1. How important and useful is the cash budget.
2. Company A wants to acquire Company B and estimates that Company B is worth $75 million. Company B has preferred stock of $5 million, debt of $10 million, and outstanding shares of 10 million. Based on this information, what is the maximum amount Company A should offer per common share?
3. Chronic Pain Clinic has estimated the following cash flows associated with a new project. The project cost of capital (discount rate) is 8 percent.
Year 0: ($700,000)
Year 1: $400,000
Year 2: $400,000
Year 3: $400,000
What is the project’s net present value?
A. $186,897
B. $197,619
C. $208,225
D. $324,538
E. $330,839