Johnson Industries finances its projects with 40 percent debt, 10 percent preferred stock, and 50 percent common stock.

• The company can issue bonds at a yield to maturity of 10% percent.
• The cost of preferred stock is 12 percent.
• The company's common stock currently sells for $40 a share.
• The company's dividend is currently $1.50 a share (D₀ = $1.50), and is expected to grow at a constant rate of 8 percent per year.
• Assume that the flotation cost on debt and preferred stock is zero, and no new stock will be issued.
• The company’s tax rate is 25 percent.

What is the company’s weighted average cost of capital (WACC)? Show work.

Mr. Sam Golff desires to invest a portion of his assets in rental property. He has narrowed his choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mr. Golff has developed the following estimates of the cash flows for these properties.

Palmer Heights Yearly Aftertax Cash Inflow (in thousands)

Probability $ 80 0.2

85 0.2

100 0.2 1

15 0.2

120 0.2

Crenshaw Village Yearly Aftertax Cash Inflow (in thousands)

Probability $ 85 0.2

90 0.3

100 0.4

110 0.1

c. Which apartment complex has more risk?

b. What is the coefficient of variation for each apartment complex?

a. Find the expected cash flow from each apartment complex. (Enter your answers in thousands (e.g, $10,000 should be enter as

Calvin Hotdogs is looking at a new sausage system with an installed cost of $685,500. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $91,000. The sausage system will save the firm $195,000 per year in pretax operating costs, and you will be able to reduce working capital by $47,000 at the beginning of the project. If the tax rate is 21 percent and the discount rate is 10%, what is the NPV of this project?

Dunder-Mifflin, Inc.​ (DMI) is selling​ 600,000 bonds to raise money for the publication of new magazines in the coming year. The bond will pay a coupon rate of 13.3% with semiannual payments and will mature in 30 years. Its par value is ​$100. What is the cost of debt to DMI if the bonds raise the following amounts​ (ignoring issuing​ costs)?

a. $58,362,000

b. $55,602,000

c. $64,440,000

d. $72,414,000

a. What is the cost of debt to DMI if the bonds raise $58,362,000?

% (Round to two decimal​ places.)

b. What is the cost of debt to DMI if the bonds raise $55,602,000?

% (Round to two decimal​ places.)

c. What is the cost of debt to DMI if the bonds raise $64,440,000?

% (Round to two decimal​ places.)

d. What is the cost of debt to DMI if the bonds raise $72,414,000?

% (Round to two decimal​ places.)

Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here.

a. Complete the following table given earnings before interest and taxes of $16,000, $28,800, and $57,000. Assume the tax rate is 10 percent. (Negative amounts should be indicated by parentheses or a minus sign. Round your answers to 2 decimal places.)
  

b-1. What is the EBIT/TA rate when the firm's have equal EPS?
  

b-2. What is the cost of debt?
  

b-3. State the relationship between earnings per share and the level of EBIT.
  

c. If the cost of debt went up to 10 percent and all other factors remained equal, what would be the break-even level for EBIT?
  

Consider the following third-quarter budget data for TAP & Brothers:

The company predicts that 4% of its credit sales will never be collected, 30% of its sales will be collected in the month of the sale, and the remaining 66% will be collected in the following month. Credit purchases will be paid in the month following the purchase.

• In June, credit sales were $138,338, and credit purchases were $102,718
• July’s beginning cash is $184,266

If TAP maintains a policy of always keeping a minimum cash balance of $75,000 as a buffer against uncertainty and forecasting errors, what is the cash surplus/deficit at the end of the quarter (i.e., end of September)?

Calculate MIRR

Io or Co =$25,000
Saving rate=1.5%,
Loan rate=8%,
Discount rate is 7%

N Cash Flows
1 $8,000
2 12,000
3 <1,000>
5 15,000

Don't use excel

s there a risk to being too focused on the financial aspects of the property? What type of strategy would you develop to maximize the value of your property?

1. Would you charge the highest possible rents? Why or why not?

2. Would you maintain the property to the highest possible levels of quality and cleanliness at all times? Why or why not?

3. Would you take any tenant so long as they paid the rent? Why or why not?

Explain and discuss.

factors that should be taken into account for the management of a maturity profile of a firm's debt portfolio

How to solve using financial calculator

16. In order to pay for all of its Super Bowl commercials, assume that Anheuser-Busch issued a bunch of bonds on January 1, 2019 with the following terms:
          Par Value                                                        $10,000,000
          Maturity                                                          20 years (January 1, 2039)
          Annual Coupon                                               6% annual rate
          Market Required Yield-to-Maturity               6% annual rate (at time of issuance)
          Payment frequency                                         Semi-annual (every 6 months)
                                                                                                                                              (8 points)
    
    1. How much cash did Anheuser-Busch receive upon issuance in January? (Ignore any possible fees or transaction costs – what was the market value of the bonds?)
       
       
       
       
       
       
       
    2. Now assume that the annual coupon rate was 8% instead of 6%. How much would Anheuser-Busch have received at issuance in this case (and all other terms were the same as above)?
       
       
       
       
       
       
       
       
       
       
    3. Now imagine it’s January 1, 2024. What would be the market value of the bonds if the annual yield-to-maturity has increased to 8% (and the annual coupon rate were 6%, with semi-annual payments)?
       
       
       
       
       

NPV profile. ​ Siesta, Incorporated is looking at a project and has the appropriate cash flow. ​ However, there is much disagreement on the appropriate discount rate to use with the project. ​ Aracely, the​ CFO, has requested that you provide the NPV at various interest rates between 0 % and 40 % at 2 % intervals. That​ way, when Siesta is able to access the proper discount rate for this​ project, it will know if the project is a​ "go". In​ addition, graph your NPV results at each interest rate to show the​ project's NPV profile. The cash flow for the project is listed here in millions of​ dollars: ​(Click on the following icon in order to copy its contents into a​ spreadsheet.) Year 0 1 2 3 4 5 6 7 8 CF negative 33.29 3.56 5.56 9.16 14.69 18.21 20.88 16.66 11.38 The NPV for a discount rate of 6 % is ​$ 40 million.  ​(Round to f

QUESTION 1

You and your workmates have come together to form an investment group called Pamodzi Investments; requiring each member to make monthly deposits into a pool account. You are planning to use these funds to create a portfolio of investments in preparation for you retirements.

Todate, the balance in the pool account amounts to K150,000-00 and you are about to make your first investment. However, there is a challenge due to different preferences of which securities to invest in. As a way towards consensus, a colleague proposes to consider the Collective Investment schemes that are available on the market. He has heard that this is a better way of accessing diversification benefits for small investors.

As an Investment Analyst in the group, you have been approached by your colleagues to advise on the options to consider and how to set up some investment guidelines for the operations of the group.

Required:

1. Explain the relevance of having an investment policy while highlighting its key component parts.

[15 Marks]

2. Explain the justification of the Modern Portfolio Theory approach to creating investment portfolios.

[15 Marks]

3. Explain diversification and how it could be achieved in this situation with reference to Zambian financial markets.

[10 Marks]

D)Explain the main investment asset classes available in Zambia while providing examples of the common securities available under each type.