McCarver Inc. is considering the following mutually exclusive projects:

At what cost of capital will the net present value of the two projects be the same? (That is, what is the "crossover" rate?) (3 points)

What is the present value of a 6-yr annuity with annual payments of $1,012, paid at the beginning of each year, and evaluated at a 10.5 percent interest rate, which is compounded quarterly? Please show financial calculator key strokes.

uno's has projected its Q1 sales at $46,000 and its Q2 sales at $48,000. Purchases equal 71 percent of the next quarter's sales. The accounts receivable period is 30 days and the accounts payable period is 45 days. At the beginning of Q1, the accounts receivable balance is $12,200 and the accounts payable balance is $14,800. The firm pays $1,500 a month in cash expenses and $400 a month in taxes. At the beginning Q1, the cash balance is $280 and the short-term loan balance is zero. The firm maintains a minimum cash balance of $250. Assume each month has 30 days. What is the cumulative cash surplus (deficit) at the end of the Q1, prior to any short-term borrowing?

Multiple Choice

• $8,880

• $8,633

• $9,157

• $9,210

• $9,684

• Sunny Disposition, Inc. has net working capital of $32,500, current assets of $59,000, equity of $74,500, and long-term debt of $42,500. What is the amount of the net fixed assets?

  Multiple Choice

• $84,500

• $94,600

• $111,000

• $58,000

• $63,900

Holiday Tree Farm has a cash balance of $34 and a short-term loan balance of $180 at the beginning of Q1. The net cash inflow for the first quarter is $36 and for the second quarter there is a net cash outflow of $48. All cash shortfalls are funded with short-term debt. The firm pays 2 percent of its prior quarter's ending loan balance as interest each quarter. The minimum cash balance is $20. What is the short-term loan balance at the end of Q2?

Multiple Choice

• $184.3

• $193.1

• $128.4

• $138.6

• $179.2

• Which statement is true?

  Multiple Choice

• The number of days in the cash cycle can be positive, negative, or equal to zero.

• Paying a supplier within the discount period rather than waiting until the end of the normal credit period will decrease the cash cycle.

• An increase in the inventory turnover rate must increase the cash cycle.

• The payables period must be shorter than the receivables period.

• A decrease in the accounts receivable turnover rate decreases the cash cycle.

Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $4 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2016, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 7%.

Assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent.

= $

Why is this AFN different from the one when the company pays dividends?

A. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of additional funds needed.

B. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of assets needed.

C. Under this scenario the company would have a higher level of spontaneous liabilities, which would reduce the amount of additional funds needed.

D. Under this scenario the company would have a lower level of retained earnings, which would increase the amount of additional funds needed.

E. Under this scenario the company would have a lower level of retained earnings, which would decrease the amount of additional funds needed.

Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $4 million as a result of an asset expansion presently being undertaken. Fixed assets total $2 million, and the firm plans to maintain a 50% debt-to-assets ratio. Rentz's interest rate is currently 9% on both short-term and long-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current assets level are under consideration: (1) a restricted policy where current assets would be only 45% of projected sales, (2) a moderate policy where current assets would be 50% of sales, and (3) a relaxed policy where current assets would be 60% of sales. Earnings before interest and taxes should be 12% of total sales, and the federal-plus-state tax rate is 40%.

What is the expected return on equity under each current assets level? Round your answers to two decimal places

Restricted policy= %

Moderate policy= %

Relaxed policy= %

In this problem, we assume that expected sales are independent of the current assets investment policy. Is this a valid assumption?

A. No, this assumption would probably not be valid in a real world situation. A firm's current asset policies may have a significant effect on sales.

B. Yes, this assumption would probably be valid in a real world situation. A firm's current asset policies have no significant effect on sales.

C. Yes, sales are controlled only by the degree of marketing effort the firm uses, irrespective of the current asset policies it employs.

D. Yes, the current asset policies followed by the firm mainly influence the level of long-term debt used by the firm.

E. Yes, the current asset policies followed by the firm mainly influence the level of fixed assets.

How would the firm's risk be affected by the different policies?

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Your company is considering a new project that will require $10,000 of new equipment at the start of the project. The equipment will have a depreciable life of five years and will be depreciated to a book value of $3,000 using straight-line depreciation. The cost of capital is 9 percent, and the firm's tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation. SHOW YOUR WORK

4. According to the Pecking Order Theory of Stewart Myers, what is the pecking order that managers should follow in raising capital for investment? What exactly is the “cost” that Myers argues that managers should consider in raising capital, and why this is the relevant concern? Roughly, describe the magnitudes of these costs associated with the issue of various types of securities in the pecking order. Describe the Lemon Problem, advanced by George Akerloff, when there is informational asymmetry between two parties. When there are informational inefficiencies in markets, Myers argues that corporate actions send important signals to market participants. Describe the signals that stock issues and bond issues might send to markets about the firms’ prospects and explain why. Correspondingly, how do markets react to announcements of these two types of security issues?

Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $15 million in invested capital, has $3 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 60% and pays 11% interest on its debt, whereas LL has a 40% debt-to-capital ratio and pays only 10% interest on its debt. Neither firm uses preferred stock in its capital structure.

Calculate the return on invested capital (ROIC) for each firm. Round your answers to two decimal places.

ROIC for firm LL is %

ROIC for firm HL is %

Calculate the rate of return on equity (ROE) for each firm. Round your answers to two decimal places.

ROE for firm LL is %

ROE for firm HL is %

Observing that HL has a higher ROE, LL's treasurer is thinking of raising the debt-to-capital ratio from 40% to 60% even though that would increase LL's interest rate on all debt to 15%. Calculate the new ROE for LL. Round your answer to two decimal places.

Table below presents information on three US Treasury bonds:

Use this information to answer the following questions:

Suppose that US Treasury plans to issue 5% coupon bonds, which pay semi-annual coupons. The bonds will mature in 18 months. What is the price of these bonds?

Table below presents information on three US Treasury bonds:

Use this information to answer the following questions:

1. Is term structure increasing or decreasing? Please provide the explanation for the main reason for the term structure being increasing or decreasing.

Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $24.00 million. The plant and equipment will be depreciated over 10 years to a book value of $3.00 million, and sold for that amount in year 10. Net working capital will increase by $1.18 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.43 million per year and cost $2.27 million per year over the 10-year life of the project. Marketing estimates 13.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 35.00%. The WACC is 10.00%. Find the IRR (internal rate of return).

Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))

Just wanted to know that I'm doing the process right. thanks

You plan to retire 31 years from now. You expect that you will live 25 years after retiring. You want to have enough money upon reaching retirement age to withdraw $150,000 from the account at the beginning of each year you expect to live, and yet still have $2,700,000 left in the account at the time of your expected death (56 years from now). You plan to accumulate the retirement fund by making equal annual deposits at the end of each year for the next 31 years. You expect that you will be able to earn 13% per year on your deposits. However, you only expect to earn 9% per year on your investment after you retire since you will choose to place the money in less risky investments. What equal annual deposits must you make each year to reach your retirement goal?

Question 18 options:

Costly Corporation plans a new issue of bonds with a par value of $1000, a maturity of 21 years, and an annual coupon rate of 9.0%. Flotation costs associated with a new debt issue would equal 7.0% of the market value of the bonds. Currently, the appropriate discount rate for bonds of firms similar to Costly is 12.0%. The firm's marginal tax rate is 30%. What will the firm's true cost of debt be for this new bond issue?

Question 24 options: