Question

make sure answers are correct and show formulas used please

Q5. During the year, Lasko's repaid $12,500 in long-term debt, borrowed $8,400, paid $611 in interest and $740 in dividends, and had an operating cash flow of $16,207. The firm acquired $33,500 in new fixed assets and sold $8,400 of old assets. Net working capital declined by $1,592 during the year. What is the annual cash flow to stockholders? [4 marks] Q6. An investment project has an initial cost of $382, and cash flows $105, $130, $150, and $150 for Years 1 to 4, respectively. The cost of capital is 9 percent. What is the discounted payback period? [4 marks] Q7. The Lo Sun Corporation offers a bond with a current market price of $1,029.75, a coupon rate of 8 percent, and a yield to maturity of 7.52 percent. The face value is $1,000. Interest is paid semiannually. How many years is it until this bond matures? (4 marks) 08. The Mill Wheel is considering a project with a life of 3 years that will require $289,400 for fixed assets, S36,700 for inventory, and $27,800 for accounts receivable. The short-term debt for this project is $16,500. The fixed assets will be depreciated straight-line to a zero book value over 5 years. At the end of the project in Year 3, the fixed assets can be sold for 20 percent of their original cost. In this project, all relevant items for the net working capital will incur in Year 0 and return to zero at the end of the project in Year 3. The project is expected to generate annual sales of $275,000 and costs of $198,000. The tax rate is 21 percent and the required rate of return is 16 percent. What is the amount of the cash flow in the project's final year? [4 marks)

Answer 1

Question 5 : Answer

The formula for Cash flow to stockholders is given by :

Cash flow to stockholders = Cash flow of firm - Cash flow to creditors

The following informations are given in the question:-

Repaid long term debt = $ 12,500

Borrowed amount = $ 8,400

Interest paid = $ 611

Divident paid = $ 740

Operating cash flow = $ 16,207

Acquired fixed asset = $ 33,500

Old asset sold = $ 8,400

Declined net working capital = $ 1,592

STEP 1

First we want to calculate the cash flow of the firm

The formula is given by :-

Cash flow of the firm = Operating Cash flow - Net capital spending - Changes in net working capital

where, Net capital spending is the amount of money spend for acquiring the fixed asset.

Cash flow of the firm =  16,207 + 8,400 - 33,500 - (- 1,592) ( since the net working capital is declined we put negative sign)

    = - $ 7,301

STEP 2

We want to calculate the Cash flow to creditors

The formula is given by :-

Cash flow to creditors = Interest paid - Net new borrowings

Cash flow to creditors = 611 + 12,500 - 8,400

= $ 4,711

STEP 3

We want to calculate the Cash flow to stockholders

The formula is given by :-

Cash flow to stockholders = Cash flow of firm - Cash flow to creditors

Cash flow to stockholders = - $ 7,301 - $ 4,711

= - $ 12,012

Therefore the Annual Cash flow to stockholders is - $ 12,012