# Finance and Accounting

## at Maastricht University

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@JMV Vda you have to add: 367,500 (amortized ABC Co. bonds) + (48,000 + 47,000 + 44,000) (trading securities) + 130,500 (LMN Co. stock) = €637,000
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I have failed in the participation part of the course but got a 7 in the written exam. In this case do I have to do the written resit on January 7th as well ( I saw it on my timetable) or I just have to finish the participation resit?
I have found the following so far: The answer key for Q14 is false. Q38 and Q52 are both not very precise and open to interpretation.
Q 24) Shouldn't the formula be: FCF / (rWACC - g) ??
There is a much easier way to calculate this. We know that the formula for a levered firm is the following: VL = VU + PV(interest tax shield) - PV (financial distress costs). We know that VU=250 million and VL = 10,85*250 = 271,25 million. For a firm with permanent debt, PV (interest tax shield) = D*Tc = 100*0,35 = 35 million. With these data, we can then calculate PV (financial distress costs) = 250+35-271,25 = 13,75 million
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Question 15:It mentions ".... If JC's managers will increase risk to maximize the expected payoff to equity holders", why still have to compare the two situations?
Dear Anonymous Ferris Wheel, The question is stated in a super weird way and it is very difficult to understand what exactly the want from you. So basically, put yourself in the position of the manager and now you have different scenarios which might occur. The manager will engage in the scenario with the highest benefit for him (the highest equity value). That`s why we first compare the different opportunities, then decide for the one with the highest payoff for equity holders and lastly calculate the asset value in this scenario. Again, I personally think that this is not clear from the exercise. Your SF-Team Martijn
hey, Martijn do we consider also the 20mil for the reduction of value bc of empire building ? bc the guy did not include that, could you please explain me this?:)
could someone explain?
Why is D) not wrong?
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Actually the correct answer is 150million. You did not include the first year, nor the growth factor over the FCFF in future years. So if I am right it should be: (6/1,07) + ((6 * 1,03) / (0,07-0,03)) = 160 million which is closest to 150
Why is this correct ? Aren't you supposed to pay interests as well ?
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I don't u derstand why because an allowance budget of 11250 should have been created for 2017 based on the sales and this 10600 taken out of the allowance? This answer would directly take the actual warranty for an allowance budget which doesn't make sense to me as you don't know the actual amount when setting up the allowance . or is 'provision' suddenly not meant as allowance anymore while it was for the previous question and is this a direct write-off all of a sudden? ... anyone?
How to approach Q7 without knowing r_e or r_d?got incorrect ansewar by taking unlevered cost of equity from pre-tax wacc and use MM prep 2 with taxes (knowing d/e ratio)?
?
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thanks for all your summaries, I owe you a drink if I pass
Can someone explain why c is correct ?
why we don't do 100mio/0.10-0.08??
because we use it to repurchase share, dont we add the 70 mio to equity??
wy do we use equity debt ratio when we un lever a firm?
ru = 12.5 (EBIT / MKT CAPI) 12.5+ 100/400 x (12.5-5)= 14.37 can someone help me?
whats the calculation
??????
I always get 4.9 but the answer is 4.7 , can someone explain ?
Hi Martijn, I understand your calculation and the 4.7 makes sense, but when checking the resit comments i found this which makes 4.9 correct... how would you calculate it then?
@succes formula?
Can someone explain me why c is right and not a, because in my opinion cash decrease and rent expense increase so it would have no effect on the total assets ?
Can someone explain why it's ALL their money? - book p.597 seems to disagree with that.
could you explain why we have to do 1/3*(125) please. And also for for equity with leverage where the 0 25 and 66 come from. thanks :)
Hey so for the 1st question, I thought since the outcome of the cqsh flow is equally likely tqht you have to take it times 1/3 . And for the second question, I just took the unlevered equity cash flow minus the debt. (ex: 150 - 125 = 25 ) I hope this helped you :)
Where did you read how to do it?
Can anyone provide me the solution of participation resit.
How was the resit for everyone else?
Does anyone know when we get the results from the participation resit?
Any complaints for the resit? ?
Discount on Bonds Payable is a contra-account of the Bonds Payable account. When the discount on a bond for a certain period is amortized, the balance of the Discount on Bonds Payable account decreases with the amount of the amortization. When the contra-account decreases and the Bonds Payable account remains the same, the total book value increases.
Could someone explain this one plz? :)
The formula used is (Interest tax shield * borrowing cost * tax on income) / borrowing cost. The only this you need to find is the interest tax shield = amount / (borrowing cost * tax rate) = 1/(0.07*0.35) = 40.8163 Finally, you apply all numbers to the formula = (40.4163 * 0.07* 0.15) / 0.07 = 6.1
where do you find this formula?
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Q49 Can someone explain how to get to the answer?
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Q23 Why do you have to discount all 3 years if you just want to know the value in year 0?
Where can you find this formula for financial distress? and why do you have to divide by shares outstanding ?
Shouldn't this be 12/48, since the total value of the shares outstanding after the repurchase isn't 60 million but 48 million?
Basically (26000 - 6000)/ 4? or is it also okay to 0,25 x 26000?
no the course coordinator said in the lecture that it is strictly forbidden
What is strictly forbidden? The first one or the second?
Can someone explain why its B and not D. Shouldnt you have more revenue to tax when the price of your inventory is declining?
Yes you are Right. This is the Explanation why B is correct
I guess 7.5k-2.1k = 5.4 but cannot say why :(
Could you explain how to get to 6650? I thought we have to use the stated bond rate and not the market rate to multiply the bond carrying amount...
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Q15: Ownership stake = 35/60 = 58,33% (just to make it clear ;) )
Yeah the formula is % Ownership = ( vL - new debt - new equity) / ( vL - new debt)