A)You have just taken a 30-year mortgage loan for $260,000. The annual percentage rate on the loan is 4.25%, and payments will be made monthly. Estimate your monthly payments. Assume compounding is monthly. Prepare an amortization table.

B) At age 30, Susan starts investing $18,000 per year with the investments at the end of each year. She does this for 9 years. She never invests any more but she leaves this money in the no-load mutual fund. The fund earns 8% per year. Calculate the value of the fund when Ann is 65. Assume compounding is annually.

C) For question B above, assuming Ann makes equal withdrawals from her retirement account at the end of each year from age 65 to age 85, how much does she withdraw to bring the fund to zero?

Explain why some bonds sell at a premum over par value while other bond sell at a discount?

Statement of Shareholders' Equity

On January 1, 2016 the Knox Company showed the following alphabetical list of Shareholders' Equity balances:

During 2016, the following events occurred and were properly recorded by the company:

Knox purchased an investment in available-for-sale securities. At year-end, the fair value of the securities had increased by $9,000.

Knox issued 2,000 shares of common stock for $25 per share.

Knox issued 110 shares of preferred stock for $116 per share.

Knox reacquired 400 shares of its common stock as treasury stock at a cost of $26 per share. (Hint: Record the reacquisition cost in a Treasury Stock account.)

Knox earned net income of $57,000.

Knox paid a $7 per share dividend on the preferred stock and a $1.25 per share dividend on the common stock outstanding at the end of 2016 (treasury stock is not entitled to dividends).

Required:

Prepare a statement of shareholders' equity for 2016, including retained earnings.

Assume that 8 years ago you borrowed $200,000 as a 30-year mortgage on your home with an annual percentage rate of 7% at monthly payments (12 payments per year). You plan to refinance this mortgage with a new 30 year low at the current rate of 5%.

a. What is the monthly payment of the original mortgage.

b. How much do you still owe of the original principal after seven years? (Hint: for a loan that is amortized, like a mortgage, the amount you still owe at any time is the present value of the remaining payments that have not yet been made).

c. How much money can you borrow now at the new interest rate if you keep the same monthly payments as the original mortgage?

1. Your local lender offers you a fixed-rate mortgage with the following terms: $200,000 at 5.50% for 30 years, monthly payments. The lender will charge you two discount points and the loan has a 4% prepayment penalty.

   A. (1 pt) What is the annual percentage rate (APR) of the loan?

   B. (1 pt) How many points are required to yield an APR of 5.75%?

2. Suppose you take a fixed-rate mortgage for $175,000 at 4.50% for 30 years, monthly payments.

   A. (1 pt) How much of the payment is interest for month 100?

B. (1 pt) How much total interest do you pay in the first six years?

3. Suppose you take a $250,000 thirty-year fixed-rate mortgage at 5.25%, two discount points, monthly payments. At the end of the first year you inherit $20,000 from your now-favorite aunt. You decide to apply this $20,000 to the principal balance of your loan.

   1. (1 pt) How many monthly payments are remaining after the extra lump sum payment is made?

   2. (1 pt) What is your net interest savings over the life of the loan, assuming the loan is held to its maturity?

4. You just took a fixed-rate mortgage for $200,000 at 4.50% for 30 years, monthly payments, two discount points. Before you make any payments you receive a nice raise so you plan to pay an extra $160 per month on top of your normal payment.

   1. (1 pt) How many monthly payments do have to make at the higher payment to fully amortize the loan?

   2. (1 pt) What is your net interest savings over the life of the loan, assuming the loan is held to its maturity?

   3. (1 pt) If you make this higher payment and hold the loan for its full life, what is the effective cost of the loan?

5. Suppose you take a 30 year fixed-rate mortgage for $180,000 at 6.25%, monthly payments with a two discount point rebate (negative discount points) to the borrower. Assume that you have no other financing fees.

A. (1 pt) What is the APR of the loan?

B. (1 pt) What is the effective cost with a five-year holding period?

6. Suppose you borrow $200,000 at 5% for 30 years, monthly payments. You pay 2 discount points.

A. (1 pt) Your APR on this loan is 5.375%. What amount of other financing fees did you pay?

B. (1 pt) Suppose that your effective cost over a five-year holding period is 5.625%. What amount of other fees did you pay?

7. Suppose you borrow $150,000 at 6% for 30 years, monthly payments with two discount points. Your mortgage contract includes a prepayment penalty of 4% over the entire loan term.

A. (1 pt) What is the APR of this loan?

B. (1 pt) What is the effective cost if you prepay the loan at the end of year five?

Please include the calculator solutions (Ex. N=, PMT=, PV=)

 Personal finance problem   Gina Vitale has just contracted to sell a small parcel of land that she inherited a few years ago. The buyer is willing to pay

​$24 , 000

​now, or the buyer will make a series of payments starting now and continuing at annual intervals shown in the following​ table,

LOADING...

.

Because Gina​ doesn't really need the money​ today, she plans to let it accumulate in an account that earns

77​%

annual interest. Given her desire to buy a house five years after selling the​ lot, she decides to choose the payment

alternativelong dash—either the lump sum or the mixed streamlong dash—that

provides the higher future value at the end of 5 years. Which alternative will she​ choose?

Begining of the year/ Cash flow

0 $2000

1 $4000

2 $6000

3 $8000

4 $10,000

The future​ value, FV Subscript nFVn​, of the lump sum deposit is

The future value of the mixed stream of payments is

​

You have an outstanding student loan with required payments of $ 500 per month for the next four years. The interest rate on the loan is 9 %APR​ (compounded monthly). Now that you realize your best investment is to prepay your student​ loan, you decide to prepay as much as you can each month. Looking at your​ budget, you can afford to pay an extra $ 250 a month in addition to your required monthly payments of $ 500 or $ 750 in total each month. How long will it take you to pay off the​ loan? ​

Note: Be careful not to round any intermediate steps less than six decimal​ places.)

The number of months to pay off the loan is

Suppose you intend to purchase a new car after you graduate. You expect to put $5,000 down and finance the balance over a 5-year period. The maximum amount you are willing to pay each month is $600. What is the maximum price you can pay for the car in other words, how much you can afford to pay for the car, assuming an interest rate of 8% per year, compounded monthly?

Common text for questions 3 and 4:

An investor buys three shares of XYZ at the beginning of 2002 for $100 apiece. After one year, the share price has increased to $110 and he receives a dividend per share of $4. Right after receiving the dividend, he buys two additional shares at $110. After another year, the share price has dropped to $90, but the investor still receives a dividend per share of $4. Right after receiving the dividend, he sells one share at $90. After another year, the share price has gone up to $95, the investor receives a dividend per share of $4 and sells all shares at $95 immediately after receiving dividends.

3. What are the arithmetic and geometric average time-weighted rates of return and what is the dollar-weighted rate of return of the investor in the above example (for the dollar-weighted return assume that (i) the cash flows from dividends received at the end of a given year are based on the number of shares held at the beginning of that year, and (ii) cash flows from dividends occur on the same day as the cash flows from buying and selling shares)?

4. Why is the dollar-weighted average rate of return in the above example lower than the geometric average rate of return?

You are considering an investment in a mutual fund with a 3% load and an expense ratio of 1.2%. You can invest instead in a bank CD paying 5% interest.

c. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 1.45% per year. What annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

The wealth of an economy is generated by real assets. The availability of tradable financial assets has no effect on the wealth of an economy. Do you agree? Why or why not?

At the end of the year ABC Company reported long-term debt of $3,974 million and the current portion of long-term debt of $219 million. At the end of the prior year they reported long-term debt of $3,503 million and the current portion of long-term debt of $268 million. How much (in $ millions) did the company receive from issuing new long-term debt or pay off any existing debt? If they issued debt, enter your answer as a positive number; if they repaid debt, be certain to place a negative sign in front of your answer. (please show all steps)

what is apple inc Naics code and why does it appear that there are conflicting numbers on the internet?

Keeping Score: Financial Analysis and Performance Metrics

Cannibalization Analysis

What is Cannibalization?

Cannibalization results when the sales of a new product in part come from sales taken away from other products sold by that firm. Cannibalization most commonly occurs when a firm introduces a new flanker brand or line extension into the same product line in which it already has brand representation. For example, when Proctor & Gamble introduces a new brand of laundry detergent into its extensive line of detergents, some sales for the new brand will highly likely come at the expense of one or more of P&G’s existing brands of laundry detergent. In other words, the sales of P&G’s existing brand of laundry detergents will be cannibalized to support sales of the new brand.

The effects of cannibalization can be good or bad, depending on the overall effect on profitability for both the new brand and the cannibalized brands. Determining the effects on profitability are relatively easy. Let’s examine a simple example of how it works. Assume two brands of mouthwash produced by the same firm (P&G?). Relevant price and cost data for these brands are below. Brand A is currently sold at $1.00 per unit with associated variable costs per unit of $.60. Brand B, the new brand to be introduced, sells for a little less, say $.95 per unit. Its costs per unit are the same as for Brand A i.e. $.60 per unit. Note that the resulting unit contribution for Brand B (price minus unit variable costs) is $.35 which is $.05 less than the unit contribution for Brand A. This means that for each unit of Brand A that is cannibalized by Brand B, the firm loses $.05 in contribution.

Assume that management anticipates that when Brand B is launched, 20% of its sales will come from sales that would have been for Brand A. In other words, 20% of Brand B’s sales will be cannibalized from the sales of Brand A. The net effect of this cannibalization on profits is easily found by comparing the contribution (gross profit) assuming Brand B is not launched (and therefore no cannibalization occurs) with the contribution (gross profit) expected from the launch of Brand B with the expected level of cannibalization.

Here is how the analysis proceeds. First, compute the expected contribution from the sales of Brand A with no cannibalization (i.e. Brand B is not launched). Assume that Brand A’s sales without the introduction of Brand B are expected to be 1,000 units. Since the unit contribution for Brand A is $.40 per unit, the overall resulting contribution (gross profit) will be 1,000 x $.40 = $400.00. Easy!

Next, compute the expected contribution dollars assuming that Brand B is launched and the expected level of cannibalization occurs. Here is how this part proceeds. Assume that Brand B is expected to sell only 500 units initially and that 20% of these sales will come from Brand A (i.e. 20% of 500 equals 100 units that will be cannibalized from Brand A.). The table below summarizes the computations. Since 100 units will be cannibalized from Brand A’s sales, the brand will now sell only 900 units. Since the profit per unit (unit contribution) is $.40, the resulting total contribution dollars from the sales of Brand A will be 900 x $ .40 = $360.00. Brand B is expected to sell 500 units in total, with 100 of these units being cannibalized from Brand A. Therefore, Brand B’s contribution dollars will be 100 units x $.35 = $35.00 plus 400 units x $.35 = $140.00 for an overall contribution of $535.00.

The net change in contribution dollars if Brand B is introduced is $535 - $400 = $135. Thus, contribution dollars are expected to increase by $135 with the addition of Brand B to the product line of mouthwashes. Should the new brand be launched? The answer is clearly YES. Had overall contribution dollars declined due to cannibalization then the decision would have been NO.

You should also be aware by now that cannibalization will only be problematic, potentially reducing dollar contribution, if the unit contribution for the new product is less than the unit contribution for the old product. The greater the difference between the unit contributions the greater the impact will be of any cannibalization of the old brand by the new brand. You can verify this for yourself if you have built a spreadsheet to run your calculations.

Now It’s Your Turn. Show Us What You Have Learned.

Returning to our running case for Shannon’s Brewery introduced in the market share exercise, assume that Shannon’s is considering the introduction of a new craft beer called Irish Stout that will be derived from its award winning Irish Red. Initially, Irish Stout will only be sold “on premise” at the brewery. Currently, pints of Irish Red consumed on premise sell for $5.00 per pint with unit variable costs of approximately $2.75 per pint. Variable costs are predominantly comprised of the costs of ingredients and utilities that directly affect the brewing process. The new craft beer will be positioned at a slightly higher price, $5.25 per pint and its unit variable costs will be about $3.25 due to the higher cost of some ingredients. The relevant price, cost, and margin data are below.

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Question 1

Shannon’s Irish Red averages on premise sales of 1,200 pints per month. What is the anticipated profit (contribution dollars) per month associated with sales of Shannon’s Irish Red assuming that the Irish Stout is not introduced. Express your answer to the nearest dollar. Do not include the dollar sign.

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Question 2

Assume that Shannon’s estimates that the sales of the new Irish Stout will be about 250 pints per month, but 25% of these sales will be cannibalized from sales of Shannon’s Irish Red. Compute the total combined increase in contribution dollars for both Irish Red and Irish Stout expected with cannibalization . Express your answer to the nearest dollar. Do not include the dollar sign.

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Question 3

1. Let’s stretch a little on this one. Assume Shannon’s Irish Red sells 1,000 pints per month in the absence of any cannibalization. Assume also that the new Irish Stout will sell 500 pints per month. The relevant price and cost data are:

What will be the maximum percentage cannibalization that can exist before the overall change in contribution dollars becomes negative? Express your answer in percentage form to the nearest percent e.g.; 99.49% rounds down to99%; 99.50% rounds up to 100%. Do not include the % symbol.