Debby’s Dance Studios is considering the purchase of new sound equipment that will enhance the popularity of its aerobics dancing. The equipment will cost $24,400. Debby is not sure how many members the new equipment will attract, but she estimates that her increased annual cash flows for each of the next five years will have the following probability distribution. Debby’s cost of capital is 14 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods.
  

  
  
b. What is the expected net present value? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
  

Net present value ____

Cooley Landscaping needs to borrow $32,000 for a new​ front-end dirt loader. The bank is willing to loan the money at 9% interest for the next 10 years with annual, semiannual, quarterly or monthly payments. What are the different payments that Cooley Landscaping could choose for these different payment​ plans? What is​ Cooley's payment for the loan at 9​% interest for the next 10 years with annual ​payments?

.You own a bond that pays $120 in annual​ interest with a $1,000 par value. It matures in 20 years. Your required rate of return is 11 percent.

a. Calculate the value of the bond.

b. How does the value change if your required rate of return​ (1) increases to 16 percent or​ (2) decreases to 6 ​percent?

c. Explain the implications of your answers in part (b​) as they relate to interest rate​ risk, premium​ bonds, and discount bonds.

d. Assume that the bond matures in 5 years instead of 20 years. Recompute your answers in part ​(b​).

e. Explain the implications of your answers in part ​(d​) as they relate to interest rate​ risk, premium​ bonds, and discount bonds.

Monthly loan payments  Personal Finance Problem   Tim Smith is shopping for a used luxury car. He has found one priced at $35,000.

The dealer has told Tim that if he can come up with a down payment of $5,700​,

the dealer will finance the balance of the price at a 77​% annual rate over 22 years

​(24 ​months).  ​(Hint: Use four decimal places for the monthly interest rate in all your​ calculations.)

a.  Assuming that Tim accepts the​ dealer's offer, what will his monthly​ (end-of-month) payment amount​ be?

b.  Use a financial calculator or spreadsheet to help you figure out what​ Tim's monthly payment would be if the dealer were willing to finance the balance of the car price at an annual rate of 3.1​%?

Please Post Excel Formulas ******

What is primary trade-off that results from factoring receivables, from the perspective of the organization that sells the A/R to the factoring company? min 200 words

A computer software development company in the U.S. exports its software to the euro zone. The company’s European distributor asks and the company agrees to receive payments in euros (€). The distributor has just ordered a shipment that is priced in euros at today’s dollar equivalent of $28,150,000 for delivery and settlement in three months. The U.S.-based company is particularly worried about a high degree of uncertainty surrounding the euro exchange rate against the dollar. It decides to consider whether to hedge. Consulting with a NY bank, the company is advised that there are four different ways it can accomplish the hedge: Through a forward contract, a futures contract, an option contract, and through a money market hedge. The following information is available:

Spot                                         $1.1260/€

3-month forward                       $1.1220/€

6-month forward                       $1.1360/€

3-month futures                        $1.1215/€

90-day call option #1                 $ 1.1280/€ strike; $ 0.0030/€ premium

90-day put option #1                 $ 1.1280/€ strike; $ 0.0050/€ premium

180-day call option #2               $ 1.1290/€ strike; $ 0.00820/€ premium

180-day put option #2                $ 1.1290/€ strike; $ 0.00980/€ premium

90-day dollar interest rate          4.40% per annum (deposit)        6.40% per annum (loan)

90-day euro interest rate            3.60% per annum (deposit)        5.60% per annum (loan)

1. Specify which hedging instruments (from the above list) you should look into.

KDV, Ltd., is a Canadian company. It can borrow or lend funds in
Canada at an interest rate of 3.82%. KDV, Ltd., also has operations
in Brazil where it can borrow or lend funds at an interest rate of
7.44%. The spot exchange rate between the Brazilian Real and the
Canadian Dollar is 4.1792 Brazilian Reals per Canadian Dollar. The
360-day forward exchange rate is 4.3594 Brazilian Reals per
Canadian Dollar. By borrowing 100,000.0000 of one currency, determine an
arbitrage that will make KDV a profit.

Questions:

1. Which country (1=Canada, 2= Brazil) would KDV borrow this money
to make this arbitrage profit?

2. When KDV converts this money to the other country?s currency,
how much of this other country?s currency would KDV receive?
3. Units for #2's answer: (1 = Canadian $s, 2 Brazilian Reals)

4. Should KDV buy or sell a 360-day forward contract at time 0?
(1 = buy, 2 = sell)

5. For how many Canadian $s should KDV?s forward contract be for?

6. KDV should then lend this money in this other country. In one
year, how much will KDV receive from the loan they made?
7. Units for #6's answer: (1 = Canadian $s, 2 Brazilian Reals)

8. In one year, after KDV receives their loan plus interest, when
KDV converts these proceeds to the original country?s currency,
how much of the original country?s currency will KDV receive?
9. Units for #8's answer: (1 = Canadian $s, 2 Brazilian Reals)

10. In one year, how much will KDV have to pay for principal and
interest on the funds they borrowed?
11. Units for #10's answer: (1 = Canadian $s, 2 Brazilian Reals)

12. Arbitrage Profit = ???? amount
13. Units for #12's answer: (1 = Canadian $s, 2 Brazilian Reals)

Your firm will issue 10-year bonds to raise $10 million. You will either (a) issue regular coupon bonds which have a 6% coupon rate and make annual payments or (b) issue zero coupon bonds which make annual payments. Both options will have a YTM of 8%. What is your firm’s total repayment 10 years from now if they went with option (a)?

I got 12244060, I want to see if this correct. Thank you

Problem 12-02
AFN equation

Broussard Skateboard's sales are expected to increase by 20% from $7.8 million in 2016 to $9.36 million in 2017. Its assets totaled $4 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, 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 3%, and the forecasted payout ratio is 60%. What would be the additional funds needed? Do not round intermediate calculations. Round your answer to the nearest dollar.
$

After starting your first full-time job out of college, you decide to buy a new car for $12,000. Using Excel, create a complete amortization table for this car-loan: You make 36 equal end- of- month payments. The discount rate is 7.25% compounded monthly. How much would you owe after the 15th payment is made?

How can you explain the Sub-prime mortgage by the twin- deficit? Include 4 graphs regarding the personal saving, national saving, budget deficit, and investment in your answer.

A corporate bond with a coupon rate of 7.2 percent has 18 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 7.9 percent. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB. The new appropriate discount rate will be 9.2 percent.

What will be the change in the bond’s price in dollars?

What will be the change in the percentage?

2. Net present value (NPV)

The capital budgeting process is comprehensive and is based on certain assumptions, models, and benchmarks. This process often begins with a project analysis. Generally, the first step in a capital budgeting project analysis—which occurs before any evaluation method is applied—involves estimating the project’s expected cash flows   .

Evaluating cash flows with the NPV method

The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions.

Consider this case:

Suppose Fuzzy Button Clothing Company is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,750,000. The project is expected to generate the following net cash flows:

Fuzzy Button Clothing Company’s weighted average cost of capital is 8%, and project Beta has the same risk as the firm’s average project. Based on the cash flows, what is project Beta’s NPV? (Note: Do not round your intermediate calculations.)

a. -$4,059,142

b. -$1,309,142

c. $1,440,858

d. -$859,142

Making the accept or reject decision

Fuzzy Button Clothing Company’s decision to accept or reject project Beta is independent of its decisions on other projects. If the firm follows the NPV method, it should   project Beta.

Suppose your boss has asked you to analyze two mutually exclusive projects—project A and project B. Both projects require the same investment amount, and the sum of cash inflows of Project A is larger than the sum of cash inflows of project B. A coworker told you that you don’t need to do an NPV analysis of the projects because you already know that project A will have a larger NPV than project B. Do you agree with your coworker’s statement?

No, the NPV calculation will take into account not only the projects’ cash inflows but also the timing of cash inflows and outflows. Consequently, project B could have a larger NPV than project A, even though project A has larger cash inflows.

No, the NPV calculation is based on percentage returns, so the size of a project’s cash flows does not affect a project’s NPV.

Yes, project A will always have the largest NPV, because its cash inflows are greater than project B’s cash inflows.

Weismann Co. issued 14-year bonds a year ago at a coupon rate of 10 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 9 percent, what is the current bond price?

We assume that the company you selected is considering a new project. The project has 8 years’ life. This project requires initial investment of $380 million to purchase equipment, and $30 million for shipping & installation fee. The fixed assets fall in the 7-year MACRS class. The salvage value of the fixed assets is 10.5% of the purchase price (including the shipping & installation fee). The number of units of the new product expected to be sold in the first year is 1,500,000 and the expected annual growth rate is 5.5%. The sales price is $255 per unit and the variable cost is $190 per unit in the first year, but they should be adjusted accordingly based on the estimated annualized inflation rate of 2.2%. The required net operating working capital (NOWC) is 9.5% of sales. Use the corporate tax rate obtained in Step (4) for the project. The project is assumed to have the same risk as the corporation, so you should use the WACC you obtained from prior steps as the discount rate. Note: you may revise the partial model in the file Ch11 P18 Build a Model.xls on the website of the textbook (also posted in this final project learning module in Blackboard) for capital budgeting analysis, but you are NOT required to strictly follow the partial model. Actually, you are encouraged to build a better model by yourself. - Compute the depreciation basis and annual depreciation of the new project. (You can refer to Table 11A-2 MACRS allowances on pp.496 in the textbook) - Estimate annual cash flows for 8 years. - Draw a time line of the cash flows. WACC = 7.20% Corporate Tax Rate = 18.30%