Complete the t-accounts below using the transactions listed (1.5 pts). 4. Calculate the ending balance of each account (.5 pts). • styx. issues a $1,000 bond in order to raise cash • styx. issues $5,000 in stocks to raise cash • styx. spends $2,400 of its cash to purchase a new tuning machine Debits - + Credits Debits + - Credits Debits Credits 5. Complete the Accounting Equation below (.5 pts). 6. Circle the mathematical functions that complete the accounting equation (.5 pts). Assets: ____________ + / - / = Liabilities: ________________ + / - / = Owners Equity: _____________
The $5,000 stock sale from the first page was split into 500 shares. Calculate the price of a share of (a company called Styx). given the following information.
Please show your work.
Year 1 Profits: $3,500 Year 2 Profits: $4,250 Discount Rate: 3.25%
A. Share Price: ________________
B) What is the new share price if you decide that Year 2 profits will be $5,500 and you change your discount rate for all years to 5%?
Share Price: ________________
c) If a company called Styx is listed on the Dow Jones Industrial Average, and the Dos divisor is .1474, by how much will the Dow change if the price of a share of Styx. increases by $3.00? ________________
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2- a. What is the price of a European put option on a non-dividend-paying stock when the stock price is $69, the strike price is $70, the risk-free interest rate is 5% per annum, the historical volatility is 35% per annum, and the time to maturity is six months?
b. WITHOUT using the B-S-M formula, please calculate the call option price on the same stock with $70 strike price and a time to maturity of 6 months? Explain how and show the process. (Simply showing a number without explanation and process is not a valid answer.)
c. For the same put option, if the actual market trading price is $5, what is the implied volatility?
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Calculate the approximate modified duration for a 10-year, 5% annual-pay bond priced at 106.84307 percent of par for a 5 basis point change in the yield to maturity. Group of answer choices
A. 7.602
B. 7.981
C. 7.853
In: Finance
In: Finance
Your firm is evaluating a new $725,000 investment opportunity with a 16% required return. You expect to sell 3,500 units per year at $50 net cash flow each for the next 8 years. Suppose that after one year, you will know more about demand and be able to revise your estimate of future unit sales based on sales you observe for year 1. Further, suppose that the project can be dismantled and sold to net $650,000 at that time.
a. What is the minimum level of unit sales for year 1 below which would it make sense to abandon the project?
b. If the original expectation of 3,500 unit sales is the average of two equally likely outcomes (3,000 units or 4,000 units), what is the value of the project, including the option to abandon at the end of the first year?
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An underwriting firm such as Morgan Stanley or Goldman Sachs serves as the quarterback in an initial public offering (IPO). Its functions include providing advice to the issuing company (the issuer), underwriting the issue, and marketing the issue. Explain what those functions entail and, if you were the CFO of the issuing company, how you would assess the performance of the underwriting firm in carrying out its job?
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Its an excel problem. Screenshots and actual work in excel is appreciated.
Suppose a company is about to start the following project, where all the dollar figures are in thousands of dollars. In year 0, the project requires a fixed cost of $12,000. The fixed costs is depreciated on the straight-line basis over five years, and there is a salvage value of $1,500 in year 5. The sales generated in years 1-5 are estimated to be 2,500 units, 3,200 units, 5,100 units, 3,400 units and 1,200 units. The costs of capital in year 1 is forecast to be 8.5% and decreases linearly by 0.2% for years 2 to 5, ending with 7.7% in year 5. The tax rate is forecast to be a constant 35.0%. Sales revenue per unit is forecast to be $8.50. Variable cost per unit is forecast to be $6.30. What is the project NPV? Develop your financial spreadsheet model with frozen panes for detailed calculations and name the worksheet “Project NPV”.
In: Finance
|
Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production. You will need an initial $2,200,000 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 $700,000 and that variable costs should be $380 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 $300,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $480 per ton. The engineering department estimates you will need an initial net working capital investment of $220,000. You require a return of 12 percent and face a marginal tax rate of 22 percent on this project. |
| a-1 |
What is the estimated OCF for this project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) |
| a-2 |
What is the estimated NPV for this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) |
| b. |
Suppose you believe that the accounting department’s initial cost and salvage value projections are accurate only to within ±15 percent; the marketing department’s price estimate is accurate only to within ±10 percent; and the engineering department’s net working capital estimate is accurate only to within ±5 percent. What is the worst-case NPV for this project? The best-case NPV? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) |
In: Finance
Has Sarbanes-Oxley been effective in mitigating auditor complicity in management frauds? Why, or why not?
In: Finance
In: Finance
Investment A
You are 25 years old, having just started working. You are considering a retirement plan for a retirement at the age of 65. You want to be able to withdraw $73,000 from your savings account on each birthday for 20 years following your retirement at the age of 65. Your first withdrawal will be on your 66th birthday. To achieve your goal, you intend to make equal annual deposits in a pension scheme which offers 7% interest per year.
According to the Investment A, you expect a lump sum of $ 100,000 from a family inheritance fund that you will receive on your 50th birthday. You will put this fund into the retirement savings account. Furthermore, you have invested in a portfolio what will be giving you $ 1,300 per year (from age 25 through age 65) which are to be added the retirement savings account as well.
If you begin making these deposits on your 25nd birthday and continue to make deposits until you are 65 (your last deposit will be made on your 65th birthday), what is the amount you are required to deposit annually to be able to make the desired withdrawals at retirement?
Investment B
Here you still have the same retirement plan in mind, in other words you want to be able to withdraw $73,000 from your savings account on each birthday for 20 years following your retirement at the age of 65. However, the investment criteria are different:
You have invested in a business which gives an annual net profit
of $ 2,300 per year.
Furthermore, your employer will contribute $ 550 to the account per
year as part of the company’s
profit-sharing plan starting from age 45 to 65. What amount must you deposit annually now to be able to make the desired withdrawals at retirement? Which investment will you choose and why?
In: Finance
HW2: Interest Rate Parity with bid-ask spreads
Suppose:
Spot rate St = $1.5080 - $1.5095 / £
Six month Forward rate Ft,t+6 = $1.5280 – 1.5292/£
Interest rate in US = 4.6% – 4.8%
Interest rate in UK = 3.0% – 3.3%
With bid-ask rates and borrowing-lending rates, is arbitrage profit possible if you start with $1 million in part (a) and £ 1 million in part (b) ? Do it both ways :
(a) borrow $ 1 million in US and invest overseas and
(b) borrow £ 1 million in UK and invest in US.
In: Finance
XYZ used an investment bank to do IPO. In IPO, XYZ sold 1 million shares at $66.52 each. The investment bank charged 7% spread. At the end of the 1st day of trading, XYZ stock price closed at $72.63. Calculate the total cost of IPO. That is, what is the sum of direct and indirect cost?
In: Finance
Dana Company projects a sales revenue of $150,000 during the calendar year 2014. Using the income statement provided below, prepare a pro-forma income statement using the percent-of-sales method.
Income Statement
Dana Dairy Products
For the Year Ended December 31, 2013
| Sales Revenue | 100,000 |
| Less: Cost of Good Sold | 87,000 |
| Gross Profits | 13,000 |
| Less: Operating Expenses | 11,000 |
| Operating Profits | 2,000 |
| Less: Interest Expense | 500 |
| Net Profits before taxes | 1500 |
| Less: Taxes (40%) | 600 |
| Net Profits after taxes | 900 |
In: Finance
|
ANNUAL BALANCE SHEET |
||||||
|
($ MILLIONS) |
||||||
|
BOEING CO |
||||||
|
Dec09 |
Dec08 |
Dec07 |
Dec06 |
Dec05 |
||
|
ASSETS |
||||||
|
Cash & Short-Term Investments |
11,223 |
3,279 |
9,308 |
6,386 |
5,966 |
|
|
Net Receivables |
6,153 |
6,027 |
6,068 |
5,655 |
5,613 |
|
|
Inventories |
16,933 |
15,612 |
9,563 |
8,105 |
7,940 |
|
|
Other Current Assets |
966 |
1,046 |
2,341 |
2,837 |
2,449 |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
-------------- |
||
|
Total Current Assets |
35,275 |
25,964 |
27,280 |
22,983 |
21,968 |
|
|
Gross Plant, Property & Equipment |
21,579 |
21,042 |
20,180 |
19,310 |
19,692 |
|
|
Accumulated Depreciation |
12,795 |
12,280 |
11,915 |
11,635 |
11,272 |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
-------------- |
||
|
Net Plant, Property & Equipment |
8,784 |
8,762 |
8,265 |
7,675 |
8,420 |
|
|
Investments at Equity |
974 |
942 |
1,085 |
964 |
84 |
|
|
Other Investments |
5,522 |
6,243 |
9,803 |
11,641 |
12,407 |
|
|
Intangibles |
7,196 |
6,332 |
5,174 |
4,745 |
2,799 |
|
|
Deferred Charges |
- |
- |
- |
- |
13,251 |
|
|
Other Assets |
4,302 |
5,536 |
7,379 |
3,786 |
1,129 |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
-------------- |
||
|
TOTAL ASSETS |
62,053 |
53,779 |
58,986 |
51,794 |
60,058 |
|
|
LIABILITIES |
||||||
|
Long Term Debt Due In One Year |
707 |
560 |
762 |
1,381 |
1,189 |
|
|
Accounts Payable |
7,096 |
5,871 |
5,714 |
5,643 |
5,124 |
|
|
Taxes Payable |
182 |
41 |
253 |
670 |
556 |
|
|
Accrued Expenses |
12,822 |
6,169 |
6,637 |
6,106 |
6,590 |
|
|
Other Current Liabilities |
12,076 |
18,284 |
18,172 |
15,901 |
14,729 |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
-------------- |
||
|
Total Current Liabilities |
32,883 |
30,925 |
31,538 |
29,701 |
28,188 |
|
|
Long Term Debt |
12,217 |
6,952 |
7,455 |
8,157 |
9,538 |
|
|
Deferred Taxes |
- |
- |
1,190 |
- |
2,067 |
|
|
Minority Interest |
97 |
|||||
|
Other Liabilities |
14,728 |
17,196 |
9,799 |
9,197 |
9,206 |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
-------------- |
||
|
TOTAL LIABILITIES |
59,925 |
55,073 |
49,982 |
47,055 |
48,999 |
|
|
EQUITY |
||||||
|
Common Stock |
5,061 |
5,061 |
5,061 |
5,061 |
5,061 |
|
|
Capital Surplus |
3,724 |
3,456 |
4,757 |
4,655 |
4,371 |
|
|
Retained Earnings |
10,869 |
9,150 |
16,780 |
10,236 |
15,498 |
|
|
Less: Treasury Stock |
17,526 |
18,961 |
17,594 |
15,213 |
13,871 |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
-------------- |
||
|
TOTAL EQUITY |
2,128 |
(1,294) |
9,004 |
4,739 |
11,059 |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
-------------- |
||
|
TOTAL LIABILITIES & EQUITY |
62,053 |
53,779 |
58,986 |
51,794 |
60,058 |
|
|
Common Shares Outstanding |
726.291 |
698.138 |
736.681 |
757.836 |
760.577 |
|
|
ANNUAL INCOME STATEMENT |
||||||
|
Dec09 |
Dec08 |
Dec07 |
Dec06 |
Dec05 |
||
|
Sales |
68,281 |
60,909 |
66,387 |
61,530 |
54,845 |
|
|
Cost of Goods Sold |
55,092 |
48,950 |
51,977 |
48,926 |
44,757 |
|
|
------------------- |
------------------ |
------------------ |
------------------ |
--------------- |
||
|
Gross Profit |
13,189 |
11,959 |
14,410 |
12,604 |
10,088 |
|
|
Selling, General, & Administrative Exp. |
9,870 |
6,852 |
7,381 |
7,428 |
6,433 |
|
|
------------------- |
------------------ |
------------------ |
------------------ |
--------------- |
||
|
Operating Income Before Deprec. |
3,319 |
5,107 |
7,029 |
5,176 |
3,655 |
|
|
Depreciation,Depletion,&Amortization |
1,273 |
1,179 |
1,130 |
1,158 |
1,092 |
|
|
------------------- |
------------------ |
------------------ |
------------------ |
--------------- |
||
|
Operating Profit |
2,046 |
3,928 |
5,899 |
4,018 |
2,563 |
|
|
Interest Expense |
604 |
524 |
608 |
657 |
713 |
|
|
Non-Operating Income/Expense |
289 |
591 |
827 |
709 |
391 |
|
|
Special Items |
(876) |
578 |
||||
|
------------------- |
------------------ |
------------------ |
------------------ |
--------------- |
||
|
Pretax Income |
1,731 |
3,995 |
6,118 |
3,194 |
2,819 |
|
|
Total Income Taxes |
396 |
1,341 |
2,060 |
988 |
257 |
|
|
------------------- |
------------------ |
------------------ |
------------------ |
--------------- |
||
|
Income Before Extraordinary |
||||||
|
Items & Discontinued Operations |
1,335 |
2,654 |
4,058 |
2,206 |
2,562 |
|
|
Discontinued Operations |
(23) |
18 |
16 |
9 |
(7) |
|
|
------------------- |
------------------ |
------------------ |
------------------ |
--------------- |
||
|
Adjusted Net Income |
1,312 |
2,672 |
4,074 |
2,215 |
2,555 |
|
|
A. What percentage decline in earnings before interest and taxes could Boeing have sustained in these years before failing to cover |
||||
|
i. Interest and principal repayment requirements, |
||||
|
ii. Interest, principal and common dividend payments? |
||||
|
B. What do these calculations suggest about Boeing’s financial leverage during this period? |
||||
Please Answer question in detailed and as soon as possible. Thank you!
In: Finance