Corporate Finance - 1266 Words

Corporate Finance Exam with Answers Posted on May 10, 2012 by Sam Corporate Finance, Chapters 8, 9 10. Exam Questions: 1. A project’s opportunity cost of capital is: A. The forgone return from investing in the project. 2. Which of the following statements is correct for a project with a positive NPV? A. The IRR must be greater than 1. 3. What is the NPV of a project that costs $100,000 and returns $50,000 annually for 3 years if the opportunity cost of capital is 14%? C. $16,085 4. The decision rule for net present value is to: C. Accept all projects with positive net present values 5. What is the maximum that should be invested in a project at time zero if the inflows are estimated at $50,000 annually for 3 years,†¦show more content†¦A. 3.5% 25. What nominal annual return is required on an investment for an investor to experience a 12% gain in purchasing power? Assume inflation to be 4%. D. 16.48% 26. What is the undiscounted cash flow in the final year of an investment, assuming $10,000 after-tax cash flows from operations, $1,0 00 from the sale of a fully depreciated machine, $2,000 required in additional working capital, and a 35% tax rate? C. $12,650 27. For a profitable firm in the 30% marginal tax bracket with $100,000 of annual depreciation expense, the depreciation tax shield would be: B. $40,000 28. Why is accelerated depreciation often favored for the corporation’s set of tax books? D. It impacts favorably with the time value of money 29. Why is it likely that firms use straight-line depreciation methods for reporting to shareholders? D. It allows asset balances to decline more slowly 30. What is the net effect on a firm’s working capital if a new project requires $30,000 in inventory, $10,000 increase in accounts receivable, $35,000 increase in machinery, and a $20,000 increase in accounts payable? C. +$20,000 31. What level of management is responsible for originating capital budgeting proposals? D. All levels of management 32. Which of the following is least likely to be responsib le for a regional manager’s conflict of interest in promoting a capital budgeting proposal? B.Show MoreRelatedCorporate Finance Notes1881 Words   |  8 PagesStudy notes By Zhipeng Yan Corporate Finance Stephen A. Ross, Randolph W. Westerfield, Jeffrey Jaffe Chapter 1 Introduction to Corporate Finance ..................................................................... 2 Chapter 2 Accounting Statements and Cash Flow.............................................................. 3 Chapter 3 Financial Markets and NPV: First Principles of Finance................................... 6 Chapter 4 Net Present Value....................................Read MoreNotes for Corporate Finance2082 Words   |  9 PagesCorporate Finance Notes * Chapter One: Introduce to Corporate Finance 1. Three Questions: A. What Long-term asset should be invested? Capital Budgeting B. How to raise cash for capital expenditures? Capital Structure C. How to manage short-term cash flow? Net Working Capital 2. Capital Structure: Marketing Value of Firm = MV of Debt + MV of Equity 3. Finance perspect and Accountant perspect: Finance: Cash Flow ! Accountant: A/R means profit ! 4. Sole proprietorshipRead MoreCorporate Finance69408 Words   |  278 PagesCorporate finance P. Frantz, R. Payne, J. Favilukis FN3092, 2790092 2011 Undergraduate study in Economics, Management, Finance and the Social Sciences This subject guide is for a Level 3 course (also known as a ‘300 course’) offered as part of the University of London International Programmes in Economics, Management, Finance and the Social Sciences. This is equivalent to Level 6 within the Framework for Higher Education Qualifications in England, Wales and Northern Ireland (FHEQ). For moreRead MoreCorporate Finance4881 Words   |  20 PagesTrends of Leverage 7 2.3 Comparison of capital structure with similar companies 9 2.4 Capital expenditures and its financing 10 2.5 Important factors influencing the use of debt financing 10 2.5.1 Tax Advantage 10 2.5.2 Corporate Tax Rate 11 2.5.3 Credit rating 11 2.5.4 Interest rate 11 2.5.5 Company’s Industry 12 2.5.6 Company’s growth rate 12 2.5.7 Some other arguments about Harvey Norman 12 2.6 Evidence of financial distress 13 Read MoreCorporate Finance1421 Words   |  6 Pagesoperating earnings of the firm. The capitalization is to be made at a rate appropriate to the risk class of the firm. Growth Plans, are involved in capital structural theories in which a certain amount will be allocated for the growth plans. A finance manager should draw a plan according for the dividend policy. For Example: The firm has $10 million as equity capital and $6 million as debt capital and the firm made a profit (after tax) of $2 million, and the fund allocated to the growth plan wasRead MoreCorporate Finance - Concept Questions12247 Words   |  49 Pagesquestions of corporate finance? a. Investment decision (capital budgeting): What long-term investment strategy should a firm adopt? b. Financing decision (capital structure): How much cash must be raised for the required investments? c. Short-term finance decision (working capital): How much short-term cash flow does company need to pay its bills. ( Describe capital structure. Capital structure is the mix of different securities used to finance a firms investmentsRead MoreFundamentals of Corporate Finance 9e82683 Words   |  331 Pageshttp://helpyoustudy.info Chapter 01 - Introduction to Corporate Finance Chapter 01 Introduction to Corporate Finance Answer Key Multiple Choice Questions 1. Which one of the following terms is defined as the management of a firm s long-term investments? A. working capital management B. financial allocation C. agency cost analysis D. capital budgeting E. capital structure Refer to section 1.1 AACSB: N/A Difficulty: Basic Learning Objective: 1-1 Section: 1.1 Topic: Capital budgeting Read MoreCorporate Business Finance 7343 Words   |  30 PagesCorporate Business Finance Seminar 5 Project Finance Lauren Leigh Essaram 207507339 Ruvimbo Mukorera 206525531 27 September 2010 Submitted in partial fulfilment of the duly performed requirement of International Business Finance, School of Economics and Finance, University of KwaZulu-Natal Abstract Non-recourse financing has grown in popularity, especially in developing countries. It has done so more specifically in the basic infrastructure, natural resources and also in the energyRead MoreAdvanced Corporate Finance4303 Words   |  18 PagesUniversity of Puget Sound School of Business and Leadership BUS 434 Advanced Corporate Finance Professor Alva Wright Butcher Tues-Thurs 11:00-12:20 McIntyre 107 Spring Semester 2012 Office: McIntyre 111 I Phone: 253-879-3349 FAX: 253-879-3156 Office Hours: T-Th: 1:00-1:50 Wed: 9:30-10:30 And by appointment Note that I am always willing to schedule additional office hours by appointment. I check email frequently, so that is also a goodRead MoreEssay Corporate Finance1613 Words   |  7 Pages Why is corporate finance important to all managers? Corporate finance is a specific area of finance dealing with the financial decisions corporations make and the tools as well as analyses used to make these decisions. The primary goal of corporate finance is to enhance corporate value, without taking excessive financial risks. A corporations managements primary responsibility is to maximize the shareholders wealth which translates to stock price maximization. Corporate finance provides

Managing Technology and Innovation Google Strategy

Question: Discuss about theManaging Technology and Innovationfor Googles Strategy. Answer: Googles Strategy for Technology Acquisition and Development Google has acquired a number of technologies and firms for the development and implementation of the same at a wider scale. The concept of introducing innovation by the process of acquisition is largely seen in a number of projects by Google. The first test that a product or a company must pass through Google for acquisition is the Toothbrush Test which says that the entity must be of such use that it is used by the user at least once or twice on a daily basis along with the concept of amalgamation associated with it. Google also makes sure that the technologies that are acquired are implemented correctly and are provided with the environment that is required for the same (Luckerson, 2015). There have been a number of acquisitions that have been done by Google in the past with majority of them in the category of successful results. Some of the popular and widely accepted company acquisitions include Android, Applied Semantics, DoubleClick, YouTube, Urchin Software and many others. Th ese companies have provided a number of technologies to Google which have provided huge profits and revenues in return. Technologies such as Google Docs spreadsheet, Google Maps and a lot many more have been purchased and acquired from other firms. With the success of the technologies and the reputation of Google in the market, there are a lot many small and medium scale companies and entities that try to come up with an innovation that may be acquired by a giant such as Google (Stringer, 2016). Strengths and Weaknesses There are a number of strengths and weaknesses that are associated with the strategy of innovation through acquisition. The strengths include the following: The overall revenues for the involved parties increase and the element of redundancy is removed The faults and mistakes that may occur during the in-house development of the technology are avoided with the acquisition of the same The existing resources may be utilized for the managerial and operational work which results in a lot cost-savings along with excellent resource utilization as well There are also a certain pitfalls that are associated with this approach and have been listed below. There may be clashes and conflicts between the parties that are involved due to difference in the methods and policies There will be a lot many changes that will be introduced with the acquisition of a technology for the employees which may become difficult to manage and may have an adverse impact on the productivity and efficiency of the employees (Bloch, 2016) External funding of the acquisition may result in debt in case of the failure of the project or lesser profits and revenues in return Innovation in Acquisition There are a lot many methods to innovate and bring out a product in a form that has not been produced in the same manner earlier. Acquisition is one such approach which can be used to innovate. There is often belief that acquisition is not a true form of innovation because the product has already been seen and used by a section of users earlier. However, the belief is not true since the organization or entity that implements and brings forward a technology by acquiring it from another entity makes it available for the users who have not used or accessed it in the same manner earlier. It is rarely a case in which exact replica of the technology that is acquired is forwarded and released for use. There are always certain modifications and amendments that are done before delivering the technology in its final form. For instance, Apple acquired a small scale firm named as Fingerworks that had its expertise in gesture based devices and operations. Apple made use of the technology offered by the company and gave shape to its iPhones and iPads enabled with gesture based operations. Apple did not release the exact technology as developed by Fingerworks, rather, made use of the concept to incorporate the same in its devices. Google has also acquired a lot many technologies and companies and has implemented the same in its products and services (Price, 2016). The approach that has been followed by Google is also the same as it modifies the technology with its own products. Also, the technologies that are made available to the users by giants such as Google, Apple, Microsoft, Cisco and many others are the ones that have not been header, seen or used earlier. It is not always the case in which the primary aim behind the acquisition is innovation. However, in the cases in which innovation is aimed, there is a lot of planning and analysis that is done in advance to ascertain that the objectives and goals are achieved successfully (Mandel, 2016). Unsuccessful External Collaboration External collaboration such as acquisition, joint venture, and outsourcing or in any other form is done with the objective of enhanced profits and revenues for all the parties that are involved. However, the collaboration does not result in success all the time and there have been cases which have seen failure with such collaboration. One such case is that is Cisco that acquired a firm named as Pure Digital in the year 2009 for $600 million. Pure Digital has developed a technology that was implemented in the flip video cameras. There were successful results that were seen in the beginning but after a short period of time, market saw some major disruptive innovations. With the entry of camera phones, the demand of users shifted from digital cameras to the cell phones that provided the feature of in-built camera. With the change in the market values and negligible revenues, Cisco decided to discontinue the flip video cameras in the market in the year 2011. The decision of collaboration therefore resulted in a big failure for Cisco and for Pure Digital as well since the estimated profits were not achieved. There are a lot many steps and processes that are essential for any type of business collaboration so that the success is ensured. Planning is one such phase which must be done with perfection. The organizations must plan the collaboration in terms of the technology and features to acquire or the company to acquire along with the risks that may be associated with the same. The planning phase shall include and extensive risk assessment and identification through qualitative and quantitative methods to understand the areas that may go wrong. Technology is something that is changing at a rapid pace and the technology that may be in the trending list at a particular instance may turn as an obsolete technology after a while. Therefore, the technological collaborations must be done with a proper change management and implementation plan in place. There must also be assistance and viewpoints collected from technical experts and consultants. Market analysis and study is also extremely signif icant to understand the user preferences, choices, likes and dislikes associated with the domain in which the collaboration is to be made. The analysis results may help in the creation of the project plan along with the schedule to achieve and complete the same (Kim, 2011). References Bloch, R. (2016). Acquiring Another Company. [online] Thehartford.com. Available at: https://www.thehartford.com/business-playbook/in-depth/business-acquisition-pros-cons [Accessed 30 Oct. 2016]. Kim, R. (2011). Gigaom | The End: Cisco Shuts Down Flip, a $590 Million Mistake. [online] Gigaom.com. Available at: https://gigaom.com/2011/04/12/stick-a-fork-in-flip-smartphones-killed-the-video-star/ [Accessed 30 Oct. 2016]. Luckerson, V. (2015). How Google Has Perfected the Silicon Valley Acquisition. [online] TIME.com. Available at: https://time.com/3815612/silicon-valley-acquisition/ [Accessed 30 Oct. 2016]. Mandel, M. (2016). Innovation by Acquisition: New Dynamics of High-Tech Competition. [online] Available at: https://progressivepolicy.org/wp-content/uploads/2011/11/11.2011-Mandel_Carew-Innovation_by_Acquisition-New_Dynamics_of_Hightech_Competition.pdf [Accessed 30 Oct. 2016]. Price, J. (2016). Why Innovation Through Acquisition Is Such A Darn Good Idea. [online] Business Insider. Available at: https://www.businessinsider.com/innovation-through-acquisition-2012-10?IR=T [Accessed 30 Oct. 2016]. Stringer, G. (2016). What Do Google's Acquisitions Reveal About the Company's Strategy? | Page 4 of 4 | AllBusiness.com. [online] AllBusiness.com. Available at: https://www.allbusiness.com/what-do-google-acquisitions-reveal-about-strategy-10585-1.html/4 [Accessed 30 Oct. 2016].