how is legality different from ethics? what are the three questions to answer when faced with a potentially unethical action such as deciding to download or upload a video that is copyrighted protected? how can we tell if business decisions are ethical? who should be held accountable for the copyright violation the people who uphold material or the web sites that carry it? if the web aren't held legally responsible, do they still have an ethical responsibility to find and remove the protected material?

Jill Meier is the sole owner of Meier Corp., which provides her only source of income. Jill has always paid herself entirely by drawing dividends from her corporation. A friend suggested that as long as she is earning about what she would have to pay someone else to run the business, she might be better off paying herself a salary instead of dividends because she would avoid the problem of double taxation. If Jill's company earns $220,000, all of which she will pay to herself, how much will she take home under each method? Assume a corporate tax rate of 33% and a personal tax rate of 22% on both salary and dividend income. Under dividends: $ ? Under salary: $ ?

Ellis Electronics Company’s actual sales and purchases for April and May are shown here, along with forecasted sales and purchases for June through September.

The company makes 10 percent of its sales for cash and 90 percent on credit. Of the credit sales, 20 percent are collected in the month after the sale and 80 percent are collected two months after. Ellis pays for 40 percent of its purchases in the month after purchase and 60 percent two months after.

Labour expense equals 10 percent of the current month’s sales. Overhead expense equals $12,000 per month. Interest payments of $30,000 are due in June and September. A cash dividend of $50,000 is scheduled to be paid in June. Tax payments of $25,000 are due in June and September. There is a scheduled capital outlay of $300,000 in September.

Ellis Electronics’ ending cash balance in May is $20,000. The minimum desired cash balance is $15,000.

a. Prepare a schedule of monthly cash receipts for June through September.

b. Prepare the monthly cash payments for June through September.

c. Prepare a complete monthly cash budget with borrowing and repayments for June through September. The maximum desired cash balance is $50,000. Excess cash (above $50,000) is used to buy marketable securities. Marketable securities are sold before borrowing funds in case of a cash shortfall (less than $15,000). (Omit $ sign in your response. Do not leave any empty spaces; input a 0 wherever it is required. Negative answers and amounts to be deducted should be indicated by a minus sign.)

XYZ corp. is considering investing in a new machine. The new machine cost will $10,000 installed. Depreciation expense will be $1000 per year for the next five years. At the end of the fifth year XYZ expects to sell the machine for $6000. XYZ will also sell its old equipment today that has a book value of $3000 for $3000. In five years, the old machine will be fully depreciated and have a salvage value of zero. Additionally, XYZ Corp expects that the new machine will increase its EBIT by $2000 in each of the next five years. Assuming that XYZ’s tax rate is 21% and the new machines WACC is 15%, what is the projects NPV. Round your final answer to two decimals.

Name and describe ten critical strategies for personal finance success.

If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1.20. The company has a target debt-equity ratio of .75. The expected return on the market portfolio is 10 percent and Treasury bills currently yield 3.8 percent. The company has one bond issue outstanding that matures in 19 years, a par value of $2,000, and a coupon rate of 6.5 percent. The bond currently sells for $2,080. The corporate tax rate is 24 percent.

a. What is the company’s cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b. What is the company’s cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

c. What is the company’s weighted average cost of capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Use MACRS to compute the depreciation schedule for office furniture purchased for $80,000 (use the 7 yr depreciation schedule). Assume salvage value is $10,000

1. What is the difference between hedging and speculation?

2. List one reason why risk management might increase the value of a firm.

3. List one difference between a futures contract and a forward contract.

4. What are you protecting against if you sell Treasury futures short?

5. Why would a company enter into a swap?

Sunburn Sunscreen has a zero coupon bond issue outstanding with a $12,000 face value that matures in one year. The current market value of the firm’s assets is $13,800. The standard deviation of the return on the firm’s assets is 34 percent per year, and the annual risk-free rate is 6 percent per year, compounded continuously. The firm is considering two mutually exclusive investments. Project A has an NPV of $1,500, and Project B has an NPV of $2,300. As the result of taking Project A, the standard deviation of the return on the firm’s assets will increase to 49 percent per year. If Project B is taken, the standard deviation will fall to 21 percent per year.

2) Analyze the project’s return in the initial business plan. Discuss the effect of possible legal constraints.

B&B Technologies is considering expanding its operations to include production and sales of high capacity storage devices. The assistant to the CFO has collected a lot of information which is described below. Unfortunately, some of the information may be of questionable relevance, but that is for you to decide. You have asked to present a net present value based analysis to help management decide on the desirability of getting into the storage device business.

The company owns a vacant building near its current manufacturing facility; this building could be used for the expansion, or it could be leased to an interested customer and generate a lease revenue of $250,000, starting this year. The firm could increase the lease charge by 5% every year. The company has some unused equipment that has a book value of $40,000 zero and a market value of $30,000. This equipment could either be sold or be modified to produce storage devices; the modification would cost $10,000. The old equipment and modification costs would be depreciated straight-line over five years. Producing storage devices would also require the purchase of new equipment costing $900,000. For purposes of depreciation, the new equipment would be in the 7-year MACRS class. This equipment would have a useful life of six years, at the end of which it would have a scrap value of 10% of the purchase price.

Producing storage devices would require an ongoing investment in working capital. Net working capital is expected to be 10% of expected sales for the coming year and would vary with sales, but remain at 10% of expected sales for the coming year. All working capital would be recovered at the end of the six-year life of the investment.

The production facility is expected to generate sales revenues of $1,000,000 in the first year; sales are expected to increase at 10% p.a. for three years and then decline by 5% p.a. over the last two years of the project. Operating costs are expected to be 40% of sales. The firm’s effective tax rate of 20% is expected to remain unchanged over the planning period, and the appropriate required rate of return for this investment is 8%.

Question

1. Estimate the net present value and the internal rate of return for this investment.

2. Now suppose the following changes occur: (i) Sales in the first year turn out to be $900,000, (ii) the CGS to sales ratio is 45%, (iii) the NWC to sales ratio is 15%, (iv) the scrap value of the new equipment in year 6 is 5% of the original cost, and (v) the required rate of return is 10%. What is the net present value and the internal rate of return with all of the above changes? Should B&B Technologies get into the storage device business?

Assume Chalktronics is for sale for $500,000 and the firm has the following characteristics:

            Cash sales: $600,000 per year forever

            Cash costs: 70% of sales

            Corporate tax rate: 40%

            Unlevered cost of capital (r₀): 20%

Both Pentronics and DebtTronics are interested in purchasing Chalktronics.

Pentronics will use no debt financing and DebtTronics will use a target D/E ratio of 10% to finance the acquisition.

A.  What is the maximum Pentronics can pay for Chalktronics? (4 pts.)

B.  What is the maximum DebtTronics can pay for Chalktronics? (4 pts.)

Calculation of individual costs and WACC   Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following​ weights: 50​% ​long-term debt, 15​% preferred​ stock, and 35​% common stock equity​ (retained earnings, new common​ stock, or​ both). The​ firm's tax rate is 21​%. Debt The firm can sell for ​$1030 a 19​-year, ​$1 comma 000​-par-value bond paying annual interest at a 9.00​% coupon rate. A flotation cost of 3​% of the par value is required. Preferred stock  7.50​% ​(annual dividend) preferred stock having a par value of ​$100 can be sold for ​$88. An additional fee of ​$4 per share must be paid to the underwriters. Common stock  The​ firm's common stock is currently selling for ​$50 per share. The stock has paid a dividend that has gradually increased for many​ years, rising from ​$2.50 ten years ago to the ​$4.07 dividend​ payment, Upper D 0​, that the company just recently made. If the company wants to issue new new common​ stock, it will sell them ​$2.00 below the current market price to attract​ investors, and the company will pay ​$2.50 per share in flotation costs.  

a.  Calculate the​ after-tax cost of debt.

b.  Calculate the cost of preferred stock.

c.  Calculate the cost of common stock​ (both retained earnings and new common​ stock).

d.  Calculate the WACC for Dillon Labs.

B3. Use the foreign exchange model to explain the impact of an increase in US interest rates on the Australian dollar?

B4. Use the per worker production function to explain why additional capital per worker cannot be a source of long run economic growth in an economy