Multiple Choice

• $22,745.27

• $25,241.83

• $-73,528.05

• $23,882.53

• $21,608.00

In finance, will higher margin companies (IBM) have a longer cash conversion cycle than a lower margins companies (Proctor and Gamble)?

Thank you.

Multiple Choice

• $39,464.62

• $37,491.39

• $16,720.00

• $322,972.00

• $41,437.85

Multiple Choice

• $2,618,820

• $2,125,200

• $2,901,180

• $2,749,762

• $2,487,879

Question 1

At the beginning of 1976 a relative migrated to Australia with $10,000 ‘spare cash’. The money could have been used to buy a block of land or invested in an ‘at-call’ savings account that paid interest at 8% p.a. compounded half-yearly. At the end of 2018, the land was valued by a local real estate agent who was keen to list the property on behalf of his agency, at a price of approximately $400,000.

Required:

1. Which of the alternative investments had the higher value at the end of 2018? Justify your response with appropriate calculations.

(Students should write no more than 50 words for this part of the question).

2. i)Assuming the half-yearly compounding of interest, what was the rate of growth in the land value over the total period expressed as a nominal annual interest rate?

2. What was the rate of growth in the land value over the total period expressed as an effective interest rate?

3. What was the rate of growth in the ‘at-call’ savings account over the total period expressed as an effective interest rate?

3. What investment in the savings account would have been necessary at the beginning

of 1976, to have the same value as the land was worth at the end of 2018? Briefly explain your response.

(Students should write no more than 50 words for this part of the question).

4. Recognising both your finance skills and ‘common sense’, one of your friends has asked whether your calculations above allow you to determine which of the investments would have been ‘better’ to make at the beginning of 1976, given the outcomes discussed above at the end of 2018. Provide a well-reasoned, complete response to this question taking into consideration various financial and non-financial issues.

(Students should write no more than 100 words for this part of the question).

e. i)You have now been provided further information that the investment in the land required the owner to make continuous annual payments of council rates over the total period held. These amounts are determined in accordance with Table 1 below. Assuming the land was sold at the end of 2018 (but ignoring the expected sale value), what is the adjusted present value at the beginning of 1976 of all the cash outflows relating to the acquisition and continued ownership of the land?

Note:     For the purposes of this question assume the following:

1. Rates are payable on the anniversary of each year of land ownership.

2. The annual amount of the rates are determined in accordance with the following formula;

Initial Purchase Cost ($) x Factor (times) x Relevant Percentage (%)

3. Rates are still payable for the 2018 year (for the full year).

Table 1

2. Taking into consideration the calculations from part e) i) of this question, what is the rate of growth in the land value over the total period expressed as an effective interest rate?

(Students should write no more than 50 words for this part of the question).

You have been following a company in the news, RC Incorporated, which sells kombucha tea online. You are considering investing in the company; but before you risk any of your money, you decide to estimate the valuation of the stock to determine what would be a reasonable price to pay per share. To help in your valuation, you have assembled the following information for the most recent fiscal year (which ended today):

- RC Incorporated has no debt

- Revenue was $2M

- Gross margins were 35%

- Depreciation was $100,000

- Tax rate is 30%

- Total CAPEX was $150,000

- Net Working Capital Increased by $20,000

- The company has 300,000 shares outstanding

- Return on Equity was 12%

- Dividend payout is 50% of earnings

From your research, the appropriate discount rate for the cash-flows is 10%.

(a) RC has been growing rapidly, but competition is intensifying. As a first guess, you assume that the company will be able to hold onto its competitive advantage and grow its FCF by 15% for the next 5 years, after which the competition will catch up and FCF growth rate will drop to 3%, in perpetuity. Using a DCF valuation method, estimate the price of a share of RC under these assumptions.

(b) Provide another estimate of the growth rate of earnings using the information in the financial statements. Assuming that free-cashflows will grow at this constant rate forever, provide an estimate of the price of a share of RC under these new assumptions. 3

(c) Using the growth rate computed in part (b), provide a third estimate for the price of a share using a discounted dividend approach instead. (Note: there is no debt, so Earnings = EBIAT)

What is the current year's entry for long-term debt on a common-sized balance sheet?

The answer is 22.98% but i dont know how to get to it, i try dividing long term debt into common sized balance but it was wrong, so can someone show me how to get to that answer? thank~

Suppose that the standard deviation of returns from a typical share is about .36 (or 36%) a year. The correlation between the returns of each pair of shares is about .4.

a. Calculate the variance and standard deviation of the returns on a portfolio that has equal investments in 2 shares, 3 shares, and so on, up to 10 shares. (Use decimal values, not percents, in your calculations. Do not round intermediate calculations. Round the "Variance" answers to 6 decimal places. Round the "Standard Deviation" to 3 decimal places.)

b. How large is the underlying market variance that cannot be diversified away? (Do not round intermediate calculations. Round your answer to 3 decimal places.)

Market risk                        

c. Now assume that the correlation between each pair of stocks is zero. Calculate the variance and standard deviation of the returns on a portfolio that has equal investments in 2 shares, 3 shares, and so on, up to 10 shares. (Use decimal values, not percents, in your calculations. Do not round intermediate calculations. Round the "Variance" answers to 6 decimal places. Round the "Standard Deviation" to 3 decimal places.)

choose a topic that relates to finance and write about it around two paragraphs and 3 citations

You are CEO of Rivet​ Networks, maker of​ ultra-high performance network cards for gaming​ computers, and you are considering whether to launch a new product. The​ product, the Killer​ X3000, will cost $902,000 to develop up front​ (year 0), and you expect revenues the first year of $806,000​, growing to $1.57 . million the second​ year, and then declining by 45% per year for the next 3 years before the product is fully obsolete. In years 1 through​ 5, you will have fixed costs associated with the product of $90,000 per​ year, and variable costs equal to 50% of revenues.   

a. What are the cash flows for the project in years 0 through​ 5?

b. Plot the NPV profile for this investment using discount rates from​ 0% to​ 40% in​ 10% increments.

c. What is the​ project's NPV if the​ project's cost of capital is %9%​?

d. Use the NPV profile to estimate the cost of capital at which the project would become​ unprofitable; that​ is, estimate the​ project's IRR.

a. What are the cash flows for the project in years 0 through​ 5?

Calculate the cash flows​ below:  ​(Round to the nearest​ dollar.)

If a large company has no debt that means that they are not using leverage of an appropriate amount of debt to enhance the earnings of their stockholders. Another concern is that they become a prime target for a hostile takeover. Why would that be?

1. An investment has the following cash flows:

August 12, 2008                 $   -1000

February 21, 2009             $   +100

October 7, 2010                 $   +200

April 25, 2011                      $   +900

May 18, 2012                       $   +600

July 29, 2013                        $   +300

November 12, 2014         $   +600

August 12, 2015                 $   +900

June 30, 2016                      $   -2800

1. Calculate the Net Present Value of this investment. Assume the annual discount rate is 14%.
2. Create a data table and graph illustrating the impact of the discount rate on the Net Present Value of this investment. Include a title and label the axes for the graph.
3. Use Solver to determine the Internal Rate of Return(s) associated with this investment.

A company wants to rise $181000 in cash for a new printing process. The company secured a long-term loan of $50000, with interest rate 3.1% p.a. The remaining cash is acquired by selling shares to investors, and the investors expect a return of investment (ROI) at 7.9% per year. Assume a corporate tax rate of 35%

1. Determine the weighted average cost of capital. Round your answer to the nearest 0.01%

2. The new printing process requires an initial investment of $67,000 and will generate +$4,500 per year of net cash flow for the next 19 years. The CEO of the company would like to readjust the return of investment (ROI) for their investor so the weighted average cost of capital is the same as the internal rate of return for this project. Determine the return of investment (ROI) per year. Round you answer to the nearest 0.01%.