Your firm needs a machine which costs $220,000, and requires $43,000 in maintenance for each year of its 7 year life. After 5 years, this machine will be replaced. The machine falls into the MACRS 7-year class life category. Assume a tax rate of 30% and a discount rate of 15%. What is the depreciation tax shield for this project in year 7?

Below are two unrelated cases involving marketable equity securities. Explain how the information provided affects the classification, carrying value, and income reported for that company's investment securities.

1. The balance sheet of a company does not classify assets and liabilities as current and noncurrent. The portfolio of available-for-sale equity securities includes securities normally considered current that have a net cost in excess of market value of $2,000. The remainder of the portfolio has a net market value in excess of cost of $5,000.
2. A company's noncurrent portfolio of marketable equity securities consists of the common stock of one company. At the end of the prior year, the market value of the security was 50% of original cost, and this effect was properly reflected in a Valuation Adjustment account. However, at the end of the current year, the market value of the security had appreciated to twice the original cost. The security is still considered noncurrent at year-end.

Objective: To provide you with an opportunity to provide support to ensure that team members can competently perform required roles associated with the management of finances

Activity: What types of support does your organisation offer to team members in completing their required roles in regards to managing finances? Describe how you have provided this type of support to the team within the last 12 months. Why was this support needed? What resources or personnel did you draw on? What sort of training, coaching or mentoring did you provide? (minimum 250 words)

CASE STUDY 1

Ann is 20 years old and has been working as a graphic designer for 3 years. She earns $35,000 per year in salary after tax. Because her family lives in a country town. Ann had to leave home to find employment and learn to look after herself and her finances.

She shares a flat with 2 friends and pays rent of $150 per week. She estimates that her other weekly expenses, on average, include public transport fares $45; food $120; utility bills $30; mobile phone $30; clothing $50; and miscellaneous expenses $60. She also makes sure that she is saving some of her income and for the past 2 years has arranged for an automatic debit of $300 per month from her bank account into a managed fund. The amount accumulated in the fund comprises the original $2500 she was given for her eighteenth birthday to start the fund and contributions and earnings of $7500, making a total sum of about $10,000. The managed fund is a balanced fund. Any money left over after expenses and investment is kept in her bank account, which totals $2000.

Ann’s main goal is to buy a car in the next 6 months if she can afford it. She will use some money in her managed fund if she has to, but hopes to buy a car valued at about $13000 plus insurance of $750 p.a. she is prepared to take on some extra work in a restaurant to earn another $150 per week in cash to help her to meet her goal.

1. Clearly state Ann’s short-term goal.
2. How would a financial counsellor help Ann to determine whether she may be on target to meet her goal?
3. Prepare a budget for Ann’s income and expenses to assist her to meet her objective.
4. Suggest some budgetary measures to help Ann accumulate her funds. Is there any other advice you may offer to help her achieve her goal?

1. Apply What You’ve Learned - Financial Goal-Setting and PersonalFinancial Statements

Scenario: You are 30 years old and feel like you are getting nowhere with your financial goals. At the end of each month, you have a hard time understanding where all your money went. You have decided it is time to take a hard look at your current financial status.

You currently have $80 of cash on hand, a checking account with a balance of $600, and a savings account containing $1,500. You own a small condo currently worth $120,000 with a mortgage on which you still owe $100,000, and on which you pay $600 per month. You own personal property (furniture, television, computer, etc.) worth $8,000. You have inherited Treasury bonds from your late aunt worth $12,000. You participate in a 401(k) retirement plan, now worth $30,000, in which you are 100% vested. You own a car originally valued at $28,000, now worth $12,000, on which you still owe $1,200, and make monthly payments of $250. Finally, you have credit card debt of $2,500 on which you pay a constant $125 per month.

Developing a set of structured and deliberately formulated financial plans is very useful in achieving financial success and security. Which of the following actions would you recommend to someone thinking about engaging in financial planning?

If you wanted to answer the question, “In financial terms, where am I right now?," which financial statement would provide the best answer?

The balance sheet

Your tax return

The cash flow statement

A monthly budget

The income and expense statement

Think about your financial condition above and the need to organize it into financial statements, and then answer the following questions:

Your car should be recorded at a value of on your personal balance sheet, while your car payment should be recorded at a value of on your personal cash flow statement.

Complete the following condensed personal balance sheet:

The balance sheets for Plasma Screens Corporation, along with additional information, are provided below:

Additional Information for 2021:

1. Net income is $74,000.
2. The company purchases $115,000 in equipment.
3. Depreciation expense is $155,000.
4. The company repays $105,000 in notes payable.
5. The company declares and pays a cash dividend of $27,500

Required:
Prepare the statement of cash flows using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)

Carrington would invest in software and some hardware upgrades that will allow them to better analyze the traffic coming in to their website. Total acquisition costs for this option are estimated to be $400,000. This improved analytics capability is expected to lead to increased revenue of $80,000 in year 1, $120,000 in year 2, $250,000 in year 3, $350,000 in year 4, and $500,000 in year 5. The estimated cost of this obtaining this revenue will be 20% per revenue dollar related to sales staff that will analyze this data and use it to generate new client relationships. Carrington will also incur fixed cost of $10,000 per year related to software updates and hardware maintenance. Carrington will set aside $250,000 in working capital for this project and this capital will be recovered at the end of 5 yrs. The salvage value of the new equipment will be $9,000 at the end of 5 yrs. Carrington uses a 10% hurdle rate to evaluate all projects, Acquisition costs qualify for modified accelerated depreciation of 50,30, and 20% in the first three yrs, Being profitable company income would be taxed at Carrington's tax rate of 30%, and all dollar values referenced in this case are in nominal dollars so for analysis ignore the effect of inflation. This option has five year useful life.

1. Calculate the payback period, internal rate of return, and NPV.

2. The data analytics program pays off a lot faster than expected. Revenue is projected to be $200,000 in yr 1, $250,000 in yr 2, $250,000 in yr 3, $300,000 in yr4, and $300,000 in yr 5.

3. The data analytics program pays off slower than expected. Revenue is projected to be $20,000 in yr 1,$80,000 in yr 2, $200,000 in yr 3, $500,000 in yr 4, and $500,000 in Year 5.

4.A great tax plan. Congress is proposing a new corporate tax plan that reduces the federal tax rate that Carrington pays from 30% to 20%. However, this tax plan would also do away with MACRS and replace it with straight line depreciation for tax purposes ( over 5 yrs).

a. Using the original estimates for your designated option, estimate the effect of this tax plan on NPV.

b. Next, given the uncertainty related to the effect of the proposed tax plan on future business, use a 14% hurdle rate instead of the 10% hurdle rate used before in estimating the effect of the plan (i.e just redo 4A).

5. What are some qualitative concerns related to accepting this designated option. Discuss and list at least 2. Provide why each would be considered an advantage or disadvantage.

Crowell Ltd. is considering using the Miller-Orr model to manage its cash flows. The minimum cash balance would be KES 4,000,000. Other information is as follows:

• Interest rate per annum = 14.4%
• Transaction cost per sale = KES 25,000
• Standard deviation of daily cash flows = KES 50,000
• A year has 360 days.

Required:

Calculate the Miller-Orr model upper limit and return point, and explain how these would be used to manage the cash balances of Crowell Ltd.

Do you think peer-to-peer lending will replace intermediated loans (i.e. bank loans) as the dominant form of loan activity in the market?

The price of a printer was reduced form $400 to $200 what wa the percent of decrease ?

"

What is the correlation of Stock X and Stock Y?

Round to 4 decimal places please.

​Time: Investment​ A:

Investment​ B:

0

A: − $2 million

B: − $2 million

1

A: $600,000

B: $1,000,000

2

A: $800,000

B: $800,000

3

A: $1,000,000

B: $600,000

An investor is considering the two investments shown above. Her cost of capital is 7​%. Which of the following statements about these investments is​ true?

1. The investor should take investment A since it has a greater internal rate of return​ (IRR).

2. The investor should take investment B since it has a greater net present value​ (NPV).

3. The investor should take investment A since it has a greater net present value​ (NPV).

4. The investor should take investment B since it has a greater internal rate of return​ (IRR).

The correct answer is The investor should take investment B since it has a greater net present value​ (NPV). Please can you show step by step how to get this answer and not use excel thank you.

Johnny Wellington, an entrepreneur who wants to engage in a short term business project, comes to you for advice. As an expert in capital budgeting, Johnny wants you to study the feasibility of the project. In particular, he needs your help to forecast the upcoming cash flows the project is going to require and generate throughout its life. After a few meetings with Johnny and his business partners, you suggest that a pilot run be conducted.

Upon completion of the pilot run at the end of year 1, Johnny and his associates can choose either to continue with the project or terminate it. You forecast that this project will generate cash flows for 4 years after the pilot run if Johnny decides to further proceed.

The pilot run costs $1.0 million to start and if they decide to continue with the project after this pilot run, an additional investment cost amounting to USD1.6 million will be incurred at the end of year 1. The investment cost of USD1.6 million will be fully depreciated on a straight line basis over the life of the project with no scrap value at the end. If the outcome from the pilot run is positive, Johnny can launch the project in full scale at the end of year 1. Revenues, variable costs and fixed costs for years 2 through 5 are estimated to be as follows:

However, if the outcome from the pilot run is not encouraging and the team decides to launch the project in full scale, the following estimates are obtained:

You project that the pilot run has a 60% chance of being successful (i.e. outcome is positive).

To finance the pilot run and the full-scale project, Johnny and his associates decide to use 50% debt and 50% equity. An investor who is Johnny’s high school buddy, Barry Lawson, agrees toenter into a special arrangement in which 5-year promissory notes with a face value of USD1000 per note will be sold to Barry at a price of USD694.11 per note. These notes do not make intermediate interest payments. (Note: Consider annual compounding for the promissory notes.)

You gather some market data to work out the equity beta for the project and it is determined to

be 1.50. Further, the market return and T-bill rate are 11 % and 4%, respectively. Assume the

T-bill rate is an appropriate proxy for the risk-free rate of return. Profits and losses from the project will be taxed at a rate of 34%.

Assume the Capital Asset Pricing Model (CAPM) is valid.

Required

a) Determine the after-tax cost of debt. (1 mark)

b) Determine the cost of equity. (1 mark)

c) Calculate the weighted average cost of capital for the project.

d) What is the present value of the cash flows at year 1 if outcome from the pilot run is positive and the team decides to launch the project in full scale? Ignore your answer in part c) and use 10% as the appropriate discount rate. [Hint: Consider cash flows from year 1 onwards]

e) What is the present value of the cash flows at year 1 if outcome from the pilot run is negative and the team decides to launch the project in full scale? Ignore your answer in part c) and use 10% as the appropriate discount rate. [Hint: Consider cash flows from year 1 onwards]

f) Should the project be implemented today (i.e. year 0)? Provide relevant and supporting calculations. Again, ignore your answer in part c) and use 10% as the appropriate discount rate. Show all steps and give proper explanations.