AFN equation

Broussard Skateboard's sales are expected to increase by 20% from $8.6 million in 2018 to $10.32 million in 2019. Its assets totaled $4 million at the end of 2018.
Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2018, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 60%. What would be the additional funds needed? Do not round intermediate calculations. Round your answer to the nearest dollar.
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APPLY THE CONCEPTS: Construct the income statement

When constructing the income statement, it is important to understand that the income statement reports the revenues and expenses for a period of time, based on the matching concept. This concept is applied by matching the expenses with the revenue generated during a period by those expenses. The excess of the revenue over the expenses is called net income or net profit.

Pleasant Co. has compiled the following account balances from its general ledger on July 31, 20Y8 (the last day of its fiscal year).

Use the information given to create Pleasant Co.’s annual financial statements. Construct Pleasant’s income statement for 20Y8.

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From the balances above, select the appropriate revenue and expense items, and compute the appropriate subtotals.

APPLY THE CONCEPTS: Construct the Statement of Stockholders' Equity.

The statement of stockholders' equity shows the change in statement of stockholders' equity as a result of net income and any dividends. It also serves as an important link between the income statement and the balance sheet in that it translates the effects of net income into an updated number for statement of stockholders' equity. Construct Pleasant’s statement of stockholders' equity for 20Y8.

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Hover over the statement of stockholders' equity definition in the earlier step to review the construction of this statement. Remember that Net Income or Net Loss from the statement in the prior step is the linking value between these two statements.

APPLY THE CONCEPTS: Construct the balance sheet

The balance sheet, also known as the statement of financial position, shows the company’s assets and the claims against those assets in the form of liabilities and stockholders' equity. Unlike financial statements that display financial performance over a given interval of time, the balance sheet is a snapshot of a financial position at a given point in time.

Construct Pleasant’s balance sheet in account form for 20Y8.

Can I get the excel workings of this question?

WBC is currently financed using debt and equity with a targeted debt to equity ratio of one (D/E = 1). Its debt financing is from three sources, overdraft, bank bills and debentures, with the ratio of overdraft to bank bills to debentures of 1:2:3. Its equity is ordinary shares. These ratios represent the long-term capital structure target for WBC. The debenture pays an annual coupon of 12 per cent per annum on its $1,000 face value. The remaining term of the debenture is six years. The debenture is currently priced $922.23. The bank bills issued by WBC are ninety-day bills, with a face value of $100,000 and are currently priced at $97,593.58. The bank overdraft rate is 1 per cent per annum above the bank bill rate. The ordinary shares sell for $8.00. The projected dividend for year one is $1.10. Dividends are expected to grow at 6 per cent per annum indefinitely. Required Calculate the Weighted Average Cost of Capital (WACC) for WBC, assuming a tax rate of 30 per cent. Hint: this requires a calculation of the effective annual cost for each source of finance. Discuss whether the WACC could be used in the above project evaluation, and if so how. Include a discussion of any restrictions that apply to the use of WACC?

A call with a strike price of $80 costs $7. A put with the same strike price and expiration date costs $5. Construct a table that shows the profit from a straddle. A straddle is created by buying both the call and the put. For what range of stock prices would the straddle lead to a loss?

Is there a more responsible way to budget for long-term or significant expenses? In other words, is one debt financing tool better than another?

Henry Doyle the president of King’s sugar is evaluating the addition of a new sugar-processing mill, to make white sugar, and eliminate the need to buy white sugar from its competitor, Kennard’s sugar company. King’s sugar makes brown sugar only, but would need a mill to process the brown sugar into white sugar. Kennard’s company produces white sugar from the raw sugar cane. Doyle believes that the new mill will bring in additional revenues and reduce operating costs. The competitor had excess capacity of white sugar that it sells to other sugar mills. Therefore, building the new mill would compete with Kennard’s mill. The new mill will cost $20 million in addition to the working capital requirements. Henry Doyle is wondering whether the investment can be justified. The project is expected to be 6 years until 2025.

The construction of the mill will take two years. $18 million will be spent in 2019, and $2 million in 2020. It is expected that when the plant start operating fully in 2020, the company’s operating costs will be reduced because the savings will be derived from the cost differences of producing versus buying white sugar from Kennard’s mill. The cost savings will be $ 2.8 million in 2020 and $ 3.7 million for the next five years. The company uses 15 % as the cost of capital. The following are the financial projections for the new mill.

Net working capital (10% of incremental sales)

SG&A (5% sales)

Taxes 40%

Answer all of the questions.

1. What is the net present value (NPV) and internal rate of return (IRR) for the investment?
2. What is the payback period of the project?
3. Would you recommend that King’s sugar go ahead with making this investment? Why?

4.(a) Sarah has decided to deposits $20 per month into a savings account that pays interest at a rate of 2.2% per year, compounded semi-annualy.How much she has deposited over 5 years? How much will she have at the end of 5 years?

(b) On the top of her savings, end the end of every year, Sarah receives gift from her grandfather at the amount of $200. How much will she have at the end of 5 years?

(c) Continue with part a). If Sarah wants to be a millionaire in 10 years,how much she has to save every day if the annual interest rate is 2.2%compounded semi-annually?

PORTFOLIO REQUIRED RETURN

Suppose you are the money manager of a $4.95 million investment fund. The fund consists of four stocks with the following investments and betas:

If the market's required rate of return is 12% and the risk-free rate is 6%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.

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Ginny is endowed with $8million and is deciding whether to invest in a restaurant. Assume perfect capital markets with an interest rate of 6%.

Investment Option: 1, 2, 3, 4

Investment (millions): 2, 3, 4, 5

End of Year 1 Cash Flows (millions): 1.8, 4.3, 5.4, 5.2

End of Year 2 Cash Flows (millions): 1.8, 1.0, 1.4, 1.6

(i) List 4 perfect capital market assumptions.

(ii) Which investment option should Ginny choose? Why?

(iii) Which investment option can be eliminated from consideration? Why?

Ginny is actively pursuing another business venture as a ticket scalper. She estimates that for a $2 million investment in inventory she can resell her tickets for $6 million over the next two years (cash flows realized in exactly two years). Assume the same 6% interest rate.

(iv) What is the NPV of the Ticket Brokering venture?

(v) What is the new value of Ginny's Corporation?

(vi) Suppose Ginny does not have the $2million to start the new venture. Instead, she wants to raise equity capital by issuing 100,000 shares. What price will new investors be willing to pay?

A project has the following estimated data: price = $66 per unit; variable costs = $43 per unit; fixed costs = $16,500; required return = 8 percent; initial investment = $25,000; life = five years. Ignoring the effect of taxes, what is the accounting break-even quantity? (Round your answer to 2 decimal places. (e.g., 32.16)) Break-even quantity What is the cash break-even quantity? (Round your answer to 2 decimal places. (e.g., 32.16)) Break-even quantity What is the financial break-even quantity? (Round your answer to 2 decimal places. (e.g., 32.16)) Break-even quantity What is the degree of operating leverage at the financial break-even level of output? (Round your answer to 3 decimal places. (e.g., 32.161)) DOL

What will you still owe after the 13th year of a 15-year, $450,000 mortgage at 4.35% APR if you only make the minimum monthly payments?

A. $77,826

B. $114,827

C. $791,338

D. $78,201

Please work out the problem!

Management of Kevin Hall, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $290,200. They project that the cash flows from this investment will be $110,820 for the next seven years. If the appropriate discount rate is 14 percent, what is the IRR that Kevin Hall management can expect on this project? (Do not round discount factors. Round other intermediate calculations to 0 decimal places e.g. 15 and final answer to 2 decimal places, e.g. 5.25%.)

IRR is ----------

enter the IRR in percentages rounded to 2 decimal places

Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $5,000,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,200,000 and that variable costs should be $225 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $575,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $332 per ton. The engineering department estimates you will need an initial net working capital investment of $480,000. You require a return of 11 percent and face a tax rate of 22 percent on this project. Calculate the accounting, cash, and financial break-even quantities

​Covan, Inc. is expected to have the following free cash​ flow:

a. Covan has 8 million shares​ outstanding, ​$3 million in excess​ cash, and it has no debt. If its cost of capital is 13%​, what should be its stock​ price? (round to nearest cent)

b. Covan adds its FCF to​ cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year​ 2, what is its expected​ price? (round to nearest cent)

c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year​ 2? (round to one decimal place)

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently run out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.

Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,300 per month, and the rent is $3,000 per month. In addition, she must make a tax payment of $11,000 in December. The current cash on hand (on December 1) is $700, but Koehl has agreed to maintain an average bank balance of $4,000 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)

The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $100,000.

1. Prepare a cash budget for December, January, and February.

   I. Collections and Purchases:
   	December	January	February
   Sales	$	$	$
   Purchases	$	$	$
   Payments for purchases	$	$	$
   Salaries	$	$	$
   Rent	$	$	$
   Taxes	$	---	---
   Total payments	$	$	$
   Cash at start of forecast	$	---	---
   Net cash flow	$	$	$
   Cumulative NCF	$	$	$
   Target cash balance	$	$	$
   Surplus cash or loans needed	$	$	$

   
   
2. Suppose Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.)
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