5.22

                        Year 0             Year 1            Year 2             Year 3             Year 4

Project A         (4,000,000)     1,600,000       1,800,000        2,000,000        2,100,000

Project B         (4,200,000)     500,000          1,700,000        1,900,000        2,000,000

The cost of capital for Project A is assumed to be 14%.

For Project B, which is the riskier project of the two, a risk-adjusted cost of capital of 15% is applied.

(a) Assess the projects using the investment appraisal technique of Net Present Value.

(b) Assess them using the investment appraisal technique of Internal Rate of Return.

You are evaluating two different silicon wafer milling machines. The Techron I costs $294,000, has a 3-year life, and has pretax operating costs of $81,000 per year. The Techron II costs $510,000, has a 5-year life, and has pretax operating costs of $48,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $58,000. If your tax rate is 22 percent and your discount rate is 10 percent, compute the EAC for both machines.

Discuss the purpose of financial ratio analysis for internal use?

1) Please explain the following terms: savings account, basic savings account, interest bearing checking account, money market deposit accounts, and certificate of deposits

2) What is the difference between a bond and a certificate deposit

Company Q’s current return on equity (ROE) is 14%. It pays out one half of earnings as cash dividends (payout ratio = 0.5). Current book value per share is $50. Book value per share will grow as Q reinvests earnings.

Assume that the ROE and payout ratio stay constant for the next four years. After that, competition forces ROE down to 11.5% and the payout ratio increases to 0.8. The cost of capital is 11.5%.

a. What are Q’s EPS and dividends in years 1, 2, 3, 4, and 5? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. What is Q’s stock worth per share?

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment, and the firm has no excess cash. The firm has total assets of $2.6 million and net plant and equipment equals $2.3 million. It has notes payable of $145,000, long-term debt of $745,000, and total common equity of $1.55 million. The firm does have accounts payable and accruals on its balance sheet. The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet.

Write out your answers completely. For example, 25 million should be entered as 25,000,000. Negative values, if any, should be indicated by a minus sign. Round your answers to the nearest dollar, if necessary.

1. What is the company's total debt?

   $  

2. What is the amount of total liabilities and equity that appears on the firm's balance sheet?

   $  

3. What is the balance of current assets on the firm's balance sheet?

   $  

4. What is the balance of current liabilities on the firm's balance sheet?

   $  

5. What is the amount of accounts payable and accruals on its balance sheet? (Hint: Consider this as a single line item on the firm's balance sheet.)

   $  

6. What is the firm's net working capital? If your answer is zero, enter "0".

   $  

7. What is the firm's net operating working capital?

   $  

8. What is the monetary difference between your answers to part f and g?

   $  

   What does this difference indicate?

Beasley Industries' sales are expected to increase from $5 million in 2013 to $6 million in 2014, or by 20%. Its assets totaled $3 million at the end of 2013. Beasley is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2013, current liabilities are $760,000, consisting of $160,000 of accounts payable, $500,000 of notes payable, and $100,000 of accrued liabilities. Its profit margin is forecasted to be 4%, and its dividend payout ratio is 50%. Using the AFN equation, forecast the additional funds Beasley will need for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations.
$ ____

Mitchell Manufacturing Company has $1,000,000,000 in sales and $200,000,000 in fixed assets. Currently, the company's fixed assets are operating at 70% of capacity.

1. What level of sales could Mitchell have obtained if it had been operating at full capacity? Round your answer to the nearest dollar. Do not round intermediate calculations.
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2. What is Mitchell's Target fixed assets/Sales ratio? Round your answer to two decimal places. Do not round intermediate calculations.
   %
3. If Mitchell's sales increase by 60%, how large of an increase in fixed assets will the company need to meet its Target fixed assets/Sales ratio? Round your answer to the nearest dollar. Do not round intermediate calculations.
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Waste Industries is evaluating a $56,900 project with the following cash flows.

The coefficient of variation for the project is 0.443.

Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. Select the appropriate discount rate.

• 7%

• 19%

• 13%

• 9%

• 16%

b. Compute the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value: ________

c. Based on the net present value should the project be undertaken?

• No

• Yes

a firm must choose between two investment alternatives, each costing $95,000. the first alternative generates $35,000 a year for 4 years. the second pays one large lump sum of $160,800 at the end of the fourth year. if the firm can raise the required funds to make the investment at an annual cost of 9% what are the present values of two investment alternatives use appendix b and appendix d to answer the question round your answers to the nearest dollar.
PV(first alternative)=
pv(second alternative)=

which alternative should be preferred?

Can someone explain me how to calculate this on a TI-83 PLUS financial calculator...

What is the duration of a five-year, $1,000 Treasury bond with a 10 percent semiannual coupon selling at par? Selling with a yield to maturity of 12 percent? 14 percent? What can you conclude about the relationship between duration and yield to maturity? Plot the relationship. Why does this relationship exist?

Consider a company that issues a dual-currency bond with a face value of €45 million, which pays an interest rate of 3.5 percent a year in dollars. Indicate how the company can manage the risk on this bond issue and calculate the net cash flows associated with the transactions. A bond with a face value of €45 million that pays 5 percent annual interest in euros is available for purchase. The fixed rates on a currency swap are 4 percent in dollars and 4.75 percent in euros, and the exchange rate is €1.15/$.