NPH wants to increase capacity by 40% with a $10 million investment in plant and machinery. The firm wants to maintain the current debt-to-total-asset ratio in the capital structure of 40%. It also wants to maintain the past dividend policy of distributing 45% of last year’s income as dividends. Last year’s income was $5 million. How much external equity must NPH seek for the expansion? Please show calculations. Thank you.
In: Finance
|
Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.38 million. The fixed asset falls into the 3-year MACRS class (MACRS schedule). The project is estimated to generate $1,760,000 in annual sales, with costs of $660,000. The project requires an initial investment in net working capital of $350,000, and the fixed asset will have a market value of $330,000 at the end of the project. |
| a. | If the tax rate is 25 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.) |
| b. | If the required return is 10 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.) |
In: Finance
|
Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $1,400,000, and its economic life is five years. The machine will be fully depreciated by the straight-line method. The machine will produce 27,000 keyboards each year. The price of each keyboard will be $49 in the first year and will increase by 6 percent per year. The production cost per keyboard will be $19 in the first year and will increase by 3 percent per year. The project will have an annual fixed cost of $255,000 and require an immediate investment of $220,000 in net working capital. The corporate tax rate for the company is 24 percent. The appropriate discount rate is 11 percent. |
| What is the NPV of the investment? |
In: Finance
Based on economists' forecasts and analysis, one-year T-bill rates and liquidity premiums for the next four years are expected to be as follows:
1R1 = .37%
E(2r1) = .62% L2 = 0.04%
E(3r1) = .72% L2 = 0.15%
E(4r1) = 1.02% L2 = 0.18%
Calculate the four annual rates.
In: Finance
Here are simplified financial statements for Phone Corporation in a recent year:
| INCOME STATEMENT | ||
| (Figures in $ millions) | ||
| Net sales | $ | 13,800 |
| Cost of goods sold | 4,410 | |
| Other expenses | 4,182 | |
| Depreciation | 2,728 | |
| Earnings before interest and taxes (EBIT) | $ | 2,480 |
| Interest expense | 720 | |
| Income before tax | $ | 1,760 |
| Taxes (at 35%) | 616 | |
| Net income | $ | 1,144 |
| Dividends | $ | 926 |
| BALANCE SHEET | |||||||
| (Figures in $ millions) | |||||||
| End of Year | Start of Year | ||||||
| Assets | |||||||
| Cash and marketable securities | $ | 96 | $ | 165 | |||
| Receivables | 2,732 | 2,630 | |||||
| Inventories | 222 | 273 | |||||
| Other current assets | 902 | 967 | |||||
| Total current assets | $ | 3,952 | $ | 4,035 | |||
| Net property, plant, and equipment | 20,043 | 19,985 | |||||
| Other long-term assets | 4,286 | 3,840 | |||||
| Total assets | $ | 28,281 | $ | 27,860 | |||
| Liabilities and shareholders’ equity | |||||||
| Payables | $ | 2,634 | $ | 3,110 | |||
| Short-term debt | 1,454 | 1,608 | |||||
| Other current liabilities | 846 | 822 | |||||
| Total current liabilities | $ | 4,934 | $ | 5,540 | |||
| Long-term debt and leases | 5,275 | 5,580 | |||||
| Other long-term liabilities | 6,248 | 6,219 | |||||
| Shareholders’ equity | 11,824 | 10,521 | |||||
| Total liabilities and shareholders’ equity | $ | 28,281 | $ | 27,860 | |||
Calculate the following financial ratios for Phone Corporation:
| a. | Return on equity (use average balance sheet figures) | % | |
| b. | Return on assets (use average balance sheet figures) | % | |
| c. | Return on capital (use average balance sheet figures) | % | |
| d. | Days in inventory (use start-of-year balance sheet figures) | days | |
| e. | Inventory turnover (use start-of-year balance sheet figures) | ||
| f. | Average collection period (use start-of-year balance sheet figures) | days | |
| g. | Operating profit margin | % | |
| h. | Long-term debt ratio (use end-of-year balance sheet figures) | ||
| i. | Total debt ratio (use end-of-year balance sheet figures) | ||
| j. | Times interest earned | ||
| k. | Cash coverage ratio | ||
| l. | Current ratio (use end-of-year balance sheet figures) | ||
| m. | Quick ratio (use end-of-year balance sheet figures) |
In: Finance
This annual figure from #3 ($16,509.66) is more than the Prof.’s current annual contribution, which makes her feel a little anxious about her future planned retirement. Also, Prof. Business’ annual retirement account contribution is based on a percentage of her salary and will increase as her salary increases. So, let’s re-plan her retirement income. Let’s account for the fact that her and the University’s contributions to Prof. Business’ University retirement plan are based on a certain percentage of her salary and will increase as her salary increases. Based on this formula, her first upcoming end of the year deposit will be $20,200 and let’s assume that her annual deposit and salary will grow at a 2% annual rate over the remaining 7 years (8 total deposits) to Prof. Business’ retirement. These deposits are in addition to the $640,000 she currently has today in the University retirement plan. The Rate of Return is 7.50%. Answer the following based on these assumptions using Excel.
a) How much money will Prof. Business have in her retirement account immediately after her last deposit 8 years from today?
b) What would be the equal annual payment from her 20-year retirement annuity whose first payment occurs exactly 8 years from today?
In: Finance
A firm is negotiating a lease on a new piece of equipment that would cost $1,000,000 if purchased. The equipment falls into the MACRS 3-year class. The depreciation would be 33%, 45%, 15%, and 7% for years 1, 2, 3, and 4 respectively. The equipment would be used for 3 years and sold. It is estimated that it would be sold after three years for $300,000. A maintenance contract on the equipment would cost $30,000 per year if purchased. Conversely, the firm could lease the equipment for a lease payment of $290,000 per year. The lease payment would include maintenance. The firm is in the 20% tax bracket, and it could obtain a loan to purchase the equipment at a before-tax rate of 10%. What is the NAL?
Please show calculation. Thank you
In: Finance
| Presented below are the 2016 income statement and comparative balance sheets for Santana Industries. |
| SANTANA INDUSTRIES Income Statement For the Year Ended December 31, 2016 ($ in thousands) |
||||
| Sales revenue | $ | 16,250 | ||
| Service revenue | 5,400 | |||
| Total revenue | $ | 21,650 | ||
| Operating expenses: | ||||
| Cost of goods sold | 8,200 | |||
| Selling | 3,400 | |||
| General and administrative | 2,500 | |||
| Total operating expenses | 14,100 | |||
| Operating income | 7,550 | |||
| Interest expense | 300 | |||
| Income before income taxes | 7,250 | |||
| Income tax expense | 3,500 | |||
| Net income | $ | 3,750 | ||
| Balance Sheet Information ($ in thousands) | Dec. 31, 2016 |
Dec. 31, 2015 |
||||
| Assets: | ||||||
| Cash | $ | 8,350 | $ | 3,100 | ||
| Accounts receivable | 4,500 | 3,200 | ||||
| Inventory | 6,000 | 4,000 | ||||
| Prepaid rent | 250 | 500 | ||||
| Plant and equipment | 16,500 | 14,000 | ||||
| Less: Accumulated depreciation | (6,100 | ) | (5,500 | ) | ||
| Total assets | $ | 29,500 | $ | 19,300 | ||
| Liabilities and Shareholders’ Equity: | ||||||
| Accounts payable | $ | 3,400 | $ | 2,100 | ||
| Interest payable | 200 | 0 | ||||
| Deferred service revenue | 1,000 | 700 | ||||
| Income taxes payable | 650 | 1,000 | ||||
| Loan payable (due 12/31/2015) | 7,000 | 0 | ||||
| Common stock | 11,000 | 11,000 | ||||
| Retained earnings | 6,250 | 4,500 | ||||
| Total liabilities and shareholders' equity | $ | 29,500 | $ | 19,300 | ||
| Additional information for the 2016 fiscal year ($ in thousands): | |
| 1. | Cash dividends of $2,000 were declared and paid. |
| 2. | Equipment costing $6,000 was purchased with cash. |
| 3. |
Equipment with a book value of $1,500 (cost of $3,500 less accumulated depreciation of $2,000) was sold for $1,500. |
| 4. | Depreciation of $2,600 is included in operating expenses. |
| Required: |
|
Prepare Santana Industries' 2016 statement of cash flows, using the indirect method to present cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.) |
In: Finance
Compute the 2019 standard deduction for the following taxpayers.
If an amount is zero, enter "0".
Click here to access the standard deduction table to use.
|
In: Finance
Southern airline inc.announced that its net income in the first quarter jumped percent to $100 million as number of passenger climbed. The airline also booked of $40 million from the sales of 2 aircraft. According to the survey of 6 analysts average estimate of the first quarter net income for the airline was $200 miliion. After earning announcement what would be the possible movement of the company's stock. Please explain with any financial concepts and theories?
In: Finance
You own a 10-acre vineyard and earn income by selling your grapes to wineries. Your vineyard is currently planted to Merlot grapes, but you are thinking of replanting with Syrah grapes because they are commanding a higher market price per ton. Merlot fetches $1400 per ton but Syrah sells for $2900 per ton, those prices are expected to remain stable, and you produce 5 tons per year per acre (so 50 tons per year total). Either way, you plan to sell the vineyard 5 years from now (at the end of the year) for 4-times (4x) the annual income (in year 5) from the sale of grapes (that is, you'll get the income from grape sales and then sell the vineyard for 4 times that amount at the end of year 5). However, if you switch to Syrah, it will cost you $117,000 immediately and the vines won’t produce any grapes until year 4 (that is, years 1-3 will have no sales if you plant Syrah, but years 4 and 5 will). The applicable discount rate is 8% per year. What is the NPV of switching? Round to the nearest cent. [Hint: Create a timeline showing the incremental annual cash flows from switching and find their NPV. Some cash flows will be negative (first 3 years) and some (years 4 and 5) will be positive.]
In: Finance
One month ago, a share was worth $192. Today it is worth $216. What is the 1-month return on the stock?
In: Finance
Suppose you have $600 in your account. You bought 2 shares of Apple stock (AAPL) at $204/share and 1 share of Microsoft stock (MSFT) at $102/share. ___, the weight of MSFT is ____, and the weight of cash ____
The weight of AAPL in your portfolio is:
The weight of MSFT in your portfolio is:
The weight of Cash in your portfolio is:
Please give your answers as two decimals. For example "fifty percent" would be "0.50".
In: Finance
Prepare a 2018 balance sheet for Rogers Corp. based on the following information: Cash = $360,000; Patents and copyrights = $760,000; Accounts payable = $500,000; Accounts receivable = $159,000; Tangible net fixed assets = $3,500,000; Inventory = $235,000; Notes payable = $180,000; Accumulated retained earnings = $1,265,000; Long-term debt = $1,530,000. What is the common stock account balance for the company?
In: Finance
You are a freshman in college and are planning a trip to Europe when you graduate from college at the end of four years. You plan to save the following amounts annually, starting today: $550, $720, $720, and $800. If you can earn 7.15 percent annually, how much will you have at the end of four years? (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)
In: Finance