Assume a corporation has just paid a dividend of $ 3.52 per share. The dividend is expected to grow at a rate of 3.8% per year forever, and the discount rate is 6.9%. What is the Capital Gains yield of this stock? Enter your answer as a percentage, rounded to 1 decimal, and without the percentage sign. So, if your answer is 0.05678, just enter 5.7.

CASH CONVERSION CYCLE - HELLO, THIS IS ALL ONE QUESTION, THANK YOU SO MUCH IN ADVANCE!

Parramore Corp has $20 million of sales, $3 million of inventories, $4 million of receivables, and $2 million of payables. Its cost of goods sold is 85% of sales, and it finances working capital with bank loans at an 6% rate. Assume 365 days in year for your calculations. Do not round intermediate steps.

1. What is Parramore's cash conversion cycle (CCC)? Do not round intermediate calculations. Round your answer to two decimal places.
     days
2. If Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold, what would be the new CCC? Do not round intermediate calculations. Round your answer to two decimal places.
     days
3. How much cash would be freed up, if Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold? Do not round intermediate calculations. Round your answer to the nearest cent. Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000.
   $
4. By how much would pretax profits change, if Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold? Do not round intermediate calculations. Round your answer to the nearest cent. Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000.
   $

CURRENT ASSETS INVESTMENT POLICY - HELLO, THIS IS ALL ONE QUESTION, THANK YOU VERY MUCH IN ADVANCE FOR ANY HELP YOU CAN GIVE!

Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $4 million as a result of an asset expansion presently being undertaken. Fixed assets total $2 million, and the firm plans to maintain a 50% debt-to-assets ratio. Rentz's interest rate is currently 9% on both short-term and long-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current assets level are under consideration: (1) a restricted policy where current assets would be only 45% of projected sales, (2) a moderate policy where current assets would be 50% of sales, and (3) a relaxed policy where current assets would be 60% of sales. Earnings before interest and taxes should be 13% of total sales, and the federal-plus-state tax rate is 40%.

1. What is the expected return on equity under each current assets level? Round your answers to two decimal places.

   Restricted policy		%
   Moderate policy		%
   Relaxed policy		%

2. In this problem, we assume that expected sales are independent of the current assets investment policy. Is this a valid assumption?
   1. No, this assumption would probably not be valid in a real world situation. A firm's current asset policies may have a significant effect on sales.
   2. Yes, this assumption would probably be valid in a real world situation. A firm's current asset policies have no significant effect on sales.
   3. Yes, sales are controlled only by the degree of marketing effort the firm uses, irrespective of the current asset policies it employs.
   4. Yes, the current asset policies followed by the firm mainly influence the level of long-term debt used by the firm.
   5. Yes, the current asset policies followed by the firm mainly influence the level of fixed assets.

On Monday morning you sell one June T-bond futures contract at $98,622.75. The contract's face value is $100,000. The initial margin requirement is $2,700, and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer the following questions.

The balance in your margin account after Wednesday will be $ _______.

Multiple Choice

• 1,322.75

• 1,768.45

• 383.86

• 543.75

On Monday morning you sell one June T-bond futures contract at $97,843.75. The contract's face value is $100,000. The initial margin requirement is $2,700, and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer the following questions.

At the close of day on Tuesday your cumulative rate of return on your investment is _____.

Multiple Choice

• −0.16%

• −5.8%

• −2.2%

• 16.2%

The initial margin requirement of an interest rate futures contract is 11% with a price of $128,547. The futures is worth $100,000 per contract. The percentage profit/loss of the investor with a short position of this futures will be _________ if the futures price becomes $126,000.

Multiple Choice

• 29.01% loss

• 18.01% loss

• 29.01% profit

• 18.01% profit

You shorted two S&P 500 index futures contracts at 1,558 two weeks ago. Your profit/loss will be $ _____________ if currently the S&P 500 futures price is at 1,562, assuming each S&P 500 index futures contract is worth $1,000? (Put a negative sign "-" in front of the number if it is a loss.)

You are given the following information concerning options on a particular stock: Stock price = $61 Exercise price = $60 Risk-free rate = 4% per year, compounded continuously Maturity = 3 months Standard deviation = 46% per year

Call option? and Put option?

In what ways can the IRR make you give a flawed decision and what relationship the NVP have with the IRR?

Complete the following table and compute the project’s conventional payback period. For full credit, complete the entire table. (Note: Round the conventional payback period to two decimal places. If your answer is negative, be sure to use a minus sign in your answer.)

The conventional payback period ignores the time value of money, and this concerns Cold Goose’s CFO. He has now asked you to compute Delta’s discounted payback period, assuming the company has a 7% cost of capital. Complete the following table and perform any necessary calculations. Round the discounted cash flow values to the nearest whole dollar, and the discounted payback period to two decimal places. For full credit, complete the entire table. (Note: If your answer is negative, be sure to use a minus sign in your answer.)

Which version of a project’s payback period should the CFO use when evaluating Project Delta, given its theoretical superiority?

a)The discounted payback period

b)The regular payback period

One theoretical disadvantage of both payback methods—compared to the net present value method—is that they fail to consider the value of the cash flows beyond the point in time equal to the payback period.

How much value in this example does the discounted payback period method fail to recognize due to this theoretical deficiency?

$2,411,755

$6,168,764

$3,957,217

$1,714,226

9. Stocks that don't pay dividends yet

Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. She expects Goodwin to pay a $5.50000 dividend at that time (D₃ = $5.50000) and believes that the dividend will grow by 28.60000% for the following two years (D₄ and D₅). However, after the fifth year, she expects Goodwin’s dividend to grow at a constant rate of 4.38000% per year.

Goodwin’s required return is 14.60000%. Fill in the following chart to determine Goodwin’s horizon value at the horizon date (when constant growth begins) and the current intrinsic value. To increase the accuracy of your calculations, do not round your intermediate calculations, but round all final answers to two decimal places.

The following are two independent projects that you are evaluating. The first project has cash flows of −$161,900, $60,800, $162,300, and -$75,000 for Years 0 to 3, respectively. The second project has cash flows of −$175,600, $261,800, -$165,000, $145,000 and -$75,000. Which of these, best summarizes your situation?

A. Project 1 has 2 IRRs and Project 2 has 2 IRRs. Therefore, we should not use IRR to evaluate the projects.

B. Project 1 has 1 IRR and Project 2 has 2 IRRs. Therefore, we should use IRR only to evaluate Project 1.

C. Project 1 has 2 IRRs and Project 2 has 3 IRRs. Therefore, we should not use IRR to evaluate the projects.

D. Project 1 has 3 IRRs and Project 2 has 4 IRRs. Therefore, we should not use IRR to evaluate the projects.

E. None of the above is correct.

Explain the relative merits of equity financing versus debt financing.

Calculate the Macaulay duration of an 8%, $1,000 par bond that matures in three years if the bond's YTM is 14% and interest is paid semiannually. You may use Appendix C(https://cnow.apps.ng.cengage.com/ilrn/books/reia11h/appendix_c.jpg) to answer the questions.

1. Calculate this bond's modified duration. Do not round intermediate calculations. Round your answer to two decimal places.

     years

2. Assuming the bond's YTM goes from 14% to 13.0%, calculate an estimate of the price change. Do not round intermediate calculations. Round your answer to three decimal places. Use a minus sign to enter negative value, if any.

     %

Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 11% and that the investments will produce the following after-tax cash flows (in millions of dollars):

Year Project A Project B

1 5 20

2 10 10

3 15 8

4 20 6

a. What is the regular payback period for each of the projects? Round your answers to two decimal places.

Project A: (years)

Project B: (years)

b. What is the discounted payback period for each of the projects? Round your answers to two decimal places.

Project A: (years)

Project B: (years)

c. If the two projects are independent and the cost of capital is 11%, which project or projects should the firm undertake?

d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?

e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?

f. What is the crossover rate? Round your answer to two decimal places.

e. If the cost of capital is 11%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.

Project A: (%)

Project B: (%)

Car Lease

use the information to answer the following questions.

You have decided to acquire a new car that costs $30,000. You are considering whether to lease it for three years or to purchase it and financing the purchase with a three year installment loan. The lease requires no down payment and lasts for three years. Lease payments are $400 monthly starting immediately, whereas the installment loan will require monthly payments starting a month from now at an annual percentage rate (APR) of 8%. The discount rate (APR) is also 8%.

1) If you expect the resale value of the car to be $20,000 three years from now, should you buy or lease it?

2) What is the break-even resale price of the care three years from now, such that you would be indifferent between buying and leasing it?

3. Car lease, Q1-1.

What is the value of the lease payment?

Hint:

• model the lease payment as an annuity due.
• use Excel PV function to calculate the present value.

(A) 12764.72 (B) 12849.82 (C) 13489.90 (D) 12953.80

4. Car lease, Q1-2

What is the present value of the resale value of $20,000 in three years?

(A) 17549.09 (B) 15745.09 (C) 15769.04 (D) 14759.08

5. Car lease: Q1-3

Following the car installment plan, the car would be brought now at $30000, and sold in three years at 20,000.

Estimate the loss in value as measured by the difference in their present values. This is the net cost of purchasing and reselling the car.

Compare the cost with leasing, should you buy or lease?

(A) Lease (B) buy

6. Care lease, Q2

What is the break-even resale price of the care three years from now, such that you would be indifferent between buying and leasing it?

(A) 18357 (B) 22987 (C) 19385 (D) 21785

Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2000 and a cash inflow the following year of $2400. Sandrine estimates that its risk-adjusted cost of capital is 13%. Currently, 1 U.S. dollar will buy 0.73 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding 6.75%, while similar securities in Switzerland are yielding 3%.

1. If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round your answers to two decimal places.

   NPV = $  

   Rate of return = %

2. What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places.

   SF per U.S. $

3. If Sandrine undertakes the project, what is the net present value and rate of return of the project for Sandrine? Do not round intermediate calculations. Round your answers to two decimal places.

   NPV = Swiss Francs

   Rate of return = %