I|nance 6806ţ I|na| Lxam Ia|| 2011Ŧ Due m|dn|ght 12]S]11

Þ|ease show a|| work to rece|ve fu|| cred|tŦ Good |uckŦ
1Ŧuavle Corp ls a book manufacLurer experlenclng a rapld growLh ln sales and proflLsŦ ln
some of Lhe years beLween 1998Ŵ2002ţ Lhe flrm purchased sLock from lLs shareholders
ln open repurchase LransacLlonsŦ 1he sLock prlce ln 2002 end for uavle ls $37Ŧ99 and Lhe
number of shares ouLsLandlng ls 3ţ213ţ000Ŧ
1he lnformaLlon on uavle's dlvldend and share repurchase ls as followsť
ear D|v]share 1ota| D|vs Share kepurchases
1998 0Ŧ2333 1ţ203ţ000 0
1999 0Ŧ2667 1ţ334ţ000 433ţ000
2000 0Ŧ3200 1ţ372ţ000 114ţ000
2001 0Ŧ3700 1ţ824ţ000 0
2002 0Ŧ4000 2ţ086ţ000 0
a)Jhy do you Lhlnk flrms repurchase sLock? uo you Lhlnk Lhe repurchase beneflLs boLh
Lhe flrm and Lhe sLockholders? (3 polnLs)
b)uslng Lhe dlvldend dlscounL modelţ calculaLe Lhe cosL of equlLy for uavle CorpŦ ln your
calculaLlonsţ use all payouLs Lo equlLy holdersŦ lrom Lhe lnformaLlon aboveţ Lhe
growLh for uavle can be calculaLed Lo be 11Ŧ27ƷŦ (3 polnLs)
c)lor 2002 and 2001 respecLlvelyţ uavle's currenL llablllLles were $6ţ362ţ000 and
$6ţ789ţ000 respecLlvelyţ and Lhe long Lerm debL was 732ţ000 and 16ţ377ţ000
respecLlvelyŦ A perusal of Lhe flrm's lncome sLaLemenL for 2002 reveals LhaL lnLeresL
expense was $480ţ000Ŧ JhaL ls uavle Corp's cosL of debL for 2002? (3 polnLs)
dŦ lf uavle Corp's Lax raLe ls 32Ŧ91Ʒţ whaL ls Lhe JACC for uavle? (6 polnLs)

eŦ uavle Corp ls conslderlng lnvesLlng ln a pro[ecL ln a buslness segmenL wlLh uncerLalnLy ln
proflLsŦ 1he rlsk premlum for Lhls segmenL ranges from 3Ʒ Ŵ 4ƷŦ lf Lhe cash flows of Lhe pro[ecL
are as followsţ should uavle underLake Lhls lnvesLmenL? (3 polnLs)
ear Cash f|ows
0Ŵ100ţ000
113ţ000
232ţ000
333ţ000
448ţ000
312ţ000
fŦ lfţ on Lhe oLher handţ lf Lhls pro[ecL ls consldered only as rlsky as Lhe flrm's debLţ should Lhls
pro[ecL be accepLed? (3 polnLs)
2Ŧ lL appears LhaL lacebook ls llkely Lo go publlc ln 2012Ŧ JhaL are some of Lhe advanLages and
dlsadvanLages of golng publlc? Jould you choose an lÞC for lacebook? JhaL are some of Lhe
approaches LhaL can be used Lo value lLs equlLy? (13 polnLs)
3Ŧ lor krlspy kreme uonuLs and ueuLchse 8rauerelţ we use flnanclal sLaLemenLs and analysls Lo
examlne Lhe flnanclal healLh of a flrm and Lhe flnanclal feaslblllLy of a pro[ecLŦ lf you are
examlnlng flnanclal sLaLemenLs Lo see lf a flrm ls ºflnanclally healLhy"ţ whaL would you look for
ln lnvesLlgaLlng such flnanclal sLrengLh? lf you were Lo assess wheLher an expanslon opporLunlLy
ls worLhwhlleţ whaL facLors would lnfluence your declslon? (13 polnLs)

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