Parramore Corp has $12 million of sales, $3 million of inventories, $2.5 million of receivables, and $1 million of payables. Its cost of goods sold is 85% of sales, and it finances working capital with bank loans at an 8% rate. Assume 365 days in year for your calculations.

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 10% each and increase its payables by 10%, 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 10% each and increase its payables by 10%, all without affecting sales or cost of goods sold? Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000. Do not round intermediate calculations. Round your answer to the nearest dollar.
   $  
4. By how much would pretax profits change, if Parramore could lower its inventories and receivables by 10% each and increase its payables by 10%, all without affecting sales or cost of goods sold? Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000. Do not round intermediate calculations. Round your answer to the nearest dollar.
   $  

Meacham Corp. wants to raise financing to purchase a competitor. It can issue 12 year bonds with a 9% annual coupon for $1090 and will incur debt flotation costs of $15 per bond.

The company can sell additional equity shares to the public for $30 per share and estimates its equity flotation costs will be $3 per share. Meacham paid a $4 per share dividend yesterday and expects is dividends to grow 7% annually. The company is targeting a capital structure of 40% debt and 60% common equity and has a 35% marginal tax rate.

Calculate the company's WACC.

Prokter and Gramble​ (PKGR) has historically maintained a​ debt-equity ratio of approximately 0.17. Its current stock price is $ 46 per​ share, with 2.4 billion shares outstanding. The firm enjoys very stable demand for its​ products, and consequently it has a low equity beta of 0.425 and can borrow at 4.5​%, just 20 basis points over the​ risk-free rate of 4.3​%. The expected return of the market is 9.8​%, and​ PKGR's tax rate is 30​%.

a. This​ year, PKGR is expected to have free cash flows of ​$6.3 billion. What constant expected growth rate of free cash flow is consistent with its current stock​ price?

b. PKGR believes it can increase debt without any serious risk of distress or other costs. With a higher​ debt-equity ratio of 0.425​, it believes its borrowing costs will rise only slightly to 4.8​%. If PKGR announces that it will raise its​ debt-equity ratio to 0.425 through a leveraged​ recap, determine the increase or decrease in the stock price that would result from the anticipated tax savings.

You are graduating from college at the end of this semester and after reading the The Business of Life box in this​ chapter, you have decided to invest ​$5,600 at the end of each year into a Roth IRA for the next 41 years. If you earn 10 percent compounded annually on your​ investment, how much will you have when you retire in 41 ​years? How much will you have if you wait 10 years before beginning to save and only make 31 payments into your retirement​ account?

Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below:

Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

What is the product margin for Product M5 under activity-based costing?

Suppose​ Alcatel-Lucent has an equity cost of capital of 10.6 %​, market capitalization of $ 11.20 ​billion, and an enterprise value of $ 14 billion. Assume​ Alcatel-Lucent's debt cost of capital is 6.6 %​, its marginal tax rate is 35 %​, the WACC is 9.34 %​, and it maintains a constant​ debt-equity ratio. The firm has a project with average risk. Expected free cash​ flow, debt​ capacity, and interest payments are shown in the​ table:

a. What is the free cash flow to equity for this​ project?

b. What is its NPV computed using the FTE​ method? How does it compare with the NPV based on the WACC​ method?

Solar Engines manufactures solar engines for tractor-trailers. Given the fuel savings available, new orders for 140 units have been made by customers requesting credit. The variable cost is $9,800 per unit, and the credit price is $12,000 each. Credit is extended for one period. The required return is 1.9 percent per period. If Solar Engines extends credit, it expects that 15 percent of the customers will be repeat customers and place the same order every period forever and the remaining customers will be one-time orders. Calculate the NPV of the decision to grant credit. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

NPV $

Assume that the data are representative of the future so that the returns obtained on firm A and the S&P 500 are the same as their expected returns. Complete the following questions:

a. The S&P 500 is a measure of the market. The market is average (by definition), so what is its beta?

b. The risk-free assets has no risk (by definition), so what is its beta?

c. Firm A, the S&P 500, and the risk-free asset should all be on the SML. The expected return for the risk-free asset can be calculated using the Forecast function. The X is risk-free beta, the known Ys are the returns on firm A and the S&P 500, and the known Xs are the betas for the same two.

d. Calculate the market risk premium.

e. From the results of (c) and (d) give the equation of the SML.

f. Use the SML from d to calculate the expected return on asset B in the return column in the first row for firm B.

g. Firm A the S&P 500, and the risk-free asset should all be on the SML. The return for firm B can also be calculated using the Forecast function. The X is firm B's beta, the known Ys are the returns on firm A, the S&P 500, and the risk-free asset, and the known Xs are the betas for the same three. Put the Forecast calculation in the return column in the second row for firm B. Is the result the same as (e).

MIRR

A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:

The projects are equally risky, and their WACC is 10%. What is the MIRR of the project that maximizes shareholder value? Round your answer to two decimal places. Do not round your intermediate calculations.

1. Many of the concepts you have studied in finance rely implicitly on efficient markets, i.e., capital budgeting, the relationship between risk and return, asset allocation and even the rule that managers should try maximize shareholder wealth. However, there is a great deal of evidence over the last 30 years that markets may not be efficient and thus these concepts may not hold empirically. Take one idea from what you learned in behavioral finance use it to explain why markets may not be efficient.

Greetings all

I’m developing a financial report regarding a specific company. The following part is something I wrote which my instructor said it is totally wrong with no further explanation. Please can anyone help me know did I do something wrong here when it comes to my interpretation.

1. MARKET-TO-BOOK RATIO VS YEAR

The market to book in 2015 was 1.02 (approximately 1) which means the company is almost accurately valued. However, in 2016, the value decreased to 0.88 which indicated that the company’s price is overvalued. The ratio increased again until it reached 1.16 in 2018. This ratio doesn’t include the intangible assets which can tremendously affect the valuation of the company.

Regards

IRR AND NPV

A company is analyzing two mutually exclusive projects, S and L, with the following cash flows:

The company's WACC is 9.0%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places.

1. Explain asymmetric loss aversions and how it impacts financial decisions? Explain the law of small numbers and how it impacts financial decisions?

CAPITAL BUDGETING CRITERIA

A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

1. Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations.
   Project M    $
   Project N    $

   Calculate IRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

   Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

2. Assuming the projects are independent, which one(s) would you recommend?
   -Select-Only Project M would be accepted because IRR(M) > IRR(N).Both projects would be rejected since both of their NPV's are negative.Only Project M would be accepted because NPV(M) > NPV(N).Only Project N would be accepted because NPV(N) > NPV(M).Both projects would be accepted since both of their NPV's are positive.Item 11
3. If the projects are mutually exclusive, which would you recommend?
   -Select-If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project N.If the projects are mutually exclusive, the project with the highest positive NPV is chosen. Accept Project N.If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the highest positive MIRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the shortest Payback Period is chosen. Accept Project M.Item 12
4. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?
   -Select-There is no conflict between NPV and IRR.The conflict between NPV and IRR occurs due to the difference in the size of the projects.The conflict between NPV and IRR is due to the relatively high discount rate.The conflict between NPV and IRR is due to the fact that the cash flows are in the form of an annuity.The conflict between NPV and IRR is due to the difference in the timing of the cash flows.Item 13