The Reynolds Corporation buys from its suppliers on terms of 2/18, net 50. Reynolds has not been utilizing the discounts offered and has been taking 50 days to pay its bills.

Ms. Duke, Reynolds Corporation's vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 18 percent. The bank requires a 15 percent compensating balance on these loans. Current account balances would not be available to meet any of this compensating balance requirement.

a. Calculate the cost of not taking a cash discount. (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

b. What is the effective rate of interest on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

In your opinion, what are the risks to an investor who is buying a property in fragments through Bricklets? (300 word limit)

Please can someone answer this question!!

As a hedge fund manager, you have a bearish view on BHP shares for the following 2 months given the uncertainties related to Covid-19. BHP Ltd’s share is currently trading at $36.00 per share. The two-month put option on BHP share with an exercise price of $32 per share is selling at $1.5 (premium) per share. The two-month call option on BHP share has an exercise price of $32 per share and is selling at $2.0 (premium) per share REQUIRED:  

1. Calculate the cost of purchasing put options on 500,000 BHP shares

2. Determine the share price for BHP shares at which the decision to purchase the above put options effectively “breaks even” for the fund manager.

3. Suppose you don’t own any shares, but you still want to make profits during this period. How can you use both put and call options to take advantage of the fall in the share price?  

4. What are the risks, if any, associated with the trading strategy prescribed in part c)

Your friend Mark is quite worried about the recent volatility in equity markets due to the current health pandemic and is thinking about investing in the bond market. He contacts you to seek your advice on bond markets. You have undertaken some research and find the following information regarding yield on different bonds.

(i) 1.8% current one-year bond

(ii) 1.9% expected one-year bond rate in 24 months’ time

(iii) 1.93% three-year bond rate

REQUIRED:

1. Using the pure expectations theory advise your friend on the yield he should expect on a one-year bond in 12 months’ time.

2. Identify and explain to your friend two assumptions of the pure expectations theory that are challenged by the segmented markets approach to interest rate determination.

3. Your friend has heard that inflation is anticipated to rise significantly over the next few years. Explain to him what effect would this expected rise in inflation have on the slope of a normal yield curve? Also, what effect, if any, this change in inflation will have on the value of his bond investments?

Apply international valuation model for determining the value of MNC where Initial Investment/Cost is PKR 10 million where 6 million is financed by debt. The MNC obtains its cash proceeds from Australia, UK and USA which are AUD 60,000, GBP 30,000 and USD 13000 respectively in two years. Spot exchange rate is PKR 102.7/ AUD, PKR 204.2/ GBP, PKR 158/USD. The spot exchange rate two years from now is expected that USD and GBP will appreciate by 2.5% and 3.25% respectively whereas AUD will depreciate by 1.25%. Applicable cost of capital is 12%. Prevalent tax rate is 33.5%.

Find

1. Expected cashflow in PKR

2. Value of the MNC

3. Evaluate project feasibility

Read the attached article “ The Reflection of Exchange Rate Exposure and Working Capital Management on Manufacturing Firms of Pakistan” and analyse the commentary of authors on subject matter

For a highly repetitive operation, using the data shown below, answer the questions that follow: (10 points)

First unit (minutes) = 11
Learning curve = 90%
Salary per hour = $10.50

What is the time required to produce the 20th unit?

If steady state is achieved with 20 units,what is the labor cost per unit for this operation?

ABC Ltd is negotiating for the purchase of a new piece of equipment for their current operations. The new equipment would replace existing equipment that was purchased 5 years ago for $50,000 and is being depreciated to zero on a straight-line basis over its effective life of 10 years. The old equipment has a current scrap value of $16,000 and it would be $1,000 in 5 years’ time.

The supplier has quoted a selling price of $60,000 for the new equipment which has an expected economic life of 5 years. The tax authorities allow a 20% investment allowance on the new equipment and its full cost to be depreciated to zero on a straight-line basis over 4 years. ABC expects to be able to sell the equipment for $3,000 at the end of 5 years. As the new equipment is fully automated, it would reduce the operating costs by $18,000 per year, but it requires ABC to hold additional inventory to a value of $4,000.

ABC has profitable ongoing operations and its before-tax cost of capital is 20%. The revenues will not be affected by the purchase of the new equipment. All cash flows are assumed to occur at year-end and the corporate tax rate is 30%.

Prepare the cash flow table (which incorporates taxes and includes initial investment, operating and terminal cash flows) for the project using the information given above. As the financial analyst of the company, you are asked to determine whether ABC Ltd should buy the new equipment based on the net present value (NPV) and internal rate of return (IRR) methods.

Which of the following cash flows is NOT an incremental cash flow associated with a project to dig a new gold mine?

Select one:

a. The cost of taking on new employees who will be hired to work on the mine site.

b. The cost of land which will be purchased for the new mine.

c. The cost of mining equipment which will be purchased for the new mine.

d. The cost of an environmental impact study which has been carried out to see if the gold mine under consideration can be dug without excessive impact on the environment.

What is the semi-annual payment on a $124,000 mortgage loan, repayable over 21 years, if the interest rate is 12% p.a., compounded semi-annually?

Select one:

a. $8078

b. $705

c. $8145

d. $818

Telewrk has 87,500 common shares trading at $75, and 12,000 preferred shares with a current price of $98. The common equity holders receive a quarterly dividend that grows at annual regular rate of 2%. Next year, this quarterly dividend will be $1.7325. Preferred shareholders also receive a quarterly dividend of $3.85. Debt completes Telewrk’s capital structure. The company has 11,000 bonds trading at $971.5, which pay an annual coupon of $103 and have 10 years to maturity. Telewrk’s tax rate is 20%. Calculate its WACC. You must show your work to get full points. 12 points.

The volatility of the market portfolio is 10%, the expected return on the market is 12%, and the risk-free rate of interest is 4%.

1) Calculate the beta for each stock.

2) Calculate the beta for the portfolio of the three stocks.

3) Calculate the beta for the market.

4) Calculate the expected return for each stock.

5) Calculate the expected return for the portfolio of the three stocks.

Please explain how to do this problem and solve.

Bid Ask

b. Norman Pilbarra submits a market order to buy 600 shares. What is the maximum price that he will pay? (Round your answer to 2 decimal places.)

Does your organization (or one you are familiar with) use financial benchmarking? Would you use it if you had a chance to do so? Why or why not?

You just finished calculating the NPV of project A and found it to be $49,242. A concurrent project, which will use the same resources as project A is now before you as well. This is project B, which will require a $2M investment in an asset that will have a $1M salvage value at the end of the project. A total of $170,000 was invested in the consulting and research leading to the marketability of the product. Project B will generate annual sales of $1.5M and total costs of $1.1M. The firm’s cost of capital is 7.5%, its tax rate is 30%, and the CCA depreciation for this asset is 20%. Project B will trigger a net change in working capital of $130,000. The project will last 6 years. Calculate the NPV of this project and say clearly whether you would accept it. You must show your work to get full points. 12 points.