oppgave 3.

Consider firm that spend $200 to produce goods in period 1. In periode 2, it sells half of those goods for $150, but it doesn
periode 3, ir sells the ofther half of the goods for $150, and it flows for this firm in periods 1 to 4.

Period 1 2
Revenue 150
Cost of goods sold -100
Profits 0 50
Change in account receuvables -150
Change I invetories -200 100
CF -200 0

Period Event Consequence

1 spend $200 to produce goods cash acount aut $200
invetories in crease $200
2 sell half of those goods for $150 Rev $150
but it does`t collect payment
COGS $100 cost of godds sold
AR increse $150
No actual cash flow.
3 sells half of those goods for $150 Rev $150
but ir dosn`t collect payment,
Collect €$150 of AR from period 2 COGS $100
AR increase $150 then devrease $150 -> unchanges
Actual cash flow in of $150
4 Collect $150 of AR from period 2 AR decrease $150
Actual cash flow of $150

Opggave 3.4

Element Amount
Cost og goods sold 8000
Income taxes paid 2000
Admnistrative expenses 3000
Interest espenses 1000
Depreciation 1000

rate 20%

a. What was the firm`s revenues?

tax=pretaxprofit(taxable income)*tax rate

Pretax profit(taxable income)=tax/tax rate= 2000/20% 10000

Net income = Pretax profit - tax = 10000 - 2000 = 8000

b. What must have been the firm`s revenues?
Income statement Amount
Revenue 23000
- COGS 8000
- Admin 3000
- Depreciation 1000
- Interest expense 1000
= pretax profitt (taxable
income) 10000 10000 test

c. What was EBIT?

EBIT( earing before interest and texes) = total revenues - cost - depreciation
 those goods for $150, but it doesn`t collect pyment one periode later. In
ds 1 to 4.

3 4
150
-100
50 0
150
100 -
150 150

st of godds sold profitt = 50

n devrease $150 -> unchanges

Oppgave 1

Current assets 41,524 Current kuabilities 29,755

Long-term Assets 46,832 long-term debt 27,752
other liabilities 14,317
equity 17,532
total 89,356 total 89,356

657,000,000 shares
83 price

a) compan`s market value added.

MV 54,531,000,000
MVA 54,530,982,468

b)Market-to-bookratio
MB ratio 3,110,369.61

oppgave 3
a. Calculate watervan`s economic value addes (EVA)
EVA=Net income + inteterst expense afther tax - capital cost (i.e. cost for
capital*capital). Capital = Interest bearing debt + equity
EVA= 77+12(1-0.21)-0.085(121+256) 54.44

Interetsepense afther tax = Interest espence * (1-0.21)

Capital cost = cost of capital (8.5%)* (Long-term debet - Sharholders` equity)

b. What is the company`s return om cpital?

ROC=NOPAT/Capital NOPAT= Net operating profit afther taxes

ROC = (77+(12(1-0.21)))/(121+256) 0.2294

77
9.48
377

c. What is its return on equility (ROE)?

ROE=Net ncome/average equity

ROE=77/256 0.3008
oppgave 1

PV 1,000.00
Interest ( r) 4% 1.04

a) First year 40.00 1,040.00

b) Secons year 41.60 1,081.60
c) 10th year 56.93 1,423.31 1,480.24

oppgave 2

Interest (r ) 0.04 1.04

Depost 1,000.00
Money after 25 years
it will take less than 25 years to your money will dobbel. 2,665.84

oppgave 3

Rate 0.05 1.05

Year 1,900 2,021 121.00
PV 1,000
FV 1,000,000
a) Investet 1k in 1900
FV2019 366,357.58

b) How much was investet in 1900

PV1900 2,729.57

oppgave 4

a)
Rate 0.08 1.08
years 10
PV 100.00
FV 215.89

b)
Rate 0.08 1.08
Years 20.00 Formler:
𝑭𝑽=𝑷𝑽(𝟏+𝒓)^𝒕
PV 100.00 𝑷𝑽=𝑭𝑽∗𝟏/(𝟏+𝒓)^𝒕
FV 466.10 𝒓=(𝑭𝑽/𝑷𝑽)^(𝟏/𝑻)−𝟏

c)
Rate 0.04 1.04
Years 10.00
PV 100.00
FV 148.02
d)
Rate 0.04 1.04
Years 20.00
PV 100.00
FV 219.11

oppgave 6
test:
r 0.06 1.06 t
PV 100.00 200=100(1.06)^t PV
FV 200.00 2=1.06^t r
t 11.90 t=ln2/ln1.06 FV

oppgave 8
a)
r 0.04 1.04
PV 400.00 1000=400(1.04)^t
FV 1,000.00 2.5=1.04^t
t 23.36 t=ln2.5/ln1.04 1,000.00

b)
r 0.08 1.08
PV 400.00 1000=400(1.08)^t
FV 1,000.00 2.5=1.08^t
t 11.91 t=ln2.5/ln1.08 1,000.00

c)
r 0.16 1.16
PV 400.00 1000=400(1.16)^t
FV 1,000.00 2.5=1.16^t
t 6.17 t=ln2.5/ln1.16 1,000.00

oppgave 9

PV 1,000.00
Sell for 2,000.00
t 10.00

a)
Rate 6% 1.06
Afther 10 yr with 6% 1,790.85
209.15 - Yes, this vill be goos deal.
Becouse it will be 209.15 more.
b)
Rate 10% 1.10
Afther 10 yr with 10% 2,593.74 No, than you will miss 593.74.
 No, than you will miss 593.74.

oppgve 12

Cash flow (FV) 100.00

a b c d
r 1.08 1.08 1.04 1.04
t 10 20 10 20
PV 46.32 21.45 67.56 45.64

Oppgave 14

Year Cash flow rate 6% PV

1 200.00 1.06 212.00
2 400.00 1.06 449.44
3 300.00 1.06 357.30

oppgave 15

PV years FV rate rate in %

400.00 11 684.00 0.05 5%
183.00 4 249.00 0.08 8%
300.00 7 300.00 0 0%

oppgave 16

PV FV t rate rate %
100.00 115.76 3 0.05 5%
200.00 262.16 4 0.07 7%
100.00 110.41 5 0.02 2%

oppave 18
yr 1 yr 2 yr 3 cost
Cash inflow 120,000.00 180,000.00 300,000.00
dicount rate 12% 12% 12%
Value of the factory

opgave 22
Pay 100 yeat for 10 years, and then receive 100 for ever atfter that. The interest rate is 6%. Is this a good deal?

2 Parts of calculation
1. Anualty for 10 years => give us the present value of the annuity
2. Prepetuity => ive us the valueat time 10 of the prepetuity. We need to discount this value to today to be able
to pompare to value 1.
NVP= Net present value
C 100
r 6%
n 10

PV1 -736 PV funcion

PV2 931 -736
NPV 195 -1,318.08

oppgave 24

10,000
oppgave 5.75
You will receive 100 from a savings bond in 3 years. The nominal interest rate is 8%
A. What is the PV from the bond?
B. If the inflation rate is 3%, what is the real value of the payment from the bond?
C. What is the real interest rate?
D. Show that the real payoff from the bond discounted at the real interest rate (B.) is equal to the PV of the bond (A.)

FV 100
rate (n) 8%
infuation 3%

a. PV 79.38
b. Real value 91.51
c. Real interest rate 4.85%
d. PV 79.38
 11.90
100.00
1.06
200.00
 400,000.00

6%. Is this a good deal?

alue to today to be able

ual to the PV of the bond (A.)
 7.19

a. P0=Div1/(r-g) 12 Y1 Y2
b. P1=P0*(1+r)-D1 10.8 r 15% 15%
c. Rate of retrn=(P1+D1-P0)/P0 15% Div1 3 2.7
g -10% -10%
Constand Divident Model P=Div/r
Constant-Growth model:
growth rate of Divided g
P=Div/(r-g) 12 10.8

7.32

P=Div/(r-g)
Year 0 1 2 3 4 5
Dividend growth 5% 5% 5%
Dividend 2 4 4.2 4.41 4.6305
IRR 12% 12% 12% 12% 12%
a Discount factor 1 0.892857 0.7971939 0.7117802
PV 1.785714 3.1887755 44.842156
Perpetuity 63
NPV 49.8166
b Discount factor 2 1 0.8928571 0.7971939 0.7117802 0.6355181
PV 3.5714286 50.223214
NPV 53.79464
Dividend yield 4.01%
Capital appreciation 7.99%
Total 12.00%
 6
5%
4.862025
12%

0.5674269

D1/P0
(P1-P0)/P0
(P1+D1-P0)/P0 = (P1+D1)/P0-1

P1=P0*(1+r)-D1
>> r= = (P1+D1)/P0-1
8.2 (selv test) Suppose the cash flow in year 3 is only $420,000. Redraw Figure
8.3. How

Year 0 1 2 3
CF1 -375,000 25,000 25,000 475,000
CF2 -375,000 25,000 25,000 420,000

IRR1 12.56%
IRR2 8.30% 20000000%

Discount rate NPV1 NPV2 15000000%

0% 150,000.00 95,000.00
1% 135,290.20 81,907.74
10000000%
2% 121,142.13 69,314.40
3% 107,529.03 57,196.24
4% 94,425.64 45,530.84 5000000%

5% 81,808.12 34,297.05
6% 69,653.98 23,474.92 0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1
7% 57,941.95 13,045.56
8% 46,651.93 2,991.16 -5000000%
9% 35,764.93 -6,705.16
10% 25,262.96 -16,059.35
-10000000%
11% 15,128.99 -25,086.54
12% 5,346.89 -33,801.02
-15000000%
13% -4,098.61 -42,216.37
14% -13,222.02 -50,345.45
15% -22,037.07 -58,200.46 -20000000%
16% -30,556.81 -65,792.98
Discount rate NP
17% -38,793.63 -73,134.01
18% -46,759.28 -80,233.98
19% -54,464.96 -87,102.83
20% -61,921.30 -93,750.00
21% -69,138.39 -100,184.46
22% -76,125.87 -106,414.74
23% -82,892.88 -112,449.00
24% -89,448.16 -118,294.95
25% -95,800.00 -123,960.00
26% -101,956.33 -129,451.16
27% -107,924.70 -134,775.15
28% -113,712.31 -139,938.35
29% -119,326.03 -144,946.88
30% -124,772.42 -149,806.55
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

Discount rate NPV1 NPV2

17.09.2021
20. Constant-Growth Model. Metatrend’s stock will generate earnings of $6 per share this year.
The discount rate for the stock is 15%, and the rate of return on reinvested earnings also is 15%.
(LO7-2)
a. Find both the growth rate of dividends and the price of the stock if the company reinvests the
following fraction of its earnings in the firm: (i) 0%; (ii) 40%; (iii) 60%.
b. Redo part (a) now assuming that the rate of return on reinvested earnings is 20%. What is the
present value of growth opportunities for each reinvestment rate?
c. Considering your answers to parts (a) and (b), can you briefly state the difference between
companies experiencing growth and companies with growth opportunities?

Plowback 0% 40% 60% Plowback 0% 40%

ROE 15% 15% 15% ROE 20% 20%
Growth rate 0% 6% 9% Growth rate 0% 8%
EPS 6 6 6 EPS 6 6
Div 6 3.6 2.4 Div 6 3.6
re 15% 15% 15% re 15% 15%
Price 40.00 40.00 40.00 Price 40.00 51.43

Plowback 0% 40%
ROE 12% 12%
Growth rate 0% 5%
EPS 6 6
Div 6 3.6
re 15% 15%
Price 40.00 35.29
 60%
20%
12%
6
2.4
15%
80.00

60%
12%
7%
6
2.4
15%
30.77
29.10.2021
1.The growing perpetuity model assumes g<r, and this is unrealistic.

(a)True
(b)False

Which formula? The Growing perpetuity modle assumes g<r

it is unrealistic
the NPV of n period's dividend -> infinity

2.Unlike using IRR, it is always possible to compare projects by NPV without problems.

(a)True
(b)False
In terms of timespan
In terms of element to be considered in calculating of NPV
Incrementl CF vs Stand a lone CF

3.As the opportunity cost of capital increases, the net present value of a
project increases.
(a)True
(b)False
Higher opportunity cost of capital
Lower NPV

4. Projects L and S each have an initial cost of $10,000, followed by a series of positive
cash inflows. Project L has total, undiscounted cash inflows of $16,000, while S has
total undiscounted inflows of $15,000. Further, at a discount rate of 10 percent, the
two projects have identical NPVs.

(a)True
(b)False
IT depends on hpw subsequet cash flow is distributed.

5. Firm Ahas recently restructured its outstanding bond issue. The bond issue has 10 years remaining to maturity
and a coupon rate of 10%, with coupons being paid annually. The new arrangement allows the firm to make no
coupon payments for the next 5 years.After that period, normal annual coupon payments will resume. At maturity,
the face value of $1,000 per bond plus all the deferred (that is, unpaid) coupons will be paid. If the required rate of
return on these bonds is 15%, what is the current market price ofFirm Abonds?
 10 yrs
10% coupond
annually
5 yrs on coupond payment but paid at the en
1000 Face value
15% requlred rate of return

Year 0 1 2 3 4 5
CF old 100 100 100 100 100
335.216
CF new 0 0 0 0 0

Discout factor 1 0.86957 0.75614 0.65752 0.57175 0.49718

PV old 86.956522 75.61436673 65.751623243 57.175325 49.7176735
PV new 0 0 0 0 0
NPV old 749.0615687
NPV new 166.6613528
NPV 1
NPV 2 166.661353
Total 537.438412
Y0
Checking
rae
discount factor 1
PV
NPV 335.216
P=Div1/(r-g)

6. Eureka Industries is experiencing a period of rapid growth in its earnings and profitability. Earnings and dividends
are expected to grow at a rate of 20% p.a. during the next two years, at 15% p.a. in the third year, and at a
constant rate of 8% p.a. thereafter. Eureka’s most recent dividend per share was $1.00, and the required rate of
return on the stock is 12% p.a. What isthe price at which Eureka’s stock should be selling for today based on the
above information.

Year 0 1 2 3 4 5
Div growth 20% 20% 15% 8% 8%
Div 1 1.200 1.440 1.656 1.788 1.932
TVn=D(n+1)/r 44.712
Discount factor 1 0.893 0.797 0.712
PV 1.071 1.148 33.004
NPV 35.223
Pt=Divt+1/(r-g)

7. Six years ago your friend borrowed $150,000 on an amortizing loan for a ten-year period at an interest rate of
12% p.a. with interest compounded on an annual basis. She has been making regular annual payments on the loan
and now wishes to repay in full the amount outstanding on this loan. What is the amount she will need to repay?
7. Six years ago your friend borrowed $150,000 on an amortizing loan for a ten-year period at an interest rate of
12% p.a. with interest compounded on an annual basis. She has been making regular annual payments on the loan
and now wishes to repay in full the amount outstanding on this loan. What is the amount she will need to repay?

Year -5 -4 -3 -2 -1 0
Annual payment 26,547.62 26,547.62 26,547.62 26,547.62 26,547.62 26,547.62

Discount rate 0.12

FV 0.00
Discount factor
PV 150,000
NPV 80,634.41

NPV
NPV

8.With the quoted APR of 8 per cent compounded quarterly,calculate the size of the
investmentat the end of 4 years from today, if you invest 1000 quarterly.

N I/YR PV PMT FV
No. of period Rate (%) Present Payment Future value
value each period
16 2 0 -1,000
=4*4 =8/4 18,639

9. A company issued a series of bonds today that pay annual coupons. The bonds have a face value of $1,000, a
10% coupon rate per annum and will mature in 15years. The yield to maturity (YTM) of a similar bond is 8%.What
is the value of the bond today?

FV 1,000
Coupon rate 10% Coupon 100
nper 15
YTM/rate 8%

N I/YR PV PMT FV
No. of period Rate (%) Present Payment Future value
value each period
15 8% 100 1,000
1171.19
1171.1896

10. You are given a task to calculate the appropriate discount rate to use when evaluating the purchase of new equipment
assumption that the company’s present structure reflects the appropriate mix of capital sources, you have determined the
company’s capital structure as follows:
10. You are given a task to calculate the appropriate discount rate to use when evaluating the purchase of new equipment
assumption that the company’s present structure reflects the appropriate mix of capital sources, you have determined the
company’s capital structure as follows:

Source of capital Market values

Bonds 3,000,000
Preference shares 1000000
Ordinary shares 5000000

To finance the purchase, KM will sell 10-year bonds paying semi-annual coupon at a rate of 8% per year at the market pric
shares paying a $2.00 dividend can be sold for $35. Ordinary shares for KM are currently selling for $45 each and the firm p
year. Dividends are expected to continue growing at a rate of 4% per year into the indefinite future. If the firm’s tax rate is
should you use to evaluate the equipment purchase?

a.Determine the weights of capital components.

b.Calculate the pre-tax cost of debt. Express your answer in effective annual yield.

c.Calculate the cost of preference share capital.

d.Calculate the cost of ordinary share capital.

e.Calculate the WACC.

11.The table below reports the probability and return outcomes across three expected economic states. The
returns of Stock A (RA) and the return of Stock B (RB) are reported for each state of the economy:

Economice state Probability RA RB

Contraction 0.1 -0.03 -0.07
Normal 0.6 0.05 0.12
Expansion 0.3 0.1 0.2

(a)Calculate the expected return for each stock,Stock A and Stock B.

(b)Calculate the variance and SD for Stock A and Stock B.

(c)Calculate the expected return and standard deviation of a portfolio that comprises
40% invested in Stock A and 60% invested in Stock B.
 >>TRUE
>> FALSE

ars remaining to maturity

ws the firm to make no
ts will resume. At maturity,
paid. If the required rate of
 6 7 8 9 10
100 100 100 100 1100

100 100 100 100 100

1500
0.43233 0.37594 0.32690 0.28426 0.24718
43.2327595912 37.593704 32.690177384617 28.4262412 271.903176734
43.2327595912 37.593704 32.690177384617 28.4262412 24.7184706122

370.777059183

Y1 Y2 Y3 Y4 Y5
100 100 100 100 100
15% 15% 15% 15% 15%
0.86956521739 0.75614367 0.657516232432 0.57175325 0.4971767353
86.9565217391 75.6143667 65.751623243199 57.1753246 49.7176735298

P=Div1/(r-g)

ility. Earnings and dividends

third year, and at a
and the required rate of
g for today based on the

6 7 8 9 10
8% 8% 8% 8% 8%
2.086 2.253 2.433 2.628 2.838

iod at an interest rate of

nual payments on the loan
nt she will need to repay?
 iod at an interest rate of
nual payments on the loan
nt she will need to repay?

1 2 3 4 Kalkulator
26,547.62 26,547.62 26,547.62 26,547.62 N I/YR
No. of period Rate (%)

10 12

N I/YR
No. of period Rate (%)

4 12

a face value of $1,000, a

a similar bond is 8%.What

ng the purchase of new equipment for the plant. Under the

sources, you have determined the market value of the Bond 3,000,000
Preferance shares 1,000,000
ng the purchase of new equipment for the plant. Under the
sources, you have determined the market value of the

Ordinary Shars 5,000,000

9,000,000

N I/YR PV
No. of period Rate (%) Present
value
20 3.644 -1,050
e of 8% per year at the market price of $1,050. Preference 10 7.279 -1050
y selling for $45 each and the firm paid $2.50 dividend last
finite future. If the firm’s tax rate is 30%, what discount rate

> Bond YM
7.42%
7.29%

Rp 5.71%
Re 9.78%

WACC= 7.80%

economic states. The 40% 60%

economy: Economic Prob Ra Rb Profolio
Contraction 0.1 -0.03 -0.07 -0.054
Normal 0.6 0.05 0.12 0.092
Expansion 0.3 0.1 0.2 0.16

Expected return 0.057 0.125 0.0978

Variace
SD
PV PMT FV
Present Payment Future
value each period value
150000 0
-26547.62

PV PMT FV
Present Payment Future
value each period value
-26547.62 0
80634.41
PMT FV
Payment Future value
each
period
40 1,000
80 1000

EAR
ARP

P= 45
Dv= 2.5 Div -1 Div 0 Div 1
g= 4% 2.6

P=D1/(re-g)
>> re=g+D1/P0 9.78%

p*[r-E(r)]^2
Ra Rb Protfolio
0.000757 0.00380 0.0023043
0.000029 0.00001 0.0050784
0.000555 0.00169 0.00768

0.0978 0.0150627
0.1227303
 0 1 2 3 4 5
CF in Leos -7.6 2 2.5 3 3.5 4
ex rate 2 2.09524 2.19501 2.29954 2.40904 2.52375
equivalent in USD -3.8 0.95455 1.13895 1.30461 1.45286 1.58494

0.47727 0.45558 0.43487 0.41510 0.39624

rfUS 5%
rfNa 10% 1$ >>
Sr 2Leos/1$ USD/Leos USD is stronger than Leos 2 Leos >>
Wacc 15%
 1.05
2.2
2.0952381
Selv tes Chapter 1
Chapter 2
Chapter 3

Direct
Indirect
Less

CF

A.
B.
C.
D.

The average tax rate equals total tax

the marginal tax it's calculated by d

capital bugdeting or capital (CAPEX) diesision
Decision to invest in tangble or intangebl assets.

financing decision
Decision on the sources and amounts of sinancing.

a. Capital budgeting
b. Financing
c. Capital budgeting
d. Capital budgeting
e. Bouth

Real assets
Asset used to produce goods and services.
Finansial assets
Financial claims to the income generated by the firm's real assets.

a.
b. Finacial assets
c. Real assets
d. Finacial assets
e. Real assets
f. Finacial assets

Freasurer
Responsible for financing, cash mamagement, and elationship with
bank and other financial insititutions.
Controller
Responsible for budgting, accounting, and taxes.
 112000 Next year
12% epected return
15% Opportunity cost of capital

Agancy problem
Managers are agents for stockholders and are tempted to act in their
own interest rather than maximazing value.
Agency cost
Value lost from agency problem or from the ost of
miliating agency problems.

a. Corporations sell securities in yhe primary market. The securities

are later traded in the secondary market.
b. The capital market is for long.tem financing, the money market.
For short-term financing.
c. The market for stock versus the market for bonds and other debt
securities.
Efficient diverification and professional management. Pension fund offer on additional
advantager, becouse investment return are not taxed until withdrawn for the fund.

Mutual funds pool investor saving and invest in rotfolios of traded securities. Financial
institutions such as banks or insurance companies raise money in spesial ways, for
eksxample, accepting deposits or selling insurance policies. They not only in securities byt
also lend directly to bussines. They prowide other financial services.

Loan 500 Debts inrease

Deposit 100 Cash in bank increase
Buy new machine 400 Assets increase
Shareholders' equity -> remains unchanged

Period 1 2 3 4 5
Inventories increace 200

Revenue 150 150

Cost if goods sold -100 -100
Profits 0 50 50

-200 150 150

 Profit 0 50 50 0 0
Change in WC(cash, inv 200 50 -100 -150 0
Inventories 200 -100 -100
Account receivables 150 0 -150
-200 0 150 150 0
0 0 0 0 0

NOT INFOE INFORMAION.

DECREASE.
INCREASE.
DEPENS ON IVESTMENT.

The average tax rate equals total taxes divided by total taxable income.

the marginal tax it's calculated by dividing the total amount of tax payable by pre-tax income.