Mid-Michigan Manufacturing Inc. (MMMI) wishes to determine whether it would be advisable to replace an existing production machine with a new one. The have hired your firm as a consultant to determine whether the new machine should be purchased. The data you will need is as follows:

   MMMI has decided to set a project timeline of 4 years.
   The new machine will cost $1,100,000. It will be depreciated (straight line) over a five-year period (its estimated useful life), assuming a salvage value of $100,000.

   The old machine, which has been fully depreciated, could be sold today for $253,165. The company has received a firm offer for the machine from Williamston Widgets, and will sell it only if they purchase the new machine.

   Additional Sales generated by the superior products made by the new machine would be $665,000 in Year 1. In Years 2 & 3 sales are projected to grow by 8.5% per year. However, in Year 4, sales are expected to decline by 5% as the market starts to become saturated.

   Total expenses have been estimated at 60.75% of Sales.

   The firm is in the 21% marginal tax bracket and requires a minimum return on the replacement decision of 9%.

   A representative from Stockbridge Sprockets has told MMMI that they will buy the machine from them at the end of the project (the end of Year 4) for $100,000. MMMI has decided to include this in the terminal value of the project.

   The project will require $100,000 in Net Working Capital, 54% of which will be recovered at the end of the project.

The calculations are done on excel.

1. What is the year 4 total cash flow?

2. What is the year 3 operating cash flow?

1. Define preferred stock, describe some of its basic features, identify and briefly explain other types of preferred stock discussed in the chapter, and identify preferred’s advantages and disadvantages.
2. Characterize the various types of leases, discuss the financial statement effects of “off balance sheet financing,” perform the analysis necessary to make lease versus borrow-and-purchase decisions, and identify and briefly explain a few of the factors affecting leasing decisions.
3. Discuss warrants and the way in which corporations utilize bonds with warrants as an alternative means of raising investment capital, describe how warrants are valued, calculate the component cost of bonds with warrants, and discuss the wealth effects and dilution due to warrants.
4. Explain how convertible securities work, define the terms conversion ratio and conversion price, explain how they are valued, calculate the component cost of convertibles, and explain how convertibles affect the issuing firm’s capital structure.
5. Identify differences between warrants and convertibles.

If you lease a $57,000 car with a $700 per month payment and its projected residual value is $37,000 at the end of the three year leasing period, what is the implied interest rate?

Because the practice is in a market with increasing competition, discuss the pros and cons of accepting an equity share in place of additional salary.

1. How is an index fund different than other managed mutual funds?

2. Describe the difference between a "no load" and "load " fund. Please use examples!!!

2. Estimate your income needs in retirement and the retirement income supported by your financial plan.

Grading rubric for assignments.

A-a scholarly response, which addresses the questions. Paragraph format with in-depth explanations with examples;

B-fully developed answers addressing the issues in a paragraph format, no grammar and/or spelling problems, explanations and examples;

C- complete sentences addressing the question;

D-one word bullet answers;

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $830,000, and it would cost another $17,500 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $630,000. The machine would require an increase in net working capital (inventory) of $14,500. The sprayer would not change revenues, but it is expected to save the firm $457,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%. What is the Year-0 net cash flow? $ What are the net operating cash flows in Years 1, 2, and 3? Round your answers to the nearest dollar. Year 1 $ Year 2 $ Year 3 $ What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)? Round your answer to the nearest dollar. $ If the project's cost of capital is 11 %, what is the NPV of the project? Round your answer to the nearest dollar. $ Should the machine be purchased?

You are planning to save for retirement over the next 20 years. To do this, you will invest $900 a month in a stock account and $600 a month in a bond account. The return of the stock account is expected to be 9 percent, and the bond account will pay 5 percent. When you retire, you will combine your money into an account with a return of 7 percent.

How much can you withdraw each month from your account assuming a 20-year withdrawal period?

Multiple Choice

a)$78,868.22

b)$6,572.35

c)$373,037.17

d)$6,440.9

e)$6,703.8

1. You have plenty of cash to invest. You are considering an investment of $125,000 in a project which is expected to earn $14425 a year for ten years. Is it an attractive investment if your minimum expected annual rate of return is 5% (compound interest)? Calculate the expected annual rate of return (R) of the project. (6 points) NO TABLE

Cute Camel Woodcraft Company is a small firm, and several of its managers are worried about how soon the firm will be able to recover its initial investment from Project Sigma’s expected future cash flows. To answer this question, Cute Camel’s CFO has asked that you compute the project’s payback period using the following expected net cash flows and assuming that the cash flows are received evenly throughout each year.

Complete the following table and compute the project’s conventional payback period. For full credit, complete the entire table. (Note: Round the conventional payback period to two decimal places. If your answer is negative, be sure to use a minus sign in your answer.)

The conventional payback period ignores the time value of money, and this concerns Cute Camel’s CFO. He has now asked you to compute Sigma’s discounted payback period, assuming the company has a 9% cost of capital. Complete the following table and perform any necessary calculations. Round the discounted cash flow values to the nearest whole dollar, and the discounted payback period to two decimal places. For full credit, complete the entire table. (Note: If your answer is negative, be sure to use a minus sign in your answer.)

Which version of a project’s payback period should the CFO use when evaluating Project Sigma, given its theoretical superiority?

The discounted payback period

The regular payback period

One theoretical disadvantage of both payback methods—compared to the net present value method—is that they fail to consider the value of the cash flows beyond the point in time equal to the payback period.

How much value in this example does the discounted payback period method fail to recognize due to this theoretical deficiency?

$4,928,461

$1,763,323

$1,351,321

$3,186,183

Chastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle. Chastain's 2019 sales (all on credit) were $286,000, its cost of goods sold is 80% of sales, and it earned a net profit of 8%, or $22,880. It turned over its inventory 5 times during the year, and its DSO was 38 days. The firm had fixed assets totaling $43,000. Chastain's payables deferral period is 45 days. Assume 365 days in year for your calculations.

1. Calculate Chastain's cash conversion cycle. Do not round intermediate calculations. Round your answer to two decimal places.
     days
2. 
   
3. Assuming Chastain holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Do not round intermediate calculations. Round your answers to two decimal places.
   

   Total assets turnover:
   ROA:		%

4. 
   
5. Suppose Chastain's managers believe that the inventory turnover can be raised to 9.5 times. What would Chastain's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9.5 for 2019? Do not round intermediate calculations. Round your answers to two decimal places.
   

   Cash conversion cycle:		days
   Total assets turnover:
   ROA:		%

(a) Company EEF ltd is considering an investment of €100,000. The desired payback period is 3 years. The board of directors have identified two alternatives; project A and project B.

The expected annual cash flows are as follows:

Cash flow: Project A       Project B

(-)       (-)

Y0 100,000.00 100,000.00

Y1                          35,000.00          35,000.00

Y2                          28,000.00          35,000.00

Y3                      32,000.00          35,000.00

Y4                      40,000.00             35,000.00

Required: Calculate the Payback period of each project and advise EEF’s board of directors which project they should invest in.

A company has two different bonds currently outstanding. Both bonds have a face value of R100. Bond A matures in 10 years. The bond makes no coupon payments for the first four years and then pays R8.50 semi-annually for the subsequent four years, and finally pays R10.50 semi-annually for the last two years. Bond B also matures in 10 years; it makes coupon payments of R4.50 semi-annually over its life. The yield to maturity on both bonds is 12% per annum, compounded semi-annually.

What is the current price of each bond?

Baresse Corporation: Income Statements for Year Ending December 31

(Millions of Dollars)

Baresse Corporation: Balance Sheets as of December 31 (Millions of Dollars)

1.Construct a common-sized income statement for 2018 and 2019. Comment on any changes you see.

4.

If you buy a call option of Amazon Inc. with an exercise price of $2000 for a premium of $210.

Draw payoff and profit of call option buyer and call option writer at expiration date graphically.

(use a ruler and draw it by hand if it is hard for you to do it on your computer)

You are getting ready to start a new project that will incur some cleanup and shutdown costs when it is completed. The project costs $ 5.39 million up front and is expected to generate $ 1.17 million per year for 10 years and then have some shutdown costs at the end of year 11. Use the MIRR approach to find the maximum shutdown costs you could incur and still meet your cost of capital of 14.9 % on this project. The maximum shutdown costs allowable to still have a positive NPV is ​$ nothing. ​(Round to the nearest​ dollar.)