External financial needed = Total assets - Total liabilities and equity

Internal growth rate = (ROA x b) / [1 - (ROA x b)]

ROA (return on assets) = Net income / Total assets
ROE (return on equity) = Net income/Total equity
Sustainable growth rate = (ROExb)/[(1-(ROExb)]

Ex 1:
Sales 43700 Assets 31395 Debt 7705
Costs 37490 Equity 23690
Net income 6210 Total 31395 Total liabilities and equt 31395

In order to balance sheet to balance, equity must be:

Total liabilities - Debt 23690
Equity increased by: 3090

Net income is 6210 but equity only increased by 3090, so dividend is

3120
So a dividend must have been paid is 3120
Dividends paid is the plug available

Ex 2:
Dividends 3120
Add to RE 3120

Sales 43700 Assets 31395 Debt 6700

Costs 37490 Equity 23705
Net income 6210 Total 31395 Total liabilities and equt 30405

Dividend 3105 --> Add to RE

The balance sheet is not balance. This due to external financial needed:
External financial needed is
Total assets - Total liabilities and equity 989.999999999996

Ex 3:
An increase of sales to 8,424 is an increase of:
17%

Sales 8424 Assets 25389 Debt

Costs 5534.1 Equity
Net income 2889.9 Total 25389 Total

External financial needed 799.1

Ex 4:

An increase of sales to 29,210 is an increase of:

15%

Sales 29210 Assets 70150 Debt

Costs 19895 Equity
Taxable income 9315 Total
Taxes (21%) 1956.15
Net income 7358.85 Total 70150

Dividends 2415

The external financial needed 4206.15

Ex 5:
Sales 9085 Current assets 4485 Current liabilitie
Costs 6325 Fixed assets 9890 Long-term debt
Taxable income 2760 Equity
Taxes (25%) 690 Total 14375 Total
Net income 2070

Dividends 828

The external financial needed 318

Ex 6:

Sales 18900 Current assets 11700 Debt

Costs 12800 Fixed assets 26500 Equity
Taxable income 6100 Total 38200 Total
Taxes (21%) 1281
Net income 4819
Dividends 1445.7
b 70.00%
Return of assets 12.62%
Internal growth rate 9.69%

Ex 7:
ROE 0.2141777778
Sustainale growth rate 17.64%

Ex 8:

The maximum percentage sales increase is the sustainable growth rate.

ROE 11.52%
b 60.00%
Sustainable growth rate 7%

The maximum increase 45977.537786

Ex 9:
Assuming costs vary with sales and a 20 percent increase in sales, the pro forma income statement will look like this:
Sales 1029000
Costs 40300
Taxable income 988700
Taxes (22%) 217514
Net income 771186

Dividends 272744.82759
Projected addition to r 498441.17241

Ex 14:

ROE 0.1779375
b 0.6712328767
Sustainable growth rate 13.56%

Ex 15:
ROE 0.16588
b 0.65
Sustainable growth rate 12.09%
 9100
15489.9
24589.9

The full capacity level of sales 48666.666667

Full capacity 251724.13793

Capital intensity ratio at full capacity

26900
39043.85
65943.85

Fixed assets 46800

 Full capacity 56206.896552
Operating 0.9304907975

2415
3700
7942
14057

Full capacity 650000

Maximum growth without additional assets

ROE return on equity 0.1152

b 0.85
Sustainable rate 0.1085491309

15700
25873.3
41573.3
b 0.6
ROE 0.0717703349
We have 0.07177 = 0.06 * (1/1.23) * EM
Equity multiplier 1.4712918655

We have 6,2% = (ROE * 45%)/(1-(ROE * 45%))

ROE 0.129734254
b 45%
We have 0,129734254 = profit margin * (1/1,2)*(1+0,064)
Profit margin 0.1463168278

maintain a growth rate of 5 percent without incurring any additio

Internal growth rate 0.072386059

 Total assets 13760
b 0.8
nt will look like this: ROA 0.2507267442
Internal growth 0.2509090909

maximum rate of growth là internal growth rate

maintain assuming that no additional external equity financing is
Sales 5145
Cost
Net income 334.425

Profit marrgin 6.50%

0.7428767123
0.0638297872
 ROE=profit margin * (1/ intensity ratio) * equity multiplier

%)/(1-(ROE * 45%))
ROE = total assets turnover ratio * profit margin * (1/capital intensity ratio)*(1+debt-equity ratio)

it margin * (1/1,2)*(1+0,064)

without incurring any additional equity financing là sustainable growth

 Total assets = total equity * (1 + debt-equity ratio)

al external equity financing is availabl là sustainable growth rate

y ratio)*(1+debt-equity ratio)
Operating Cash Flow (OCF) = EBIT + depreciation – taxes
OCF = Net income + depreciation (when there is no interest expense)
Cash Flow From Assets (CFFA) = OCF – net capital spending (NCS) – changes in NWC
Depreciation tax shield = D*T
D = depreciation expense
T = marginal tax rate of the firm
Depreciation = (Initial cost – salvage) / number of years
Book value giá trị theo các quy tắc kế toán = initial cost – accumulated depreciation
Market Value – Book Value = gain (or loss)
Take gain (or loss) x (marginal tax rate)
Pay taxes on a gain; Receive a tax benefit on a loss
After-tax salvage = salvage – T*(salvage – book value at time of sale)
After-tax Salvage = Market Value – taxes paid or
After-tax Salvage = Market Value + tax benefit
Bottom-Up approach:OCF = NI + depreciation
Top-down approach: OCF = Sales – Costs – Taxes
Tax Shield Approach:OCF = (Sales – Costs)(1 – T) + Depreciation*T
Straight-line depreciation: khấu hao đều đặn
D = (Initial cost – salvage) / number of years

Exercise 1:

3,6m in anticipation is sunk cost --> Irrelavant, not included

4,1m is oppotunity cost --> Relavant, included
950000 and 18,1m is fixed asset investment needed

The initial investment in fixed assets 23150000

Exercise 2:
Sales due solely to the new product line are:
630000000
Increased sales of motor homes
261900000
Relavant
Decreased sales of motor coaches
188500000
The net sales figure is
703400000

Exercise 3:

Sales 585000
Variable costs 257400
Fixed costs 187000
Depreciation 51000
EBIT 89600
Tax 18816
Net income 70784

Exercise 4:
Sales 747300
Costs 582600
Depreciation 89300
EBIT 75400
Taxes 16588
Net income 58812

Operating cash flow = EBIT + depreciation - taxes

148112
Depreciation tax shield =Depreciation*taxes %
19646

Exercise 5:

Sales 175000
Costs 93000
Depreciation 24800
EBIT 57200
Taxes 13156
Net income 44044

Operating cash flow 68844

Operating cash flow 68844
Operating cash flow 68844
Operating cash flow 68844

Exercise 7:

Costs 680000
Asset 143000
Tax rate 21%

Annual depreciation 85000

After 5 year, the accumulated depreciation will be:
425000
Book value at the end of Year 5
255000
Aftertax salvage value
166520
There are three common break-even measures:
Accounting break-even:
sales volume at which NI = 0 cân bằng doanh thu và chi phí
Cash break-even:
sales volume at which OCF = 0 thì cash in = cash out
Financial break-even:
sales volume at which NPV = 0 thì present value out = pv in
Total variable costs = quantity * cost per unit
Total costs = fixed + variable = FC + vQ
1. Accounting Break-even
NI = (Sales – VC – FC – D)(1 – T) = 0
QP – vQ – FC – D = 0
Q(P – v) = FC + D
Where NI = 0
Q = (FC + D)/(P – v)
OCF = (S – VC – FC - D) + D
2. Cash Break-even
OCF = [(P-v)Q – FC – D] + D = (P-v)Q – FC
Where OCF = 0
Q = (FC + OCF)/(P – v) (ignoring taxes)
3. Financial Break-even
Where NPV = 0
Cash B-E < Accounting B-E < Financial B-E
Financial breakeven = (FC +OCF) / (P-V)
OCF = initial invest / ((1- ((1+r)^-t))/r)

DOL depends on the sales level you are starting from.

DOL = 1 + (FC / OCF)
Percentage change in OCF
= DOL*Percentage change in Q
The degree of operating leverage:
DOL = 1 + (FC / OCF)
The average cost = total cost/total quantity
Marginal cost per unit is total variable cost per unit
Minimum acceptable total revenue from the order = marginal cost per unit * extra units
The best-case, sales and price increase, while costs decrease. In the worst-case, sales and price decrease, and costs increase
COntribution margin per unit = Unit sales price - Unit variable cost

Exercise 1:
a. Variable cost per unit 11.13+7.29
18.42
b. Total cost for the year
Variable materials cost 2114700
Variable labor cost 1385100
Fixed costs 875000 4374800
Total cost for the year 4374800

c.
Cash breakeven
Qc 32931.878058
Accounting break-even point
Qa 49303.726007

Exercise 2:

Variable raw material costs 4811100

Variable labor expense 3532200
Fixed costs 1750000
Total production costs 10093300

Marginal cost per pair is total variable cost per pair

57.54
The average cost = total cost/total quantity
69.608965517
Minimum acceptable total revenue from the order
287700
Exercise 3:

Base-case
Unit price 1440
Unit quantity 85000
Unit variable costs 460
Fixed costs 3900000

Best-case
Unit price 1656
Unit quantity 85000
Unit variable costs 391
Fixed costs 3315000

Worst-case
Unit price 1224
Unit quantity 85000
Unit variable costs 529
Fixed costs 4485000

Exercise 7:

Exercise 8:
 Depreciation
311624
975000
128700
Accounting breakevUnit price Unit variable coFixed costs
125736 39 30 820000
165000 46.96969697 27 2320000
21430 92 74.935137657 237000

Exercise 9:

Unit price 62
Unite variable cost 28
Fixed costs 27300
Required return 12%
Initial investment 34800
Life 4 years

Accounting break-even
1058.8235294
Cash break-even
802.94117647
Financial breakeven when NPV = 0
OCF = initial invest / ((1- ((1+r)^-t))/r)
11457.358383
Financial breakeven = (FC +OCF) / (P-V)
1139.9223054
The degree of operating leverage at financial brea-even level of output
DOL 3.3827481943

Exercise 10:
Accounting breake 13700
Cash breakeven 9600
life 5 years
Fixed costs 185000
Unite variable costs 23
Required return 12%

We have cash breeakeven = FC/(P-v)

P 42.270833333
We have accounting breakeven = (FC + D)/(P-v)
Depreciation 79010.416667

OCF 109591.29254

Financial breakeven quantity

15286.899505

Exercise 11:

Quantity 45000 units

DOL 2.79

Percentage change in Q
Rise in output / Previous output level
0.0666666667

Percentage change in OCF = DOL * percentage in Q

Percentage change in OCF 0.186

Exercise 12:
FC 175000
Q 43000 units
DOL 2.79
We have DOL = 1+(FC/OCF)
OCF 97765.363128

The percentage change in quantity sold at 43,000 units is

-4.44%

Percentage change in OCF = DOL * percentage in Q

-0.124
New OCF 153300
DOL will be 2.1415525114

a.
Unit Variable cost
FC
Depreciation expense
Unit Sales price
Selling
Worst case
Unit Variable cost
FC
Depreciation expense
Unit Sales price
Unit
The sales revenue under the worst case sce

b.
Best case
Unit Variable cost
FC
Depreciation expense
Unit Sales price
Unit

COntribution margin per unit

 c.
Worst case
Unit Variable cost
FC
Depreciation expense
Unit Sales price
Unit
The amount of total costs per unit

d.
Operating cash flow = ((sales price - variable
755 0.35

e.
FC
OCF

Bài tập:

Sell
give or take
Expected fixed cost
Expected var cost per
depreciation exp
sale price
give or take 2
Tax rate
plus or minus

Sales
Base case 1,627,500
Worst case 1,515,203
Best case 1,743,053
Units price 1,627,500
Variable cost 546,000 Fixed cost Total cost
FC 589,000 590000 1,265,000
Depreciation expen 129,000 590000 1,286,840
EBIT 363,500 590000 1,243,160
Tax rate 34%
ice decrease, and costs increase.
Accounting break even pointCash break even point
13254.4378698225 9585.7988166
73600 37000
636.666666666667 461.66666667
Accounting breakeven = (Fixed cost + depreciation)/(Price - v)
 260 give or take
589000 5%
129000 plus or minus
750 4%
2100 plus or minus 2
2%
270.4
612560
129000
735
1995
evenue under the worst case scenario
1466325

249.6
565440
129000
765
2205

n margin per unit

515.4
 270.4
612560
129000
735
1995
of total costs per unit
577.44761905

ash flow = ((sales price - variable cost)*units - FC) *((1-T)+(D*T))

337975

590000
330500

2,100
5%
589,000
260
129,000
775
2%
34%
4%

Variable cost
546,000
567,840
524,160

Cash flow
362,500
228,363
499,893
Accounts payable turnover = total purchases/average accounts payable
Inventory turnover = Cost of goods sold/average inventory
Receivable turnover = Net sales/average receivable
Receivable turnover = Credit sales/average receivable
Payable turnover = Costs of goods sold/Average payable
accounts payable period = 365/accounts payable turnover
accounts receivable period = 365/accounts payable turnover
inventory period = 365/accounts payable turnover
Cash = Long-term debt + Equity - Fixed assets + Current liabilities - Current assets other than cash
NWC = long-term debt + Equity - Fixed assets
NWC = Current assets - Current liabilities
Beginning inventory + purchases − ending inventory = cost of goods sold.
Operating cycle – time between purchasing the inventory and collecting the cash from sale of the inventory = inventory period +
Inventory period – time required to purchase and sell the inventory
Accounts receivable period – time required to collect on credit sales
Operating cycle = inventory period + accounts receivable period
Cash cycle = Operating cycle – accounts payable period = inventory period + accounts receivable period – accounts payable p
Cash collections = Begining receivable + 1/2 *Sales
Ending receivables = 1/2 * Sales
The effective cost = EAR = (1 + Periodic rate)^m – 1
Average to collect its receivable = Average collection period = average accounts receivable / sales * 365

The Mountain Top Shoppe has sales of $512,000, average accounts receivable of $31,400 and average accounts payable of $
Cost of goods sold 363520
There was no ending and beginning inventory, so purchase = cost of goods sold
Accounts payable turnover = total purchases/average accounts paya 14.66
Accounts payable period = 365/accounts payable turnover 24.90 days

Exercise 2:

Equity 13315
Long-term debt 8200
Other than cash 2750 Other than cash đã bao gồm current liabilities
Fixed assets 17380
Current liabilities 2025

Cash 1385
NWC 4135
Current assets 6160

Exercise 5:

Exercise 6:
 Average inventory
13291.5
Inventory turnover = cost of goods sold / average inventory
5.7297520972 times
Inventory period
64 days
Average accounts rêcivable
5993.5
Accounts rreceiable turnover
21.253357804 times
Account receivable period
17 days

Operating cycles = inventory period + accounts receivable period

81 days

Average accounts payable period

8430
Accounts paayable turnover
9.0340450771 times
Accounts payable period
40 days

Cash cycle = operating cycle - accounts payable period

40

Exercise 7:

Number of period
11.774193548

The effective cost = EAR = (1 + Periodic rate)^m – 1

 15.96%

Exercise 8:

Exercise 9:
Sales 811000
COGS 510930
Beginning receivable 41000
Ending receivable 38000

Average receivable 39500

Receivable turnover 12.934936709 times
Receivable period 28 days
Average collection period
18 days
ale of the inventory = inventory period + accounts receivable period

eceivable period – accounts payable period

ble / sales * 365

400 and average accounts payable of $24,800. The cost of goods sold is equivalent to 71 percent of sales. How long does it take The Moun
a.
A 45-day collection period implies all receivables outstanding from the previous quarter are collected in the current quarter, and
0.5

Q1 Q2 Q3 Q4
Beginning rêcivables 365 425 440 480
Sales 850 880 960 1040
Cash collections 790 865 920 1000
Ending receivables 425 440 480 520

b.
A 60-day collection period implies all receivables outstanding from the previous quarter are collected in the current quarter, and
0.333333333333333

Q1 Q2 Q3 Q4
Beginning rêcivables 365 283.33333333 293.33333333 320
Sales 850 880 960 1040
Cash collections 648.333333333333 576.66666667 613.33333333 666.66666667
Ending receivables 283.333333333333 293.33333333 320 346.66666667

c.
A 30-day collection period implies all receivables outstanding from the previous quarter are collected in the current quarter, and
0.666666666666667

Q1 Q2 Q3 Q4
Beginning rêcivables 365 566.66666667 586.66666667 640
Sales 850 880 960 1040
Cash collections 931.666666666667 1153.3333333 1226.6666667 1333.3333333
Ending receivables 566.666666666667 586.66666667 640 693.33333333
a.
The payables period is zero since the company pays immediately. The payment in each period is 30 perce
Q1 Q2 Q3 Q4
Sales 810 880 840 930
Payment of accounts 264 252 279 279.45

b.
The payables period is zero since the company pays immediately. The payment in each period is 90-day o
The payment in each period of next period's sales is
30.00%
Q1 Q2 Q3 Q4
Sales 810 880 840 930
Payment of accounts 243 264 252 279

c.
The payables period is zero since the company pays immediately. The payment in each period is 60-day o
So Quarterly payments = 2/3(.30) times current sales + 1/3(.30) next period sales

Q1 Q2 Q3 Q4
Sales 810 880 840 930
Payment of accounts 250 260 261 279.15

Payables each period = 2/3 of last quarter’s orders + 1/3 of this quarter’s orders
Payables each period = 2/3(.75) times current sales + 1/3(.75) next period sales

Q1 Q2 Q3 Q4
Sales 1670 2065 1810 1530
Payment of accounts 1351.25 1485 1287.5 1271.25
Wages, taxes, other expenses 334 413 362 306
Long-term financing expenses 90 90 90 90
Total 3445.25 4053 3549.5 3197.25
ng does it take The Mountain Top Shoppe to pay its suppliers?
n the current quarter, and current sales are collected:

n the current quarter, and current sales are collected:

n the current quarter, and current sales are collected:

n each period is 30 percent of next period’s sales, so:
Next Q1
931.5

n each period is 90-day of next period’s sales, so:

n each period is 60-day of next period’s sales, so:

Next Q1
931.5

Next quarter
2025
Cash Flows from the Lessee’s point of view:
After-tax lease payment (outflow)
Lease payment*(1 – T)
Lost depreciation tax shield (outflow)
Depreciation * tax rate for each year
NAL là Net advantage of leasing
If NAL > 0, the firm should lease
If NAL < 0, the firm should buy
Lease – contractual agreement for use of an asset in return for a series of payments
Lessee – user of an asset; makes payments
Lessor – owner of the asset; receives payments
Direct lease – lessor is the manufacturer
Captive finance company – subsidiaries that lease products for the manufacturer

Bài tập:
Baxter Contractors is evaluating the lease versus the purchase of a $329,000 machine.
The machine could be leased for $105,000 a year for 4 years. The firm can borrow money at 9.5 percent and has a 35 percent
The firm does not expect to pay any taxes for the next 5 years. What is the net advantage to leasing?
purchase 329000 year 4 tax rate 35%
lease per year 105000 borrow 9.5%

Since firm does not expect to pay any tax next 5 years, including tax in this analysis is irrelevant, we simply have to determine t
NAL = $329,000 - $105,000(P/A, 9.5%, 4)
NAL = $329,000 - $105,000 x 3.204481 After-tax cost of debt
NAL = $329,000 – 336,470.51 OCF
NAL = $7471 rounded (7,470.510) NAL
NAL (7,470.52)

Using financial calculator, set N = 4, I/Y = 9.5, PMT = -105000 Press CPT + PV, result will be $336,470.52

Exercise 1:
Depreciation expense = cost/year Cost 4,800,000
1,200,000 lease cost/ year 1,430,000
After-tax base payment = lease payment * (1 - T) tax rate 21%
1,129,700 borrow before tax 8%
Lost depreciation shield year 4
252,000
OFC each year 1,381,700
Y0 Y1 Y2 Y3
After lease payment (1,129,700) (1,129,700) (1,129,700)
Lost depreciation tax shield (252,000) (252,000) (252,000)
Cost of machine 4,800,000
Total cash flow 4,800,000 (1,381,700) (1,381,700) (1,381,700)

After-tax cost of debt

 6.3200%
Net advertise leasing
47,138 >0
--> lease is better

Exercise 2:
The NAL of the lease from the lessor's viewpoint
(47,138)

Exercise 3:
Pro 3
To lessor and lessee be indifferent about the lease
NPV = 0 = 4,800,000 - OCF x ((1 - 1/(1+after-tax cost of debt)^4)/after-tax cost of debt)
-> OCF = $1,395,403

The break-even lease payment is $1,447,346

Cost
Time
Pre-tax
Tax rate
Leased cost

After-tax leasing payment

Depreciation expense

Lost depreciation shield

Total OCF each year

7 Cost 8,780,000
Time 5 4
Pre-tax 7%
Tax rate 21%
Leased cost 1,950,000

After-tax leasing payment

$ 1,540,500
Depreciation expense
$ 1,756,000
Lost depreciation shield
$ 368,760
find the maximum payment NAL = 0 Using X to represent the maximum payment
X= $ 1,600,493.57 4.50 1,573,415
1,600,493.57
the maximum pretax lease payment
$ 2,025,941.23

8 after tax residual value 900,000 852,838

NAL = 0 $ 1,789,898.39
Pretax lease payment
$ 2,265,694.16 -

9 security deposit 600,000

lease still 1,950,000
NAL = 238,693
ercent and has a 35 percent tax rate.

e simply have to determine the PV of lease payments and any excess of that Present value of lease payment is net advantage to leasing.

-tax cost of debt 14.62%

3.20448112
328989.7313

OFC 1,449,219.86

NAL -

Y4
(1,129,700)
(252,000)

(1,381,700)
 1200000
7 year
8%
32%
242500

-tax leasing payment After-tax cost of debt

164900 5.44%
eciation expense NAL
171428.5714 -51566.37331838
depreciation shield --> buy is better
54857.14286
OCF each year
219757.1429
 After-tax cost of debt
5.53%
NAL
$ 270,134.62
> leased is better

maximum payment
et advantage to leasing.