Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl’s Doll Shop. Business has been good, but Koehl frequently runs out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.

Sales are made on a cash basis only. Koehl’s purchases must be paid for during the following month. Koehl pays herself a salary of $4,800 per month, and the rent is $2,000 per month. In addition, she must make a tax payment of $12,000 in December. The current cash on hand (on December 1) is $400, but Koehl has agreed to maintain an average bank balance of $6,000—this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)

The estimated sales and purchases for December, January, and February are $16,000, $40,000, and $60,000 respectively. Purchases during November amounted to $140,000.

1. What would be the cash position in the end of December, January, and February, respecively. Explan which month has suplus or needs a bank loan.

2. Suppose that Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. Discuss what would the company’s loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.)

This is all the information that is provided.

Mystic Beverage Company is considering purchasing a new bottling machine. The new machine costs $230,000, plus installation fees of $10,000 and will generate earning before interest and taxes of $60,000 per year over its 6-year life. The machine will be depreciated on a straight-line basis over its 6-year life to an estimated salvage value of 0. Mystic's marginal tax rate is 40%. Mystic will require $50,000 in NWC if the machine is purchased.

(a) determine the initial outlay
(b) determine the annual cash flows in years 1-6
(c) assume the discount rate is 7%, what is the NPV of this project?
(d) What is the IRR of this project
€ should the project be accepted or rejected?

Discuss whether or not the tax rates applicable to private equity firms should be changed?

True or false: It is never optimal to exercise an American call option (on a non-dividend paying stock) early.

Group of answer choices

True

False

what is Delta Air current financial position?

The owners would like you to explain the background to preparing the projected financial statements and business ratios. Specifically, they would like answers to the following questions:

• What is the purpose of preparing the financial statements?
• What principles are involved in preparing the different financial statements?
• Why is depreciation not included in the Statement of Cash Flow?
• What is the difference between profit and cash?
• Explain the importance of ratios and comparing them to industry averages
• What other benchmarking tools can you use other than ratios?

Your corporation is considering investing in a new product line. The annual revenues (sales) for the new product line are expected to be $163,994.00 with variable costs equal to 50% of these sales. In addition annual fixed costs associated with this new product line are expected to be $56,720.00 . The old equipment currently has no market value. The new equipment cost $74,629.00 . The new equipment will be depreciated to zero using straight-line depreciation for the three-year life of the project. At the end of the project the equipment is expected to have a salvage value of $28,509.00 . An increase in net working capital of $66,220.00 is also required for the life of the project. The corporation has a beta of 0.804 , a tax rate of 33.52% , and a target capital structure consisting of 61.43% equity and 38.57% debt. Treasury securities have a yield of 3.43% and the expected return on the market is 12.00% . In addition, the company currently has outstanding bonds that have a yield to maturity of 8.36%.         

a) What is the WACC?     

b) What is the NPV for this project?

I am stuck on how to approach this question - if someone could provide me some guidance, that would be very appreciated!!

One year ago, after graduating from university, you bought a nice house. You plan to stay in this house for at most 10 more years from now. Then you will move into an even better one and sell the current one when your children grow older. When buying the house, you took a 10- year-ARM mortgage from a bank. The APR of the mortgage is 4%. The rate is expected to rise to 4.75% after the 10-year (from the origination of the mortgage) period. The remaining balance is $1 million. Noticing that the mortgage rates decrease recently, you are considering whether to refinance your mortgage or not. To make a more informed decision, you contacted a few mortgage brokers. From these brokers, the best options you find are the following.

Option 1: 30 years fixed-rate mortgage with an APR of 4%. The closing fee is $4000.

Option 2: 10 year ARM with and APR of 3.875%. The closing fee is $1000.

Option 3: 10 year ARM with and APR of 3.75%. The closing fee is $8000.

Besides looking into these options, you are also aware that all the interest rates have a 50% chance to increase by 0.5%, and a 50% chance to drop by 0.25% in half a year (when you can refinance again). Are you going to refinance your mortgage now? If yes, which option would you choose and what is the benefit (in $ amount)? Please explain the reason behind your choice.

1- How does a startup begin to seek viable VC funding sources

2- Where the trends in the VC industry are heading in the international market, US economy and growth, and global partnership trends.   

3- How can a new venture position tier VC portfolio strategy?

(PLEASE SHOW WORK)

Hankins Corporation has 5.4 million shares of common stock outstanding; 290,000 shares of 5.2 percent preferred stock outstanding, par value of $100; and 125,000 5.7 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $72 per share and has a beta of 1.13, the preferred stock currently sells for $103 per share, and the bonds have 20 years to maturity and sell for 103 percent of par. The market risk premium is 6.8 percent, T-bills are yielding 4.3 percent, and the firm’s tax rate is 23 percent.

1. What is the firm’s market value capital structure?

2. If the firm is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows?

What should be Greta’s capital allocation? (Do not round your intermediate calculations. Round your answers to 2 decimal places.)

Greta, an elderly investor, has a degree of risk aversion of A = 3 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of one-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 7.2% per year, with a SD of 22.2%. The hedge fund risk premium is estimated at 12.2% with a SD of 37.2%. The returns on both of these portfolios in any particular year are uncorrelated with its own returns in other years. They are also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims the correlation coefficient between the annual returns on the S&P 500 and the hedge fund in the same year is zero, but Greta is not fully convinced by this claim.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM

You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.

Refer to Exhibit 7.2. What is your investment strategy concerning the three stocks?