Incremental analysis would be appropriate for

In his estimation of the project’s cost of capital, Sandell would like to use the asset beta of Kruspa as a base in his calculations. The estimated asset beta of Kruspa prior to the China project is closest to

Jurgen Knudsen has been hired to provide industry expertise to Henrik Sandell, CFA, an analyst for a pension plan managing a global large-cap fund internally. Sandell is concerned about one of the fund’s larger holdings, auto parts manufacturer Kruspa AB. Kruspa currently operates in 80 countries, with the previous year’s global revenues at h5.6 billion. Recently, Kruspa’s CFO announced plans for expansion into China. Sandell worries that this expansion will change the company’s risk profile and wonders if he should recommend a sale of the position. Sandell provides Knudsen with the basic information. Kruspa’s global annual free cash flow to the firm is h500 million and earnings are h400 million. Sandell estimates that cash flow will level off at a 2 percent rate of growth. Sandell also estimates that Kruspa’s after-tax free cash flow to the firm on the China project for next three years is, respectively, h48 million, h52 million, and h54.4 million. Kruspa recently announced a dividend of h4.00 per share of stock. For the initial analysis, Sandell requests that Knudsen ignore possible currency fluctuations. He expects the Chinese plant to sell only to customers within China for the first three years. Knudsen is asked to evaluate Kruspa’s planned financing of the required h100 million with a h80 public offering of 10-year debt in Sweden and the remainder with an equity offering. Additional information: Equity risk premium, Sweden 4.82% Risk-free rate of interest, Sweden 4.25% Industry debt-to-equity ratio 0.3 Market value of Kruspa’s debt h900 million Market value of Kruspa’s equity h2.4 billion 34 Learning Outcomes, Summary Overview, and Problems part-i-03 13 January 2012; 10:18:46 Kruspa’s equity beta 1.3 Kruspa’s before-tax cost of debt 9.25% China credit A2 country risk premium 1.88% Corporate tax rate 37.5% Interest payments each year Leve A. 1.053. B. 1.110. C. 1.327.

Cardinal Company uses the indirect method to prepare its statement of cash flows

Using the following information, complete the worksheet for the year ended December 31, 2016. - Net Income for the year ended December 31,2016 was $49,000 - Depreciation expense for 2016 was $12,000 - During 2016, plant assets with a book value of $10,000 (cost $10,000 and accumulated depreciation $0 ) were sold for $14,000 - Plant assets were acquired for $52,000 cash - Issued common stock for $28,000 - Issued long-term notes payable for $34,000 - Repaid long-term notes payable for $40,000 - Purchased treasury stock for 3,000 - Paid dividends of $10,000 Cardinal Company Spreadsheet for Statement of Cash Flows Year Ended December 31, 2016 Balance 12/31/15 Transaction Analysis Debit Transaction Analysis Credit Balance 12/31/16 Panel A-Balance Sheet: Cash $18,000 $21,000 Accounts Receivable 35,000 31,000 Merchandise Inventory 25,000 53,000 Plant Assets 70,000 112,000 Accumulated Depreciation-Plant Assets (20,000 ) (32,000 ) Total Assets $128,000 $185,000 Accounts Payable 6,000 4,000 Accrued Liabilities 1,000 2,000 Long-term Notes Payable 50,000 44,000 Common Stock 2,000 30,000 Retained Earnings 74,000 113,000 Treasury Stock (5,000 ) (8,000 ) Total Liabilities and Stockholder's Equity $128,000 $185,000 Panel B-Statement of Cash Flows: Cash Flows from Operating Activities: Net Income Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense-Plant Assets Gain on Disposal of Plant Assets Increase/Decrease in Accounts Receivable Increase/Decrease in Merchandise Inventory Increase/Decrease in Accounts Payable Increase/Decrease in Accrued Liabilities Net Cash Provided by Operating Activities Cash Flows from Investing Activities: Cash Payment for Acquisition of Plant Assets Cash Receipt from Disposal of Plant Assets Net Cash Used for Investing Activities Cash Flows from Financing Activities: Cash Receipt from Issuance of Notes Payable Cash Payment of Notes Payable Cash Receipt from Issuance of Common Stock Cash Payment for Purchase of Treasury Stock Cash Payment of Dividends Net Cash Provided by Financing Activities Net Increase (Decrease) in Cash Total What will be an ideal response