You and your team are financial consultants who have been hired by a large, publicly traded electronics firm, Brilliant Electronics (BI), a leader in its industry. The company is looking into manufacturing its new product, a machine using sophisticated state of the art technology developed by BI’s R&D team, overseas. This overseas project will last five years. They’ve asked you to evaluate this project and to make a recommendation about whether or not the company should pursue it. BI’s management team needs your recommendation and the analysis used to arrive at it by no later than December 4, 2019.

The following market data on BI’s securities are current:

Debt: 210,000 6.4 percent coupon bonds outstanding, 25 years to maturity, selling or 108 percent of par; the bonds have $1000 par value each and make semi-annual payments

Common Stock: 8,300,000 shares outstanding, selling for $68 per share; beta=1.1

Preferred Stock: 450,000 shares of 4.5% preferred stock outstanding, selling or $81 per share

Market: 7 percent expected market risk premium; 3.5 percent risk-free rate

The company bought some land three years ago for $3.9 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. The land was appraised last week for $4.4 million on an after-tax basis.   In five years, the after-tax value of the land will be $4.8 million, but the company expects to keep the land for a future project. The company wants to build its new manufacturing plant on this land; the plant will cost $37 million to build.

At the end of the project (the end of year 5), the plant can be scrapped for $5.1 million. The manufacturing plant will be depreciated using the straight line method.

The company will incur $6,700,000 in annual fixed costs excluding depreciation. The plan is to manufacture 15,300 machines per year and sell them at $11,450 per machine; the variable production costs are $9,500 per machine. Selling price and costs are expected to remain unchanged over the life of the project.

BI uses PK Global (PKG) as its lead underwriter. PKG charges BI spreads of 8% on new common stock issues, 6% on new preferred stock issues, and 4% on new debt issues. PKG has included all direct and indirect issuance costs (along with its profit) in setting these spreads. BI’s tax rate is 35 percent. The project requires $1,300,000 in initial net working capital investment to get operational. Assume BI raises all equity for new projects externally (that is, BI does not use retained earnings).

The weighted average flotation cost is the sum of the weight of each source of funds in the capital structure of the company times the flotation costs, so:

f_T = ($564.4/$827.65)(0.08) + ($36.45/$827.65)(0.06) + ($226.8/$827.65)(0.04) = 0.0682, or 6.82%

Thus the initial investment is increased by the amount of flotation costs:

                    (Amount raised)(1 – 0.0682) = $37,000,000   

                    Amount raised = $37,000,000/(1 – 0.0682) = $39,708,092

Your analysis should include, and your recommendation should be based on, the following:

1. Calculate the firm’s current cost of capital using the information provided.

2. Calculate the project’s cost of capital (the appropriate discount rate to use to evaluate BI’s new project) assuming the capital structure will remain the same if the project is undertaken.

This project is somewhat riskier than a typical project for BI; therefore, management has asked you to use an adjustment factor of 12% to account for this increased riskiness (that is, to add 12% to the firm’s cost of capital) to estimate the project’s required rate of return.

(NOTE: Flotation costs do not have to be considered when calculating the required rate of return for each class of security – they are addressed in this problem by adjusting the cost of the initial investment to $39,708,092 from $37,000,000).

3. Calculate the project’s annual cash flows, taking into account all the relevant cash flows.
   1. Calculate the project’s initial Time 0 cash flow, taking into account all relevant cash flows.
   2. Calculate the project’s annual operational cash flows (OCF) over the life of the project.
   3. Calculate the project’s terminal (last year of the project) cash flow.   Include all relevant cash flows.

                (Note: You can present the cash flows from Year 0 to Year 5 in a table format)

4. What is the NPV and IRR of the project?

Instructions:

For this assignment, you will create a cash flow statement for Happy Healing Hospital for 2016.

The information for 2016 has been collected from various sources within the healthcare organization and is listed in the info below.  It is not nice and neat. The entries are not lined up very well and may be a little out of order for your report but the information that you need to create this statement is all listed. It is up to you to create the statement and make it presentable.

You will find the information for 2015 has already been entered in the spreadsheet as an example to go by.

To complete this assignment, please do the following:

• add a column next to 2015 and label it 2016 for side-by- side comparison.
• enter the information below in the appropriate cell.
• create formulas to total each section as was done for 2015.

• Happy Healing Hospital - Cash Flow Statement
  		Reported Values
  Operating Activities		2015	2016
  	Cash received from patients and third party payors	$19,915,566
  	Cash paid to employees for salaries and benefits	($11,081,726)
  	Cash paid to vendors for goods and services	($7,166,776)
  	Other operating receipts, net	$671,212
  	Net cash from operating activities	$2,338,276
  Capital and related financing activities
  	Acquisition and construction of capital assets	($477,992)
  	Proceeds from sale of capital assets	$3,980
  	Interest paid on long-term debt	($42,184)
  	Payments on line of credit	-
  	Proceeds on long-term debt	-
  	Principal payments on long-term debt	($391,003)
  	Net cash from capital and related financing activities	($907,199)
  Investing activities
  	Investment and other nonoperating income	$108,045
  	Net cash from investing activities	$108,045
  	Net change in cash and cash equivalents	$1,728,113
  	Cash and cash equivalents, beginning of year	$2,379,906
  	Cash and cash equivalents, end of year	$4,324,109
  Reconciliation of cash and cash equivalents to the balance sheets
  	Cash and cash equivalents
  	In current assets	$5,166,428
  	In noncurrent cash and investments	$809,491
  	Total cash and cash equivalents	$5,975,919
  Reconciliation of operating loss to net cash from operating activities
  	Operating income	$861,828
  	Adjustments to reconcile operating income to net cash from operating activities:
  	Depreciation and amortization	$1,883,051
  	(Gain) loss on disposal of capital assets	($525)
  	Provision for bad debt	$1,281,107
  	Changes in assets and liabilities
  	Patient accounts receivable	($2,044,870)
  	Estimated third-party settlements	$1,199,971
  	Supplies and other current assets	$90,264
  	Other assets	($7,698)
  	Accounts payable and accrued expenses	$2,077,036
  	Other current liabilities	$57,535
  	Accrued salaries and related liabilities	($2,405,197)
  	Other long-term liabilities	($25,000)
  Net cash flows from operating activities		$2,967,502

Charlotte's Crochet Shoppe has 14,000 shares of common stock outstanding at a price per share of $74 and a rate of return of 11.57 percent. The company also has 270 bonds outstanding, with a par value of $2,000 per bond. The pretax cost of debt is 6.11 percent and the bonds sell for 96.9 percent of par. What is the firm's WACC if the tax rate is 39 percent?

A $1,000 par value bond has coupon rate of 5% and the coupon is paid semi-annually. The bond matures in 20 years and has a required rate of return of 10%. Compute the current price of this bond?

Problem 7-11
Balance Sheet Analysis

Complete the balance sheet and sales information in the table that follows for J. White Industries using the following financial data:

Total assets turnover: 1.3
Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 20%
Total liabilities-to-assets ratio: 45%
Quick ratio: 1.05
Days sales outstanding (based on 365-day year): 39.5 days
Inventory turnover ratio: 7.0

Round your answers to the nearest whole dollar.

Balance Sheet

Answer all the blanks ____ and plz show steps

i want to know about the financial summary/stock purchase recommendation of the texas instrument inc.

Assume that stock market returns have the market index as a common factor, and that all stocks in the economy have a beta of 1.2 on the market index. Firm-specific returns all have a standard deviation of 25%.

Suppose that an analyst studies 20 stocks and finds that one-half of them have an alpha of +1.6%, and the other half have an alpha of −1.6%. Suppose the analyst invests $1.0 million in an equally weighted portfolio of the positive alpha stocks, and shorts $1 million of an equally weighted portfolio of the negative alpha stocks.

a. What is the expected profit (in dollars) and standard deviation of the analyst’s profit? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

b. How does your answer change if the analyst examines 50 stocks instead of 20 stocks? 100 stocks? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Working Capital Cash Flow Cycle

Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $2,700,000 (all on credit), and its net profit margin was 4%. Its inventory turnover was 7.5 times during the year, and its DSO was 44 days. Its annual cost of goods sold was $1,500,000. The firm had fixed assets totaling $430,000. Strickler's payables deferral period is 50 days. Assume 365 days in year for your calculations. Do not round intermediate calculations.

1. Calculate Strickler's cash conversion cycle. Round your answer to two decimal places.
        days
   
2. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover. Round your answer to two decimal places.
        x
   Calculate its ROA. Round your answer to two decimal places.
        %
   
3. Suppose Strickler's managers believe the annual inventory turnover can be raised to 11 times without affecting sale or profit margins. What would Strickler's cash conversion cycle have been if the inventory turnover had been 11 for the year? Round your answer to two decimal places.
        days
   What would Strickler's total assets turnover have been if the inventory turnover had been 11 for the year? Round your answer to two decimal places.
         x
   What would Strickler's ROA have been if the inventory turnover had been 11 for the year? Round your answer to two decimal places.
        %

Problem 12-16
Unequal Lives

Shao Airlines is considering two alternative planes. Plane A has an expected life of 5 years, will cost $100 million and will produce net cash flows of $30 million per year. Plane B has a life of 10 years, will cost $132 million and will produce net cash flows of $27 million per year. Shao plans to serve the route for only 10 years. Inflation in operating costs, airplane costs, and fares is expected to be zero, and the company's cost of capital is 11%.

1. By how much would the value of the company increase if it accepted the better project (plane)? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
   $ __________________million

2. What is the equivalent annual annuity for each plane? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to two decimal places.

   Plane A	$ _________ million
   Plane B	$ _____________ million

Cost of Trade Credit

Grunewald Industries sells on terms of 3/10, net 60. Gross sales last year were $4,385,500 and accounts receivable averaged $466,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.) Do not round intermediate calculations. Round your answers to two decimal places.

13. Assuming there is ONE risk factor, the interest rate (IR) risk factor. Investors can borrow at the risk-free rate rf of 3%. Portfolio (A) is well-diversified with the risk-return profile below. If an investor wants to profit $10,000 from a net-zero portfolio, constructed with Portfolio A, IR portfolio, and the risk-free rate. How much does he need to borrow/lend at the risk-free rate?

Portfolio A has a beta of 1.2 and E(R)-rf = 8%

Interest Rate Risk Factor Portfolio has a beta of 1 and E(R)-rf = 6%

a) Borrow $55,556

b) Lend $55,556

c) Borrow $250,000

d) Lend $250,000

e) None of the above

Consider the following option portfolio: You write a January 2012 expiration call option on IBM with exercise price $172, and the price of the call option is $8.93. You also write a January expiration IBM put option with exercise price $167, the price of the put option is $10.85.

Instructions: for parts a, b, and c, enter your answer as a decimal rounded to the nearest cent.

a. What will be the profit/loss on this position if IBM is selling at $159 on the option expiration date? $  

b. What will be the profit/loss on this position if IBM is selling at $180 on the option expiration date? $  

c. At what two stock prices will you just break even on your investment (i.e., zero net profit)?

    For the put, this requires that: $  

    For the call this requires that: $  

d. What kind of “bet” is this investor making; that is, what must this investor believe about IBM’s stock price in order to justify the position?

• betting that the IBM stock price will go up.

• betting that the IBM stock price will go down.

• betting that the IBM stock price will have low volatility.

• betting that the IBM stock price will have high volatility.