Demolition Construction Services has 12,500 shares of stock outstanding and no debt. The new CFO is considering issuing $75,000 of debt and using the proceeds to retire 2,500 shares of stock. The coupon rate on the debt is 6.8 percent. What is the break-even level of earnings before interest and taxes between these two capital structure options?

A) $16,860

B) $18,520

C) $18,240

D) $21,000

E) $15,300

A project has an initial cost of $60,500, expected net cash inflows of $13,000 per year for 8 years, and a cost of capital of 12%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Round your answer to the nearest cent.

ABC Co has 10 million shares of common stock outstanding which currently trades at a market price of $5 per share. The company also has 100,000 bonds issued which are trading at $1,050 per bond. ABC has not issued any preferred stock. If ABC’s cost of equity is 10% and their effective cost of debt is 5%, what is their WACC?

Weighted average cost of capital American Exploration, Inc., a natural gas producer, is trying to decide whether to revise its target capital structure.

Currently it targets a 50-50 mix of debt and equity, but it is considering a target capital structure with 90% debt.

American Exploration currently has 5% after-tax cost of debt and a 10% cost of common stock.

The company does not have any preferred stock outstanding.

a. What is American Exploration's current WACC?

b. Assuming that its cost of debt and equity remain unchanged, what will be American Exploration's WACC under the revised target capital structure?

c. Do you think shareholders are affected by the increase in debt to 90%? If so, how are they affected? Are the common stock claims riskier now?

d. Suppose that in response to the increase in debt, American Exploration's shareholders increase their required return so that cost of common equity is 14%. What will its new WACC be in this case?

e. What does your answer in part d suggest about the tradeoff between financing with debt versus equity?

Develop an organizational chart for an organization, such as your employer or another company of your choice ( Anheuser-Busch ) This should be limited to senior management groups. Answer the following questions: 1. What specific types of data were collected? 2. What did you learn about the management structure in terms of relationships and authority? 3. What did you learn about the development of an organizational chart? 4. What types of data sources were used to prepare responses to these questions?

Chastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle. Chastain's 2016 sales (all on credit) were $249000; its cost of goods sold is 80% of sales; and it earned a net profit of 7%, or $17430. It turned over its inventory 4 times during the year, and its DSO was 35.5 days. The firm had fixed assets totaling $38000. Chastain's payables deferral period is 40 days. Assume 365 days in year for your calculations. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

1. Calculate Chastain's cash conversion cycle. Round your answer to two decimal places. Do not round intermediate calculations.

   days

2. Assuming Chastain holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Round your answers to two decimal places. Do not round intermediate calculations.

   Total assets turnover
   ROA		%

3. Suppose Chastain's managers believe that the inventory turnover can be raised to 9.3 times. What would Chastain's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9.3 for 2016? Round your answers to two decimal places. Do not round intermediate calculations.

   Cash conversion cycle		days
   Total assets turnover
   ROA		%

8. Cash flow patterns and the modified rate of return calculation

Blue Elk Manufacturing is analyzing a project with the following cash flows:

This project has_____________[normal/non-normal] cash flows.

Blue Elk Manufacturing’s WACC is 9.00%. Calculate this project’s modified internal rate of return (MIRR).

A: 2.40%

B: 9.00%

C: 4.40%

D: 8.99%

Blue Elk Manufacturing’s managers select projects based only on the MIRR criterion. Should Blue Elk Manufacturing’s managers accept this independent project?

*Yes

*No

PLEASE SHOW ON EXCEL ALONG WITH FORMULAS

10. A stock is selling today for $30. The stock has an annual volatility of 70 percent and the annual risk-free rate is 11 percent. 7

a. Calculate the fair price for a 9 month European call option with an exercise price of $25.

b. Calculate the intrinsic value for a 9 month European call option with an exercise price of $25.

c. Calculate the time value for a 9 month European call option with an exercise price of $25.

A universe of securities includes a risky stock (X), a stock-index fund (M), and T-bills. The data for the universe are:

The correlation coefficient between X and M is -0.8

A. Draw the opportunity set of securities X and M

B. Find the optimal risky portfolio (O), its expected return, standard deviation, and Sharpe ratio. Compare with the Sharpe ratio of X and M

C. Find the slope of the CAL generated by T-bills and portfolio O.

D. Suppose an investor places 2/9 (i.e., 22.22%) of the complete portfolio in the risky portfolio O and the remainder in T-bills. Calculate the composition of the complete portfolio, its expected return, SD, and Sharpe ratio.

Steve was a certified professional planner who was a general partner of a hedge fund. He placed most of his clients in that hedge fund without telling them of his ownership in it. When the results seemed to be disappointing, he sold his ownership and personal holdings in the fund and thereafter told his clients to get out. Which SEC and CFP violations were violated? What would you recommend he do to try to rectify the situation? What would you do if Steve was your partner or employee?

List the seven principals of the CFP Code of Ethics. Describe and define each of the seven principals. Describe how Steve violated each of the principals.

Thank you!

1. The expected returns on Able Ltd, Blume Ltd and Cosmo Ltd can be explained fully by the Capital Asset Pricing Model. The standard deviation of returns on the market portfolio is 25%. The returns, standard deviation of returns and betas estimated for the companies are as follows:

Using this information determine the correlation coefficient between Cosmo Ltd and the Market Index. You will need to use the data above to, firstly, calculate the expected return on the market portfolio and the risk-free rate of interest.

13.5: Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3.0 and 3.5 years, respectively.

Use the NPV decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Merton Analytics is considering changes in its working capital policies to improve its cash flow cycle. Merton’s sales last year were $4,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 7.5 times during the year, and its DSO was 41 days. Its annual cost of goods sold was $2,200,000. The firm had fixed assets totaling $585,000. Merton’s payables deferral period is 42 days.

a.         Calculate Merton’s cash conversion cycle.

b.         Assuming Merton holds negligible amounts of cash and marketable securities,

calculate its total assets turnover and ROA.

c.         Suppose Merton’s managers believe the annual inventory turnover can be raised to 9.5 times without affecting sales. What would Merton’s cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9.5 for the year?

Question 6

1. What is the variance of the returns on a portfolio that is invested 40 percent in Stock S and 60 percent in Stock T?

   State of Economy	Probability of State of Economy	Rate of Return if State Occurs
   		Stock S			Stock T
   Boom	.06	.22			.18
   Normal	.92	.15			.14
   Bust	.02	−.26			.09