Benson, Inc., has sales of $39,230, costs of $12,930, depreciation expense of $2,630, and interest expense of $1,910. The tax rate is 22 percent. What is the operating cash flow, or OCF? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Nicholas Company loaned $68,587 to Nathan, Inc. in exchange for Nathan’s 2-year, $80,000, zero-interest-bearing note.  Nathan’s incremental borrowing rate for comparable debt is 8%.

Required:

1. Prepare an effective interest amortization schedule for Nicholas relative to this note. (Round to whole dollars.)

2. Prepare Nicholas’ journal entries for the initial loan transaction, recognition of interest each year, and the collection of the note at maturity.

Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The assets required for the project were fully depreciated at the time of purchase. The financial staff has collected the following information on the project:

The company has a 25% tax rate, and its WACC is 13%.

Write out your answers completely. For example, 13 million should be entered as 13,000,000.

1. What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest dollar.
   $   
2. 
   
3. If this project would cannibalize other projects by $1 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest dollar.
   The firm's OCF would now be $   .

Broward Manufacturing recently reported the following information: Net income $228,000 ROA 8% Interest expense $91,200 Accounts payable and accruals $950,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC).

Edelman Engines has $14 billion in total assets — of which cash and equivalents total $100 million. Its balance sheet shows $2.1 billion in current liabilities — of which the notes payable balance totals $0.91 billion. The firm also has $7.7 billion in long-term debt and $4.2 billion in common equity. It has 300 million shares of common stock outstanding, and its stock price is $26 per share. The firm's EBITDA totals $1.014 billion. Assume the firm's debt is priced at par, so the market value of its debt equals its book value. What are Edelman's market/book and its EV/EBITDA ratios? Do not round intermediate calculations.

Read the following scenario and answer the question in 5-10 sentences.

You are the CEO of a small company that sells transportation and logistics software. Your company has not been doing well because of competition from larger rivals. You learn of a lucrative opportunity to sell licenses of your software to the Lackria Department of Transportation, a government agency of the nation of Lackria. Closing the deal could save your company from bankruptcy. In an impulsive moment, you meet with a Lackrian government minister and offer her ownership of a luxury lakeside home in exchange for a guaranteed software contract with the Lackrian government. The minister refuses your offer and asks you to leave her office. The next day you regret your decision. Discuss any possible violations of white collar laws.

When you were born, your dear old aunt minnie promised to deposit $500 into a savings account bearing a 5% compounded annual rate on each birthday, beginning with your first. You have just turned 21 and want the dough. However, it turns out that dear old (forgetful) aunt minnie made no deposits on your fifth and eleventh birthdays. How much is in the account right now?

1. The owner of a European put option on a share has the right, but not the obligation, to sell one share for a fixed price known as the option’s strike price, on a fixed date known as the option’s expiry date. If the share price equals S on the option’s expiry date then the option’s payoff function is the larger of 0 and K − S, where K is the option’s strike price. This question illustrates what we can learn about the prices of Arrow-Debreu securities if we can observe the prices of a set of put options on the same stock, but with different strike prices. We assume that the option expires at date 1 and that the state of nature at date 1 is the share price at date 1, where the share price can take the values $0, $1,$2, . . . , $99, $100. Suppose that the Arrow-Debreu security paying out in state “$j” has price θ_j, for j = 0, 1, 2, . . . , 100.

1. Fill in the following table, where Portfolio A comprises one short position in a put option with strike price $51 and one long position in a put option with strike price $52; and Portfolio B comprises one short position in a put option with strike price $52 and one long position in a put option with strike price $53. The missing entries are the date 1 payoffs of the indicated assets (and portfolios) if the share price at date 1 equals the value given at the head of each column.

2. Use the current option prices given in the table above to calculate the prices of Arrow-Debreu securities that pay out when the date 1 share price equals $S, for each of S = 48, 49, 50, 51, 52.

11.     Etna Tech is a company set up by two friends, Larry and Mike. The company’s only product is a popular online game called Fisticuffs. Etna Tech will be holding an IPO of 5 million shares tomorrow. Market expectations are high for this IPO. The company is expected to pay $1 per share starting one year from now. The dividends are then expected to grow at a supernormal rate of 30% for three years, before dropping down to 15% for three more years, and then to 5% afterwards. What is the total value of this IPO if the required return for similar issues is 18%?

How can I solve this using the HP 10bii financial calculator? A well-known financial writer argues that he can earn an extremely high return buying wine by the case. Specifically, he assumes that he will consume one $14 bottle of fine Bordeaux per week for the next 12 weeks. He can either pay $14 per week or buy a case of 12 bottles today. If he buys the case, he receives a discount of 8 percent. Assume he buys the wine and consumes the first bottle today. What is the EAR of purchasing wine by the case with this discount?

Blanche Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1000 and their current market price is $1040.35. However, Blanche Inc. may call the bonds in eight years at a call price of $1060. What are the YTM and the yield to call (YTC) on Blanche Inc.'s bonds?

                               Value

YTM                      a. 9.89%    b. 8.55%   c. 7.83%   d. 7.93%

YTC                      a. 7.93%    b. 7.36%   c. 8.82%   d. 7.83%

If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Blanche Inc.'s bonds?

a. 5 years

b. 8 years

c. 13 years

d. 18 years

If Blanche Inc. issued new bonds today, what coupon rate must the bonds have to be issued at par?

a. 7.36%

b. 8.55%

c. 7.93%

d. 7.83%

Which statements are true?

Check all that apply:

It is impossible to sell a part of your ownership stake in a sole proprietorship.

A sole proprietorship is subject to few government regulations.

A sole proprietorship is easy to set up.

All profits from a sole proprietorship are passed through to the owner for paying taxes.

A sole proprietorship offers limited liability.

A limited liability company is taxed like a _____ and its owners have _____ liability.

partnership; limited

partnership; unlimited

corporation; unlimited

corporation; limited

Which statements are true about partnerships?

Check all that apply:

Partnerships make it easy to raise large amounts of capital.

A partnership is easy to set up.

All profits from a partnership are passed through to the partners for paying taxes.

Partners have unlimited liability.

What are advantages of a corporation over a partnership?

Check all that apply:

Easier fundraising

Lower taxes

Limited liability

Unlimited life