Dewina Food Industries is considering the development of a new ketchup product. The ketchup will be sold in a variety of different colours and will be marketed to young children. In evaluating the proposed project, the company has collected the following information:

• The company estimates that the project will last for four years.
• The company will need to purchase new machinery that has an up-front cost of $30 million. At the end of the project, the company expect to sell off the machinery for $5 million.
• The machinery will be depreciated on a 4-year straight-line basis towards zero salvage value.
• Production on the new ketchup product will take place in a recently vacated facility that the company owns.
• The project will require a $6 million increase in inventory. The company expects that its accounts payable will rise by $1 million. After t = 0, there will be no changes in net operating working capital, until t = 4 when the project is completed, and the net operating working capital is completely recovered.
• The company estimates that sales of the new ketchup will be $20 million each of the next four years.
• The operating costs, excluding depreciation, are expected to be $10 million each year.
• The company’s tax rate is 28 percent.
• The project’s WACC is 10 percent.

Draw up the project analysis worksheet providing details of each of the three basic elements that must be considered in your evaluation and make recommendation based on the NPV and IRR criteria?  

Broussard Skateboard's sales are expected to increase by 25% from $8.8 million in 2019 to $11.00 million in 2020. Its assets totaled $2 million at the end of 2019.

Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2019, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 60%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Do not round intermediate calculations. Round your answer to the nearest dollar.

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 10 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.

Project A Cashflow: Year 0: $-32,000.00 Year 1: $22,000.00 Year 2: $42,000.00 Year 3: $13,000.00

Project B Cashflow: Year 0: $-42,000.00 Year 1: $22,000.00 Year 2: $8,000.00 Year 3: $62,000.00

Use the payback decision rule to evaluate these projects; which one(s) should it be accepted or rejected?

• Total investment: 100K

• Invested 30K in stock A, with three past returns: 5%, 6%, and 7%.

• Invested the rest in stock B, with three past returns: 1%, 11%, and 21%.

• What is the coefficient of variation of each stock?

Which method of capital budgeting is considered the most appropriate and why ? (should be 400 words min.)

Olivia Hardison, CFO of Impact United Athletic Designs, plans to have the company issue $500 million of new common stock and use the proceeds to pay off some of its outstanding bonds. Assume that the company, which does not pay any dividends, takes this action, and that total assets, operating income (EBIT), and its tax rate all remain constant.

A). Explain Dividends, total assets, EBIT and new common stock.

B).What affect will it  have on the company’s financial statements and which accounts would be impacted ? Explain in detail (min 400 words)

The Kay Company has the following Capital structure as at 31^st March, 2019.

                                    Based on Book Value Based on Market Value             % Costs

            Debentures                300,000                                     330,000                7                 

            Preference                  100,000                                    110,000                9

            Equity                     1,500,000                                   1,700,000            15

            Debt                           200,000                                    180,000              10

            Required :

            Determine the Weighted Average cost of capital using :

1. Book Value weights, include formula used.     
2. Market Value weights, include formula used.
3. What are the factors affecting Cost of Capital, minimum 150 words, explain each factor?                                                  

Consider the balance sheet of Wikileaks Industries as shown below. Because Wikileaks has $900,000 of retained earnings, do you think that the company would be able to pay cash to buy an asset with a cost of $300,000? Why or why not? Give logical arguments to support your answer. (minimum 250 words)

Why is it more important for a company to maximize shareholders wealth, rather than to maximize profits? Discuss with details should be minimum 400 words.

Explain what is the time value of money. (minimum 150 words)

c) A firm has the following capital structure: 100 million shares outstanding, trading at £1.5 per share, and £100 million of debt. The beta of the firm’s stock is 1.5. The firm’s cost of equity is 10 percent, and the yield on riskless bonds is 2.5 percent. There is no tax. Assuming that the firm can borrow at the risk free rate and that both CAPM (Capital Asset Pricing Model) and the Modigliani-Miller theorem hold, answer the following questions.

iv) Suppose the firm changes its capital structure so that its debt increases to £150 million, and the equity decreases by £50 million. What should be the firm’s cost of equity after the change?

*Different question*

c) A firm has the following capital structure: £100 million of equity (market value) with 100 million shares outstanding, and £100 million of debt. The beta of the firm’s stock is 1.6. The firm’s cost of equity is 10 percent, and the yield on riskless bonds is 2 percent. There is no tax. Assuming that the firm can borrow at the risk free rate and that both CAPM (Capital Asset Pricing Model) and the Modigliani-Miller theorem hold, answer the following questions

iv) Suppose the firm changes its capital structure so that its debt increases to £140 million, and the equity decreases to £60 million. What should be the firm’s cost of equity after the change?

What is the difference between RRSP and TFSA? Briefly describe how each one works. What is the advantage of RRSP over TFSA? What is the advantage of TFSA over RRSP? What is the advantage of each (RRSP and TFSA) over a regular taxable investment account?

Probability A B

0.1 (7%) (32%)

0.2 5 0

0.4 10   21

0.2 21 29

0.1 31 38

Stocks A and B have the following probability distributions of expected future returns

A. Calculate the expected rate of return, , for Stock B ( = 11.60%.) Do not round intermediate calculations. Round your answer to two decimal places.

B.Calculate the standard deviation of expected returns, σ_A, for Stock A (σ_B = 19.30%.) Do not round intermediate calculations. Round your answer to two decimal places.

C.Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places.

2. Mrs. D who 27 years old plans to retire at the age of 55. Mrs. D would like to be able to withdraw $132,000 per year from her retirement account for 45 years after retirement beginning the year after her retirement. She is also expecting an inheritance of $54,000 to be transferred to her on her 35th birthday. a How much does she need to have in her retirement account by retirement date if the interest rate is 6% per year during the post-retirement years? b Suppose she already has $12,000 in her retirement investment account that earns 9% per year. What will be the value of this amount by her retirement date? c Given her goal, her expected inheritance, and the investment she already has in 1b, how much does she need to invest per year from now till retirement (at 9% annual rate of return) in order to reach her retirement goal?