(a) The most recent financial statements for Mandy Company are shown here: Income Statement Balance Sheet...
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(a) The most recent financial statements for Mandy Company are shown here: Income Statement Balance Sheet Sales Costs RM 20,300 Current assets RM 11,980 RM 13,900 Fixed assets RM 32,400 Debt Equity RM 16,540 RM 27,840 Taxable income RM 6,400 Total RM 44,380 Total RM 44,380 Taxes (21%) RM 1,344 Net income RM 5,056 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 45 percent dividend pay-out ratio. What is the sustainable growth rate for this company? (10 marks) (b) A project that costs RM21,000 today will generate cash flows of RM7,300 per year for seven years. Calculate the project's payback period? (5 marks) (c) Living Colour Company has a project available with the following cash flows: Year 0 Cash Flow (RM) -34,910 1 8,000 2 9,610 3 13,630 15,650 10,400 4 5 If the required return for the project is 8 percent, calculate the project's net present value (NPV). (5 marks) (d) A project has an initial cost of RM92,200, a life of 7 years, and equal annual cash inflows. The required return is 9 percent. According to the profitability index decision rule, what is the minimum annual cash flow necessary to accept the project? (a) The most recent financial statements for Mandy Company are shown here: Income Statement Balance Sheet Sales Costs RM 20,300 Current assets RM 11,980 RM 13,900 Fixed assets RM 32,400 Debt Equity RM 16,540 RM 27,840 Taxable income RM 6,400 Total RM 44,380 Total RM 44,380 Taxes (21%) RM 1,344 Net income RM 5,056 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 45 percent dividend pay-out ratio. What is the sustainable growth rate for this company? (10 marks) (b) A project that costs RM21,000 today will generate cash flows of RM7,300 per year for seven years. Calculate the project's payback period? (5 marks) (c) Living Colour Company has a project available with the following cash flows: Year 0 Cash Flow (RM) -34,910 1 8,000 2 9,610 3 13,630 15,650 10,400 4 5 If the required return for the project is 8 percent, calculate the project's net present value (NPV). (5 marks) (d) A project has an initial cost of RM92,200, a life of 7 years, and equal annual cash inflows. The required return is 9 percent. According to the profitability index decision rule, what is the minimum annual cash flow necessary to accept the project?
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a The sustainable growth rate can be calculated using the formula Sustainable Growth Rate Return on ... View the full answer
Related Book For
Essentials Of Corporate Finance
ISBN: 9780073405131
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan
Posted Date:
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