Which one of the following can be termed as strategy development?

a. deciding on the sources of data for market research

b. planning to recover lost market share

c. choosing the right design for market research

d. none of the above

Product and channel decisions are made during which stage of the marketing planning process?

a. Implementation

b. Situation analysis

c. Strategy development

d. Marketing program development

1. Assume you were born 30 years ago. At that time, your grandparents opened an account for you and deposited $5,000. The account has earned an average of 9%, compounded annually.

1. What is the account balance today?
2. Using the information above, construct (calculate) a timeline of account values for each year 1 – 30. Be sure to use appropriate absolute and relative referencing.
3. Create a line graph depicting how the account balance grew from year to year. Be sure to include appropriate axis labels, legends, axis formats, and chart title.  

After months of study and spending $60,000 in researching its options, Black & Decker Company purchased and installed a made-to-order machine tool for fabricating parts for small appliances this morning. The machine cost $286,000. This afternoon, Square D Company offered a similar machine tool that will do exactly the same work, but costs only $176,000 and could be installed in less than two hours. There will be no differences in either revenues or operating costs between the machines. The only annual cash flow difference will be the income tax savings due to the depreciation tax shield.

Both machines will last for six years (don’t worry about the few hours that have elapsed). Black & Decker would depreciate either machine on a straight-line basis to a $15,000 salvage value for income tax purposes. However, each machine is expected to be worth $20,000 at the end of its useful life year. The relevant income tax rate is 40%, and Black & Decker earns sufficient income from its other operations so that it can utilize any annual operating losses or losses on disposal of equipment.

The after-tax discount rate, also known as the hurdle rate or MARR, is 16%.

Required:

Using after-tax cash flow analysis, determine the minimum resale value of the “old” machine tool (“old” because it was purchased this morning) that would justify Black & Decker’s purchase of the Square D machine tool at this time.

Hint: If Black & Decker could sell the “old” machine for $1,000,000 and buy the Square D machine, they would do it in a heartbeat. On the other hand, if they could sell the “old’ machine for only $1, they would not do it. Clearly, there is a selling price between $1 and $1,000,000 where it makes sense to sell the “old” machine -- find that value. If they sell the “old” machine, there will be income tax consequences at the time of the sale (time zero).

You are a financial analyst for a company that is developing a new resort in Hawaii and the firm is in the process of purchasing 10 gold carts to carry potential condominium buyers around the property. You are choosing between one made by Club Car or one made by Yamaha. The two carts are judged to be similar in utility, but the Club Car is made more durably and is expected to have an effective working life of 5 years, compared to 4 for the Yamaha. Your firm’s tax rate is 35% and the required rate of return on this investment is 8%. Either one would be deprecated over its useful life to a salvage value of zero. At the end of their effective life, the carts will be donated to a local school system and so will have zero estimated salvage value. Which cart should the firm purchase? The following information is available:

Club Car:

Purchase price: $22,000

Annual Maintenance Expense: $1,900

Salvage Value at Life End: $0

Yamaha:

Purchase price: $19,000

Annual Maintenance Expense: $2,100

Salvage Value at Life End: $0

when looking at PE ratios is it considered a better investment if the ratio matches similar industries?

I understand the PE ratio shows current investors demand for a company share and a high PE ratio generally indicates increased demand because investors anticipate earnings growth in the future so do we want to look at high ratios or low? why?

Your company has been approached by Detroit Motors to bid on supplying Detroit Motors with 61,500 tons of machine screws annually for five years. You will need an initial $1,880,000 to purchase threading equipment to get the project started. The accounting department estimates that the variable costs of production will be $250 per ton and that additional annual fixed costs of $575,000 will be required for the project.

For tax purposes you have a choice of either Straight-line (SL) or Modified Accelerated Cost Recovery System (MACRS) depreciation to a zero residual value over five years. However, you expect to be able to sell the used threading equipment for $220,000, net of dismantling costs, at the end of the fifth year. MACRS percentages for an asset with a five-year life are 20%, 32%, 19%, 11%, 10%, and 5%.

Given an applicable income tax rate of 40% (for all years) and an MARR (cost of capital or hurdle rate) of 16%, determine the lowest per ton selling price that you could offer to Detroit Motors so that you would meet your MARR requirements (and, possibly, outbid the competition).

Required:

a. In determining your lowest possible per ton selling price, which method of depreciation, SL or
MACRS, would you choose and WHY?

b. Regardless of your answer to part a, assume that you were to choose Straight-line depreciation for the threading equipment. Determine the lowest per ton bid price that will meet your
MARR requirements?

You got a well-paying job in Finance and took out a mortgage for your house. It is paid monthly. The amount you borrowed is $790,000, at a monthly rate of 0.5% for the next 30 years (360 months). 1 Use 0.5% as both the interest rate you are paying and the discount rate r.

-Show an amortization schedule if this loan had constant monthly payments. How much do you have to pay every month? Show how much of these payments is interest and how much is paying off the principal. Please show how to do this in excel

Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 4 years to maturity, whereas Bond Dave has 15 years to maturity.

If interest rates suddenly rise by 5 percent, what is the percentage change in the price of Bond Sam?

If interest rates suddenly rise by 5 percent, what is the percentage change in the price of Bond Dave?

If rates were to suddenly fall by 5 percent instead, what would the percentage change in the price of Bond Sam be then?

If rates were to suddenly fall by 5 percent instead, what would the percentage change in the price of Bond Dave be then?

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 14 years to maturity, and a coupon rate of 7 percent paid annually. If the yield to maturity is 11 percent, what is the current price of the bond?

You have to estimate the expected exchange rates one year from now between your home currency and the other currencies of the major other countries that you deal with in terms of both imports and exports. The reason is that increases in the values of other currencies compared to the U.S. Dollar may impact your imports negatively, whilst it may on the other hand, be good for exports. To do this estimate, you obtain the following spot exchange rate information:

You also obtain the following rates that you regard as similar to the annual risk free rates applying in the countries:

Your focus is presently to estimate the 12 month forward rates in order to consider the impact that it will have on the import and export sales of the company. Calculate the forward rates of the $ in terms of all the currencies by using simple interest rate parity e.g. 10% annual interest rate = 10/2 = 5% for six months. Do not apply effective annual interest rate compounding. Show all your workings in table 1 on the separate answer sheet by using the correct formula provided in your formula sheet.

Provide an indication about what will happen to the value of the US$ based on the forward exchange rate calculations by calculating the expected discount/premium of it for each of the currencies in Table 2 on the separate answer sheet. Also show whether the impact will be positive (P) or negative (N) for imports and exports. For example:

Table 1: Calculation of 12 month forward rates using the simple interest rate parity principle

Table 2: Discounts/Premium of US$

Question 1

The market index experienced the following returns over the first 6 months of this year:

Month Return Month Return
January 0.68 April -1.71
February 5.43 May -2.44
March 1.12 June 3.58

What is the average return and standard deviation of returns over this six-month period?

Group of answer choices

1.33%, 2.75%

1.11%, 3.02%

1.11%, 2.33%

2.49%, 2.33%

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Question 2

Which of the following investments is clearly preferred to the others?

Investment Return Standard Deviation
A 18% 20%
B 20% 20%
C 20% 18%

Group of answer choices

Investment B.

Investment C.

Investment A.

Cannot be determined without information regarding the risk aversion of the investor.

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Question 3

What does beta measure?

Group of answer choices

The amount of credit risk the stock is exposed to

The amount of market risk the stock is exposed to

The amount of unique risk the stock is exposed to

The amount of business risk the stock is exposed to

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Question 4

Orchestral Tissues Ltd has a beta of 1.35. The risk-free rate of return is 7 percent and return on the market portfolio is 11.5 percent. Using the CAPM, what is the required return on this Orchestral Tissues shares?

Group of answer choices

30.90%

13.08%

15.78%

8.94%

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Question 5

In calculating the cost of capital for an average firm, which of the following statements is true?

Group of answer choices

The cost of a firm's retained earnings is less than the cost of its bonds.

The cost of a firm's ordinary shares is greater than the cost of its bonds.

The cost of a firm's preference shares is greater than the cost of its ordinary shares.

The cost of a firm's bonds is greater than the cost of its ordinary shares.

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Question 6

Which of the following is a correct formula for calculating the cost of capital?

Group of answer choices

WACC = weighted cost of debt + weighted cost of preference shares + weighted cost of ordinary shares

WACC = (after-tax cost of debt + cost of preference shares + cost of ordinary shares )/3

WACC = weighted after-tax cost of debt + weighted cost of preference shares + weighted cost of ordinary shares

WACC = weighted after-tax cost of debt + weighted after-tax cost of preference shares + weighted after-tax cost of ordinary shares

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Question 7

The last paid dividend is $2 for a share of ordinary shares that is currently selling for $20. What is the cost of ordinary equity if the long-term growth rate in dividends for the firm is expected to be 8%?

Group of answer choices

18.8%

12.8%

16.8%

14.8%

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Question 8

Based on current market values, Shawhan Supply’s capital structure is 30% debt, 20% preference shares, and 50% ordinary shares. When using book values, capital structure is 25% debt, 10% preference shares, and 65% ordinary shares. The required return on each component is: debt—10%; preference shares—11%; and ordinary shares—18%. The marginal tax rate is 40%. What rate of return must Shawhan Supply earn on its investments if the value of the firm is to remain unchanged?

Group of answer choices

14.3%

10.0%

13.0%

18.0%

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Question 9

________ measures the risk of a capital budgeting project by estimating the NPVs relating to a best case, base case and worst case cash flow estimates.   

Group of answer choices

Monte Carlo analysis

Scenario analysis

Sensitivity analysis

Multiple regression analysis

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Question 10

Jolly Roger Beverages Pty Ltd is considering purchasing one of two new rum fermenting machines to use at its Nowra distillery. The MegaDistiller 3000 costs $390,000 and is expected to have operating costs $33,000 per year for five years at which time it is considered worthless. The LiteBrewer 409 costs $350,000 and is expected to have operating costs of $29,500 per year for four years at which time it is considered worthless. Both machines perform the same function. The appropriate discount rate for the company is 10%. Based on an NPV analysis what should Jolly Roger Beverages do?

Group of answer choices

We do not have any information on revenues and therefore cannot make a decision.

Both have negative NPVs and therefore both should be rejected.

The company should buy the LiteBrewer 409.

The company should buy the MegaDistiller 3000.

Much appreciated!

A well-known reputable supplier of integrated heart monitoring devices is currently debating whether to expand its sales overseas. While the firm expects an extra $14,440,000 in sales if it enters foreign markets, it also knows that 8% of its sales will ultimately be uncollectible. In addition, selling costs will be 7% on all new sales and the firm's production costs are 60% of sales. The tax rate is 30%. (PLEASE SHOW YOUR WORK).

a) Calculate supplier additional net income from the new sales.

Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,900 and sell its old washer for $2,100. The new washer will last for 6 years and save $1,900 a year in expenses. The opportunity cost of capital is 18%, and the firm’s tax rate is 21%.

a. If the firm uses straight-line depreciation over a 6-year life, what are the cash flows of the project in years 0 to 6? The new washer will have zero salvage value after 6 years, and the old washer is fully depreciated. (Negative amounts should be indicated by a minus sign.)

b. What is project NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. What is NPV if the firm investment is entitled to immediate 100% bonus depreciation? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $46,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $11,500. The grill will have no effect on revenues but will save Johnny’s $23,000 in energy expenses. The tax rate is 30%.

Required:

a. What are the operating cash flows in each year?
b. What are the total cash flows in each year?
c. Assuming the discount rate is 12%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?