The Purpose of This Practice Exercise Is to Underscore How

question 85

Essay

The purpose of this practice exercise is to underscore how small changes in terminal value assumptions result in disproportionately large changes in firm value. Using the Excel spreadsheet model in the file folder entitled Target Valuation Model found on the companion website to this book, locate the present value of the Target's enterprise and equity values on the Valuation Worksheet and write them down. Increase the terminal value growth rate assumption by one percentage point and reduce the discount rate by one percentage point. How does this impact the firm's enterprise and equity value? Explain how this might happen (Hint: Consider the definition of the constant growth valuation model.) Click the undo command to eliminate changes to the base case model or close model but do not save the results.

Comprehend the establishment, replenishment, and adjustment of petty cash funds.

Grasp the concept and importance of a voucher system in accounting.

Recognize the purpose and handling of petty cash accounts.

Appreciate the role of internal controls in ensuring the success and security of a business.

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Definitions:

Large Rotating Air Circulator

A device, often referred to as a fan, that moves air around a room or space to provide cooling.

Certified Public Accountant (CPA)

A professional accountant who has met the educational and experience requirements and passed the CPA exam; certified to provide accounting services to the public.

Fireproof Four-Drawer Vertical Filing Cabinet

A type of filing cabinet that is designed to be resistant to fire, equipped with four drawers and oriented in a vertical position for storing documents.

Vendor

An individual or company that sells goods or services to others, often in a retail or wholesale setting.