In your internship with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's additional funds needed (AFN) for next year. The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year?

Select the correct answer.

QUESTION 59

1. Peter has a fixed income portfolio that consists of Bond A, Bond B, and Bond C. The bonds have durations of 4, 6 and 10, respectively. If Peter has 50% invested in Bond A and 25% invested in each of the other two bonds, what is the duration for the portfolio? Assume that the correlation between the bonds is 0.5.

   		a. 5.5.
   		b. 6.0.
   		c. 6.7.
   		d. 7.2.

QUESTION 60

1. Gordon bought a 10-year bond, with a 6% coupon paid semi-annually. He paid $1,078 for the bond. What is the effective duration assuming a 50-basis point change in interest rates?

   		a. 7.3427.
   		b. 7.5755.
   		c. 8.1669.
   		d. 8.2154.

You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 11 percent and 16 percent, respectively. The standard deviations of the assets are 28 percent and 36 percent, respectively. The correlation between the two assets is 0.39 and the risk-free rate is 4.4 percent. What is the optimal Sharpe ratio in a portfolio of the two assets? What is the smallest expected loss for this portfolio over the coming year with a probability of 16 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your Sharpe ratio answer to 4 decimal places and the z-score value to 3 decimal places when calculating your answer. Enter your smallest expected loss as a percent rounded to 2 decimal places.)

The YayForSemesterBreak Company wants to calculate the NPV and IRR on the following project: Cost is $17,800 today, with end-of-year cash flows of $8,000, $8,000, and $7,000, Years 1 through 3 respectively for three years. Assume the cost of capital is 8%. SHOW ALL WORK on the TI BAII Plus Calculator FOR FULL CREDIT. a) NPV? b) IRR? c) Do you accept or reject the project, and why?

Titan Mining Corporation has 7.9 million shares of common stock outstanding, 295,000 shares of 4.2 percent preferred stock outstanding, and 180,000 bonds with a semiannual coupon rate of 5.7 percent outstanding, par value $2,000 each. The common stock currently sells for $58 per share and has a beta of 1.10, the preferred stock has a par value of $100 and currently sells for $98 per share, and the bonds have 17 years to maturity and sell for 106 percent of par. The market risk premium is 6.7 percent, T-bills are yielding 3.4 percent, and the company’s tax rate is 23 percent.

a. What is the firm’s market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.)

b. If the company is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows? (Do not round intermediate calculations enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

18) You are considering investing in a project that increases annual costs $25,000 by per year over the project's 5 year life . The project has an initial cost of $ 500,000 and will be depreciated straight - line over 5 years Assume a 32 % tax bracket and a discount rate of 11 % . Suppose the equipment is sold at the end of year 5 for $ 300,000 , pretax . What is the NPV ?

a)-$317,,818.44

b)-$455,887.34

c)-$243,667.99

d)-$323,497.47

e)-$356,428.12

Final earnings estimates for the Smithfield Meat Packing Company have been prepared for the CFO of the company and are shown in the following​ table:

YEAR PROFITS AFTER TAXES 1 12,000,000 2 15,000,000 3 19,000,000 4 23,000,000 5 25,000,000

The firm has 4,000,000 shares of common stock outstanding. As assistant to the​ CFO, you are asked to determine the yearly dividend per share to be paid depending on the following possible​ policies:

a. A stable dollar dividend targeted at 30 percent of earnings over a​ 5-year period.

b. A​ small, regular dividend of $0.60 per share plus a​ year-end extra when the profits in any year exceed ​$18,000,000 The​ year-end extra dividend will equal 50 percent of profits exceeding ​$18,000,000

c. A constant dividend payout ratio of 40 percent.

a. What is the yearly dividend per share to be paid depending on a stable dollar dividend targeted at 30 percent of earnings for years 1 through​ 5?

​$nothing per share  ​(Round to the nearest​ cent.)

b. Determine the yearly dividend per share to be paid depending on a​ small, regular dividend of ​$0.60 per share plus a​ year-end extra when the profits in any year exceed ​$18,000,000.

The​ year-end extra dividend will equal 50 percent of profits exceeding $18,000,000.

c. Determine the yearly dividend per share that will be paid assuming a constant dividend payout ratio of

40 percent.

Assume that the USD/JPY exchange rate is 108.58. Which one of the following concepts supports the idea that an item that sells for 500 U.S. dollars in the U.S. is currently selling in Japan for 54,290 Japanese yen?

Group of answer choices

Interest rate parity

Absolute purchasing power parity

International fisher effect

Uncovered interest rate parity

Unbiased forward rates condition

Parramore Corp has $10 million of sales, $3 million of inventories, $4 million of receivables, and $3 million of payables. Its cost of goods sold is 85% of sales, and it finances working capital with bank loans at an 6% rate. Assume 365 days in year for your calculations. Do not round intermediate steps.

1. What is Parramore's cash conversion cycle (CCC)? Do not round intermediate calculations. Round your answer to two decimal places.
     days
2. If Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold, what would be the new CCC? Do not round intermediate calculations. Round your answer to two decimal places.
     days
3. How much cash would be freed up, if Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold? Do not round intermediate calculations. Round your answer to the nearest cent. Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000.
4. By how much would pretax profits change, if Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold? Do not round intermediate calculations. Round your answer to the nearest cent. Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000.
   $

Assume that international capital markets are competitive and that global real interest rates are the same. The one-year interest rate is 9 percent in the United States and 5 percent in Switzerland. If the expected inflation rate is 6 percent in the United States, what is the expected inflation rate in Switzerland?

Your corporation is considering investing in a new product line. The annual revenues (sales) for the new product line are expected to be $163,994.00 with variable costs equal to 50% of these sales. In addition annual fixed costs associated with this new product line are expected to be $56,720.00 . The old equipment currently has no market value. The new equipment cost $74,629.00 . The new equipment will be depreciated to zero using straight-line depreciation for the three-year life of the project. At the end of the project the equipment is expected to have a salvage value of $28,509.00 . An increase in net working capital of $66,220.00 is also required for the life of the project. The corporation has a beta of 0.804 , a tax rate of 33.52% , and a target capital structure consisting of 61.43% equity and 38.57% debt. Treasury securities have a yield of 3.43% and the expected return on the market is 12.00% . In addition, the company currently has outstanding bonds that have a yield to maturity of 8.36%.

a) What are the estimated annual operating cash flows?

b) What is the terminal cash flow?

c) What is the corporations cost of equity?

HCJ Corporation is completing their cash budget for the following year. They are going to buy an industrial robot. They will make the acquisition on January 2 of next year, and it will take most of the year to train the personnel and reorganize the production process to take full advantage of the new equipment.”

The robot will cost $1,000,000 financed with a a one-year $1,000,000 loan from My Bank and Trust Company. I’ve negotiated a repayment schedule of four equal installments on the last day of each quarter.

The interest rate will be 10 percent, and interest payments will be quarterly as well

HCJ Corporation is a manufacturer of metal picture frames. The firm’s two product lines are designated as S (small frames; 5 x 7 inches) and L (large frames; 8 x10 inches). The primary raw materials are flexible metal strips and 9-inch by 24-inch glass sheets.   Other raw materials, such as cardboard backing, are insignificant in cost and are treated as indirect materials.

Here is the provided budget information

     1. Sales in the fourth quarter of 20x0 are expected to be 50,000 S frames and 40,000 L frames. Over the next two years, sales in each product line will grow by 5,000 units each quarter over the previous quarter. For example, S frame sales in the first quarter of 20x1 are expected to be 55,000 units.

    2. HCJ's sales history indicates that 60 percent of all sales are on credit, with the remainder of the sales in cash. The company’s collection experience shows that 80 percent of the credit sales are collected during the quarter in which the sale is made, while the remaining 20 percent is collected in the following quarter. (For simplicity, assume the company is able to collect 100 percent of its accounts receivable.)

    3. The S frame sells for $10, and the L frame sells for $15. These prices are expected to hold constant

throughout 20x1.

    4. HCJ's production team attempts to end each quarter with enough finished-goods inventory in each product line to cover 20 percent of the following quarter’s sales. Moreover, an attempt is made to end each quarter with 20 percent of the glass sheets needed for the following quarter’s production. Since metal strips are purchased locally, HCJ buys on a just-in-time basis; inventory is negligible.   The purchase and production quantities are shown.

5. All direct-material purchases are made on account, and 80 percent of each quarter’s purchases are paid in cash during the same quarter as the purchase. The other 20 percent is paid in the next quarter.

6. Indirect materials are purchased as needed and paid for in cash. Work-in-process inventory is negligible.

7. Projected manufacturing costs in 20x1 are as follows:

Direct material:

Metal strips. @ $1 per foot

Glass sheets: $8 per sheet  

Direct labor for both products .1 hour @ $20 per hour

Manufacturing overhead: .1 direct-labor hour @ $10 per hour

Total manufacturing cost per unit . S: $7 L: $10

1. Sales budget:

2. Cash receipts budget:

3. Cash disbursements budget: (including purchases of direct materials and payments for same)

4. Summary cash budget:

You are an entrepreneur starting a biotechnology firm. If your research is​ successful, the technology can be sold for $26 million. If your research is​ unsuccessful, it will be worth nothing. To fund your​ research, you need to raise $3.8 million. Investors are willing to provide you with $3.8 million in initial capital in exchange for 40% of the unlevered equity in the firm.

a. What is the total market value of the firm without​ leverage?

b.Suppose you borrow $0.8 million. According to​ MM, what fraction of the​ firm's equity will you need to sell to raise the additional $3.0 million you​ need?

c. What is the value of your share of the​ firm's equity in cases

​(a​)

and

​(b​)?

a. What is the total market value of the firm without​ leverage?

The market value without leverage is

​$nothing

million.  ​(Round to one decimal​ place.)

b.

Suppose you borrow

$ 0.8$0.8

million. According to​ MM, what fraction of the​ firm's equity will you need to sell to raise the additional

$ 3.0$3.0

million you​ need?The fraction of the​ firm's equity you will need to sell is

nothing​%.

​(Round to the nearest whole​ percentage.)c. What is the value of your share of the​ firm's equity in cases

​(a​)

and

​(b​)?

The value of your share of the​ firm's equity:

Case

​(a​)

is

​$nothing

million.  ​(Round to one decimal​ place.)Case

​(b​)

is

​$nothing

million.  ​(Round to one decimal​ place.)

1. A stock records the following returns over the last 6 months.

1. What are the arithmetic returns for the stocks?
2. What are the geometric returns for the stocks?
3. What are the variances for the stocks?
4. What are the standard deviations for the stocks?
5. Compute the coefficient of variation of stocks.
6. Which stock would you choose? Why?