Questions
In our class example, I simplified the “annuity” prize option by assuming level, equal annual payments....

In our class example, I simplified the “annuity” prize option by assuming level, equal annual payments. Actually, this annuity prize option is now on an annuitized prize payment schedule with 30 beginning of year payments that start at a lower amount with each successive payment being 5% higher than the previous annual payment. The sum of these 30 annuitized payments equal the announced estimated jackpot amount with a lower one-time lump-sum payment also being available as the Cash Option.

A recent Mega Millions estimated jackpot amount is $200 million which is the undiscounted sum of the 30 annuity option payments with a Cash Option of $138 million. The first payment under the Annuity Option which would occur immediately is $3,010,300 with 29 additional annual payments with each payment being 5% larger than the previous one. Using this information and assuming you demand a 3.5% annual return, would you prefer the Annuity Option or the Cash Option if you have the winning ticket? Please include the following to support your decision: 1. A complete schedule of all 30 annual payments under the Annuity Option. 2. A comparison of the present value of all the payments under the Annuity Option and the present value of the Cash Option. 3. Your decision.

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You are buying a new car. You can choose any car you want, Determine what your...

You are buying a new car. You can choose any car you want, Determine what your monthly car payments will be. *Do not forget to include tax and interest rate* include maker, model, and year of car. include sticker price, APR, and tax rate. Show all the work for determing cost. include thorough explanation for how monthly payments were determined. Compare at least two different plans such as one with down payment versus one without.

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Research the financial press (online media) to find two companies that merged within the last 5...

Research the financial press (online media) to find two companies that merged within the last 5 years. Determine or estimate the following:

(maybe the companies, Saudi Aramco and SABIC)

  1. Summarize the chronology of events from the first offer that was made by the acquiring firm until the final acquisition was agreed. Include information about other firms that were involved, even in an indirect manner (for example, where there any “white knights” out there?) and the potential synergies that drove the merger, if any.
  2. Was the deal 1) all equity, 2) all cash, or 3) a combination thereof?
  3. Consider your answer to part (c). Is this a taxable event to 1) the target firm’s existing shareholders, and 2) the acquiring firm’s existing shareholders?
  4. Was there a premium offered for the shares of the target firm? If so, try to approximate it
    .

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You are considering investing in a real estate project which has an asking price of $30,000....

You are considering investing in a real estate project which has an asking price of $30,000. The project is expected to generate annual cash flows to you of: $4,500 in year 1, $5,000 in years 2-5, $8,000 in year 6 and $19,000 in year 7. Your required rate of return for projects with similar risk is 12% annually.

  1.          What is the investment value of this property?
  1.          What is the NPV of this investment opportunity?
  1.          What is the IRR of this investment opportunity?

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Compute ROE and RNOA with Disaggregation Selected balance sheet and income statement information for Home Depot...

Compute ROE and RNOA with Disaggregation
Selected balance sheet and income statement information for Home Depot follows.

$ millions Jan. 31, 2016 Feb. 01, 2015
Operating assets $40,333 $38,223
Nonoperating assets 2,216 1,723
Total assets 42,549 39,946
Operating liabilities 14,918 13,427
Nonoperating liabilities 21,315 17,197
Total liabilities 36,233 30,624
Total stockholders' equity 6,316 9,322
Sales 88,519
Net operating profit before tax (NOPBT) 11,774
Nonoperting expense before tax 753
Tax expense 4,012
Net income 7,009


Round all answers to two decimal places (ex: 0.12345 = 12.35%)

a. Compute return on equity.
Answer%

b. Compute return on net operating assets (RNOA).
Answer%

c. Use ROE and RNOA to determine the nonoperating return for the year.
Answer%

d. Disaggregate RNOA into components of profitability and productivity and show that the product of the two components equals RNOA. Assume a statutory tax rate of 37%.
NOPM Answer%
NOAT Answer
RNOA Answer%

Most important, I can not figure out D

In: Finance

Chapter 11 Mini Case, Capital Budgeting, Capital Rationing, and Cash Flow It’s been 2 months since...

Chapter 11 Mini Case, Capital Budgeting, Capital Rationing, and Cash Flow It’s been 2 months since you took a position as an assistant financial analyst at Caledonia Products. Although your boss has been pleased with your work, he is still a bit hesitant about unleashing you without supervision. Your next assignment involves both the calculation of the cash flows associated with a new investment under consideration and the evaluation of several mutually exclusive projects. Given your lack of tenure at Caledonia, you have been asked not only to provide a recommendation but also to respond to a number of questions aimed at judging your understanding of the capital-budgeting process. The memorandum you received outlining your assignment follows: To: The Assistant Financial Analyst From: Mr. V. Morrison, CEO, Caledonia Products Re: Cash Flow Analysis and Capital Rationing We are considering the introduction of a new product. Currently we are in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital. This project is expected to last 5 years and then, because this is somewhat of a fad product, be terminated. The following information describes the new project: Cost of new plant and equipment: $7,900,000 Shipping and installation costs: $100,000 Sales price per unit: $300/unit in years 1 through 4, $260/unit in year 5 Variable cost per unit: $180/unit Annual fixed costs: $200,000 per year in years 1–5 Working-capital requirements: There will be an initial working-capital requirement of $100,000 just to get production started. For each year, the total investment in net working capital will be equal to 10 percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 through 3, then decrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5. Use the simplified straight-line method over 5 years. Assume that the plant and equipment will have no salvage value after 5 years. Year Units Sold 1 70,000 2 120,000 3 140,000 4 80,000 5 60,000 The purpose/risk classes and preassigned required rates of return are as follows: • Replacement decision 12% • Modification or expansion of existing product line 15% • Project unrelated to current operations 18% • Research and development operations 20% a. Should Caledonia focus on cash flows or accounting profits in making its capital-budgeting decisions? Should the company be interested in incremental cash flows, incremental profits, total free cash flows, or total profits? b. How does depreciation affect free cash flows? c. How do sunk costs affect the determination of cash flows? d. What is the project’s initial outlay? e. What are the differential cash flows over the project’s life? f. What is the terminal cash flow? g. Draw a cash-flow diagram for this project. h. What is its net present value? i. What is its internal rate of return? j. What is its modified internal rate of return? NEW QUESTION k. Should the project be accepted? Why or why not? l. In capital budgeting, risk can be measured from three perspectives. What are those three measures of a project’s risk? m. According to the CAPM, which measurement of a project’s risk is relevant? What complications does reality introduce into the CAPM view of risk, and what does that mean for our view of the relevant measure of a project’s risk? Please delete this question. m. Explain how simulation works. What is the value in using a simulation approach? n. What is sensitivity analysis and what is its purpose?

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1. Should companies impose their corporate values on employees? 2. Should a company be held responsible...

1. Should companies impose their corporate values on employees?

2. Should a company be held responsible for the actions of its investors or does a duty to shareholders trump such ethical questions?

3. Should companies reject investors that they perceive as misaligned with their values?

4. Is it a corporation’s role to take a public stance on a political situation?

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(Estimated time allowance: 4 minutes) Pera Inc. is planning to buy a piece of equipment that...

(Estimated time allowance: 4 minutes) Pera Inc. is planning to buy a piece of equipment that can be used in a 9-year project. The equipment costs $2,000,000; has a tax life of 10 years, and is depreciated using the straight-line method. The equipment can be sold at the end of 9 years for $200,000. If the marginal tax rate is 20 percent, what is termination value of the equipment (the after-tax cash flow from the sale of this asset)? PLEASE SHOW ALL STEPS!!

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Manzana Inc. is buying a piece of equipment. The equipment costs $1,000,000. The equipment is considered...

Manzana Inc. is buying a piece of equipment. The equipment costs $1,000,000. The equipment is considered for tax purposes as a 5-year MACRS class. If the equipment is sold at the end of 4 years for $200,000, what is termination value of the equipment (the after-tax cash flow from the sale of this asset)? The marginal tax rate is 20 percent. The Annual expense percentage for a 5-year MACRS property from year 1 to 6 respectively are: 20.00%; 32.00%; 19.20%; 11.52%; 11.52: and 5.76%. PLEASE SHOW ALL STEPS!!

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8.You save $2000 a year into a 401(k) account that you invest in a mutual fund...

8.You save $2000 a year into a 401(k) account that you invest in a mutual fund earning 9% per year. You plan to retire in 35 years. How much money will you have in your account at retirement?

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Ivanka maintains an aggressive investment posture including margin trading. She currently holds a $100,000 diversified stock...

Ivanka maintains an aggressive investment posture including margin trading. She currently holds a $100,000 diversified stock portfolio in her margin account. The account has a debit balance of $40,000. She believes T. Enterprises, which is selling at $20 per share, is about to soar to at least $50 per share in the next year. The company pays no dividends. The initial margin requirement is 50% and margin loans charge 10%.

  1. Suppose Ivanka decides to buy 1000 shares of T. Enterprises. Bear in mind this is a $20,000 transaction.
    1. What is her current (before the purchase or T. Enterprises) margin?
    1. Suppose she pays cash, what is the new margin in her account?
    1. What is her new margin position after the transaction if she uses $5,000 of her own money and obtains a $15,000 margin loan for the balance?
    1. Explain why in part c Ivanka can purchase the stock while putting up only 25% of the transaction ($5,000/20,000) and borrows the rest when the initial requirement is 50%
    1. Suppose she finances the new stock completely on the margin that is, she puts up no money and borrows the full purchase price. What is her account’s new margin?
    1. Explain why both d and e involve pyramiding.

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P4-15 (similar to) Multiple cash budgetslong dash—Scenario analysis   ​Brownstein, Inc., expects sales of $101,000 during each...

P4-15 (similar to)

Multiple cash

budgetslong dash—Scenario

analysis   ​Brownstein, Inc., expects sales of $101,000 during each of the next 3 months. It will make monthly purchases of $56,000 during this time. Wages and salaries are $ 10,000 per month plus 6 %of sales. Brownstein expects to make a tax payment of $25,000 in the next month and a $19,000 purchase of fixed assets in the second month and to receive $8,000 in cash from the sale of an asset in the third month. All sales and purchases are for cash. Beginning cash and the minimum cash balance are assumed to be zero.

a. Construct a cash budget for the next 3 months.

b. Brownstein is unsure of the sales​ levels, but all other figures are certain. If the most pessimistic sales figure is $81,000

per month and the most optimistic is $121,000 per​ month, what are the monthly minimum and maximum ending cash balances that the firm can expect for each of the​ 1-month periods?

c. Briefly discuss how the financial manager can use the data in parts a. and b. to plan for financing needs.

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A japanese comapny has a bond outstanding that sells for 91.53 percent of its 100,000 par...

A japanese comapny has a bond outstanding that sells for 91.53 percent of its 100,000 par value. The bond has a coupon rate of 3.4 percent paid annually and matures in 16 years. What is the yield to maturity of this bond?

Settlement date = 1/1/2000

Maturity date = 1/1/2016

Annual coupon rate = 3.4%

Coupons per year = 1

Face value (% of par) = 100

Bond price (% of par) = 91.530

Face value = 100,000

Please answer in exel format: =Yeild(settlement, matruity, rate, pr, redemption, frequency)

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Do you think it makes sense to do a seed round of financing? Why or why...

Do you think it makes sense to do a seed round of financing? Why or why not?

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Project Analysis: You are considering a new product launch. The project will cost $760,000, have a...

Project Analysis: You are considering a new product launch. The project will cost $760,000, have a four year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 420 units per year; price per unit will be $17,200; variable cost per unit will be $14,300; and fixed costs will be $640,000 per year. The required return on the project is 15 percent, and the relevant tax rate is 35 percent.

a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within +- 10 percent. What are the upper and lower bounds for these projections? What is the base case NPV? What are the best case and worst case scenarios?

b. Evaluate the sensitivity of your base case NPV to changes in fixed costs.

c. What is the accounting break even level of output for this project?

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