Exhibit 12 In Addition a Regression Analysis Indicates the Following Relationship Between

question 48

Multiple Choice

Exhibit 12.6
Use the Information Below for the Following Problem(S)
Consider the following information that you propose to use to obtain an estimate of year 2004 EPS for the MacLog Company.
$\begin{array}{lrr}\begin{array}{l}\\\\\text{GDP}\\\text{GDP growth}\\\text{Sales per share}\\\text{Operating profit margin}\\\text{Depreciation/Fixed Assets}\\\text{Fixed asset turnover}\\\text{Interest rate}\\\text{Total asset turnover}\\\text{Debt/Total assets}\\\text{Tax rate}\\\end{array}\\begin{array}{r}\\\text{Year 2003}\\\hline\text{11,000 Billion}\\\\ \$ 800 \\\\\\\\\\\\\\\\end{array}\\begin{array}{r}Estimated\\\text{Year 2004}\\\hline\\ 3.5 \% \\\\ 12 \% \\ 14 \% \\2\\3.5 \% \\ 0.7 \\45 \% \\36\%\end{array}\\end{array}$
In addition a regression analysis indicates the following relationship between growth in sales per share for MacLog and GDP growth is
%D Sales per share = 0.015 + 0.75(%∆GDP)
-Refer to Exhibit 12.6.Obtain an estimate of the per share depreciation charge for the year 2004.

• A) $58.31
• B) $102.35
• C) $53.68
• D) $75.93
• E) $65.78

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Definitions:

Capital Budgeting Technique

Methods used to evaluate and select long-term investments based on potential for profit and alignment with strategic goals, such as NPV or IRR.

Time Value

The principle that current money holds greater value than an identical sum in the future because of its earning potential.

Net Present Value Method

A method used in capital budgeting to evaluate the profitability of an investment or project by calculating the present value of expected future cash flows.

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.