Compuvac Company Has Just Completed Its First Pass Forecast Using

question 23

Multiple Choice

Compuvac Company has just completed its first pass forecast using the projected balance sheet method.The firm has determined that it needs $4 million in new debt which can be sold at par with a 10% annual coupon.Additionally,the firm will sell 500,000 shares of new common equity at $18.10 per share.Next year's expected dividend is $0.48 per share.The firm expects that taxes will be $160,000 less under the second pass than they were under the first pass based on a 40% tax rate.Given this information,what is the incremental change in AFN for Compuvac going from the first pass to the second pass?

• A) $240,000
• B) $0
• C) $480,000
• D) $160,000
• E) $640,000

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Definitions:

Balanced Scorecard

A management and planning approach designed to align a company's operations with its vision and strategy, enhance communication both internally and externally, and track the organization's performance in relation to strategic objectives.

Financial Measures

Metrics and ratios used to evaluate the financial health and performance of a business, such as net income, return on equity, or debt-to-equity ratio.

Future Financial Performance

An estimate or forecast of a company's financial outcomes in future periods based on current data and trends.

Direct Costs

Direct costs refer to expenses that can be directly attributed to the production of specific goods or services, such as raw materials and labor.