Question 1

Differing accrual accounting policies have an impact on the estimated value of equity when using the ROPI model.

Accepted Answer

A) True 
 B)False

Question 2

A firm has expected residual operating income of $20.1 million, the weighted average cost of capital (WACC) of 7%, and net operating assets (NOA) at the beginning of the period of $240 million. NOA is projected to grow to $252 million by the end of the year. 
What is the projected return on net operating assets (RNOA) for the year?

Accepted Answer

ROPI = NOPAT - (WACC × NOA_BEG). $

Question 3

There is no difference between valuing debt securities and equity securities since the value of a debt security is the present value of the interest and principal payments that the investor expects to receive in the future and the valuation of equity securities is also based on expectations.

Accepted Answer

A) True 
 B)False

Differing accrual accounting policies have an impact on the estimated value of equity when using the ROPI model.

There is no difference between valuing debt securities and equity securities since the value of a debt security is the present value of the interest and principal payments that the investor expects to receive in the future and the valuation of equity securities is also based on expectations.

Financial Accounting for MBAS

Introducing Financial Statements

Transactions, Adjustments, and Financial Statements

Analyzing and Interpreting Financial Statements

Revenues, Receivables, and Operating Expenses

Inventory, Accounts Payable, and Long-Term Assets

Current Liabilities and Long-Term Liabilities

Stock Transactions, Dividends, and EPS

Intercorporate Investments

Leases, Pensions, and Income Taxes

Cash Flows

Forecasting Financial Statements

Filters

Exam 13: Using Financial Statements for Valuation

Differing accrual accounting policies have an impact on the estimated value of equity when using the ROPI model.

There is no difference between valuing debt securities and equity securities since the value of a debt security is the present value of the interest and principal payments that the investor expects to receive in the future and the valuation of equity securities is also based on expectations.

Financial Accounting for MBAS

Introducing Financial Statements

Transactions, Adjustments, and Financial Statements

Analyzing and Interpreting Financial Statements

Revenues, Receivables, and Operating Expenses

Inventory, Accounts Payable, and Long-Term Assets

Current Liabilities and Long-Term Liabilities

Stock Transactions, Dividends, and EPS

Intercorporate Investments

Leases, Pensions, and Income Taxes

Cash Flows

Forecasting Financial Statements

Filters