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STEI TAZKIA

Soal UAS
Mata Kuliah : Manajemen Keuangan Lanjutan
Dosen
: Endri, SE., MA
Problem 1 ( 25 points)
Early in the spring of 2003, the Jonesboro Steel Corporation (JSC) decided to purchase a
small computer. The computer is designed to handle the inventory, payroll, shipping, and
general clerical functions for small manufacturers like JSC. The firm estimates that the
computer will cost $60,000 to purchase and will last four years, at which time it can be
salvaged for $10,000. The firms marginal tax rate is 50 percent, and its cost of capital for
projects of this type is estimated to be 12 percent. Over the next four years, the
management of JSC thinks the computer will reduce operating expenses by $27,000 a
year before depreciation and taxes. JSC uses straight-line depreciation.
JSC is also considering the possibility of leasing the computer. The computer sales firm
has offered JSC a four-year lease contract with annual payments of $18,000. In addition,
if JSC leases the computer, the lessor will absorb insurance and maintenance expenses
valued at $2,000 per year. Thus JSC will save $2,000 per year if it leases the asset (on a
before-tax basis).
1. Evaluate the net present value of the computer purchase. Should the computer be
acquired via purchase?
2. If JSC uses a 40 percent target debt to total assets ratio, evaluate the net present
value advantage of leasing. JSC can borrow at a rate of 8 percent with annual
installments paid over the next four years. (Hint: Recall that the interest tax
shelter lost through leasing is based on a loan equal to the full purchase price of
the asset, or $60,000.)
3. Should JSC lease the asset?
Problem 2 ( 25 points)
A group of college professors has decided to form a small manufacturing corporation.
The company will produce a full line of contemporary furniture. Two financing plans
have been proposed by the investors. Plan A is an all-common-equity alternative. Under
this arrangement 1,200,000 common shares will be sold to net the firm &10 per share.
Plan B involves the use of financial leverage. A debt issue with a 20-year maturity period
will be privately placed. The debt issue will carry an interest rate of 9 percent and the
principal borrowed will amount to $3.5 million. Under this alternative, another $8.5
million would be raised by selling 850,000 shares of common stock. The corporate tax
rate is 50 percent.
a. Find the EBIT indifference level associated with the two financing proposals.
b. Prepare an analytical income statement that proves EPS will be the same
regardless of the plan chosen at the EBIT level found in part (a)
c. Prepare an EBIT-EPS analysis chart for this situation
d. If a detailed financial analysis projects that long-term EBIT will always be close
to $1,500,000 annualy, which plan will provide for the higher EPS?

Problem 3 (25 points)


Fernando Hotels has an all-common-equity capital structure. Some financial data for the
company are follows:
--------------------------------------------------------Shares fo common stock outstanding = 575,000
Common stock price, Po = $38 per share
Expected level of EBIT = $4,500,000
Dividend payout ratio = 100 percent
---------------------------------------------------------In answering the following questions, assume that corporate income is not taxed
a. Under the present capital structure, what is the total value of the firm?
b. What is the cost common equity capital, Kc? What is the composite cost of
capital, Ko?
c. Now suppose Fernando sells $1.5 million og long-term debt with an interest rate
of 11 percent. The proceeds are used to retire outstanding common stock.
According to the net operating income theory (the independence hypothesis),
what will be the firms cost of common equity after the capital structure change?
1. What will be the dividend per share flowing to the firms common
shareholders?
2. by what percent has the dividend per share changed owing to the capital
structure change?
3. By what percent has the cost of common equity changed owing to the
capital structure change?
4. What will be the composite cost of capital after the capital structure
change?
Problem 4 ( 25 points)
Fly-By-Night Couries is Analyzing the possible acquisition of Flas-in-the-Pan
Restaurants. Neither firm has debt. The forecasts of Fly-By-Night show that the purchase
would increase its annual after-tax cash flow by $600,000 indefinitely. The current
markets value of Flash-in-the-Pan is $20 million. The current market value of Fly-ByNight is $35 million.The appropriate discount rate for the incremental cash flows is 8
percent
a. What is the synergy from the merger?
b. What is the value of Flash-in-the-Pan to Fly-By-Night?
Fly-By-Night is trying to decide whether it should offer 25 percent of its stock or $15
million in cash to Flash-in-the-Pan
c. What is the cost to Fly-By-Night of each alternative?
d. What is the NPV to Fly-By-Night of each alternative?
e. Which alternative should be Fly-By-Night use?

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