s capital structure and unused debt capacity?3. What is the nature
Develop an investment opportunity schedule (IOS) for ProChem.
What is ProChem's cost of new common stock?
How can Cecil estimate the firm’s(Where Do We Draw the Line?) cost of retained earnings? Should it be adjusted for taxes? Please explain?
Develop operating cash flow forecasts for the relevant lives of each type of tanning equipment using 100% (Best case), 80% (Most Likely Case), and 50% (Worst Case) occupancy estimates for each
Should Jacqueline and Keith go ahead and close the 2.75%, 15 year mortgage? Explain your answer with suitable calculations.
Using the assumption in question 8, how many total years would it take for the Sommers to pay off the existing loan? Demonstrate your answer with an amortization schedule
Analyze Gillian Pool’s liquidity, asset utilization, long-term solvency, and profitability ratios. What arguments would have to be made to convince the bank that they should grant Gillian Pool
After conducting an interview with the production manager, Matt realizes that Healthy Grains, Inc. is operating its plant at 90% capacity, how much additional financing will it need to support growth
Analyze the firm’s liquidity, leverage, turnover, and profitability using ratio analysis.
If the Sommers had chosen the original 15-year, 6.25% mortgage proposal, how much tax shelter would they have lost (over the last five years) as compared to the 30-year, 7.25% mortgage?
If the house is currently worth $355,000 and most lenders are willing to lend up to 90% of home value, how much excess equity can the Sommers cash out?
Should Jacqueline and Keith cash out the excess equity that they have built up? Assume money market rates are 2.15%.
If the Sommers had increased each payment by one twelfth (since the beginning of the loan), what would their current loan balance amount to?
What are two alternative ways by which floatation costs can be included in the analysis?
How many break points will the firm’s(Where Do We Draw the Line?) marginal cost of capital schedule (MCC schedule) have? Why?
Based upon your results, where should Cecil draw the line when it comes to deciding between the 4 product acquisitions? Why?
Calculate and interpret Steadfast Manufacturing Company’s key liquidity, profitability, turnover, and leverage ratios. What do the ratios indicate?
Calculate the firm’s NOPAT for both years. $50,000 ($45,000) of the owners’ salary was considered to be a reinvestment for future growth of the firm in 2015 (2014).
What are the relative proportions of debt and equity in Steadfast Manufacturing Company’s capital structure?
Calculate the firm’s(EVA – Does It Really Work?) dollar cost of capital. The prime rate is currently at 7% per year and the bank charges prime plus 2%. The company is in the 40% tax bracket.
Calculate the firm’s EVA for both years. What does it indicate about the performance of the company?
Do your conclusions regarding the firm’s(EVA – Does It Really Work?) performance, based on EVA, concur with those from the ratio analysis? Please explain.
What are the main advantages of using EVA as a performance evaluation measure?
What seems to be wrong with the way the NPV of each project has been calculated? Indicate without any calculations, how Russ and Art should go about recalculating the projects’ NPVs.
Why is the target capital structure of concern to Art? How should it be determined?
Russ collects the necessary data and prepares Table 6. Accordingly, calculate the component costs of debt, preferred stock, and common stock. Will these costs be constant irrespective of the amount
Develop the Marginal Cost of Capital for the intended capital investments. Explain how the values are arrived at.
Develop an Investment Opportunity Schedule using the data for the 5 proposals and accordingly indicate which combination of projects would be acceptable.
Recalculate the NPVs of the 5 projects using the appropriate hurdle rate. Are the projects still acceptable? Please explain.
Let’s assume that the cash flows of Project B were 40% less risky than those of the other 4 projects –which were estimated to be of average risk. How would the evaluation process be affected and
How does insolvency differ from bankruptcy? Which one applies to Durawear and why?
During their meeting, Brian told Kirk that the firm(When in Doubt, Hedge!) had been forced to use floating-rate loans for expansion due to their low credit rating. Although long-term rates were
Under the original 15-year, 6.25% mortgage option, how much total interest would have been paid over the life of the loan? How does this compare with the total interest that would be paid on the
Had the couple opted for the original 15-year mortgage proposal (15 year, 6.25%), how much higher would their monthly payment have been?
During the first 5 years of owning their dream home, how much money has the couple paid towards the mortgage? What proportion of this has been applied towards interest?
Using a cash flow statement for the most recent year, explain how Greg would sum up the company’s cash position.
What is Jacqueline and Keith’s monthly mortgage payment prior to the refinancing?
How much additional sales can the company support without having to add fixed assets?
After preparing a detailed budget, Jason estimates that the maximum he will be able to save for retirement is $500 per month, for the first five years. After that he is confident that he will be able
What would Greg find out after performing a Du Pont Analysis on the company’s key profitability ratios?
Will Paramount Paper have to raise external capital over the next 12 months? If so how much? If not, why not?
If Jason wants to have the equivalent of a million dollars (in terms of today’s dollars) when he retires, how much should he save in equal monthly deposits from the end of the next month?
If Jason saves up the equivalent of a million dollars (in current dollars) by the time of his retirement at age 65, how much can he withdraw each month in equal dollar amounts, if he figures he will
One of the terms that a majority of the firm’s(Bond Analysis and Valuation) clients had no idea about during the survey stage was “yield to maturity.” Using the example of the bonds listed in
During the slideshow, Jill often made reference to a corporate bond’s “nominal” yield and its “effective” yield, leading to some clients being confused about the definition and
How should Jill go about explaining the riskiness of each bond? Rank the bonds in terms of their relative riskiness.
One of Jill’s best clients poses the following question, “ If I buy 10 of each of these bonds, reinvest any coupons received at the rate of 6% per year and hold them until they mature, what will
Comment on Kelly’s preference of the Corporate Value Model. Based on her approach, what would Orange Brite’s selling price per share be if they were to issue 5 million shares?
How does Kelly’s price estimate compare with Billy’s price estimate based on the price-ratio models? What are the pros and cons of Billy’s preferred approach?
How far off would Joey’s price estimate if he were to use a 3-stage approach with growth assumptions of 30% for the first 3 years, followed by 20% for the next two years, and a long-term growth
Based on all three estimates and on the valuation figures for the three competitors how much per share do you think that Orange Brite is really worth? Explain your rationale.
Prepare a Pro Forma Statement showing the annual cash flows resulting from the Lawn Robot project.
Use a scenario analysis to show how the cash flows would change if the sales forecasts were 15% worse (Pessimistic) and 15% better (Optimistic) than the stated forecast (base).
Using the base case estimates calculate the cash, accounting, and financial breakeven of the Lawn Robot project. Interpret each one.
Calculate and comment upon the accounting, cash, and financial break-even sales for the dome unit and the tanning bed unit respectively.
Calculate the net present value, payback period, and the traditional IRR for each tanning option under the various scenarios. What do the decision rules indicate?
If you decide to use the replacement chain method, how do the calculations and decisions change?
What are some externalities, side effects, and other relevant issues that could affect the decision?
How would the numbers turn out after taking into consideration the contingency that the drug may not be sold until year 2 or 3 due to delay in getting FDA approval?
Using the data given in Table 2, determine the relative variability of each division’s sales as compared to that of the consolidated firm (We Are Not All Alike!). Which one is the riskiest and why?
Explain the process by which Julie must have determined the hurdle rate for the entire company. The corporate tax rate was 40%, the yield on outstanding bonds was 11%, treasury bills were yielding 4%
Using Julie’s methodology of adjusting the firm’(We Are Not All Alike!)s hurdle rate based on the relative variability of each division’s sales in relation to that of the consolidated firm(We
Comment on this methodology of estimating the divisional hurdle rates. Do you agree with it or not? Explain your answer.
Using the firm’s(We Are Not All Alike!) overall weighted average cost of capital evaluate the three divisions’ project proposals. What are your findings?

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