Assume today is March 16, 2016. Natasha Kingery is 30 years old and has a Bachelor of Science degree in computer science. She is currently employed as a Tier 2 field service representative for a telephony corporation located in Seattle, Washington, and earns $38,000 a year that she anticipates will grow at 3% per year. Natasha hopes to retire at age 65 and has just begun to think about the future.
Natasha has $75,000 that she recently inherited from her aunt. She invested this money in 30-year Treasury Bonds. She is considering whether she should further her education and would use her inheritance to pay for it.*
She has investigated a couple of options and is asking for your help as a financial planning intern to determine the financial consequences associated with each option. Natasha has already been accepted to both of these programs, and could start either one soon.
One alternative that Natasha is considering is attaining a certification in network design. This certification would automatically promote her to a Tier 3 field service representative in her company. The base salary for a Tier 3 representative is $10,000 more than what she currently earns and she anticipates that this salary differential will grow at a rate of 3% a year as long as she keeps working. The certification program requires the completion of 20 Web-based courses and a score of 80% or better on an exam at the end of the course work. She has learned that the average amount of time necessary to finish the program is one year. The total cost of the program is $5000, due when she enrolls in the program. Because she will do all the work for the certification on her own time, Natasha does not expect to lose any income during the certification.
Another option is going back to school for an MBA degree. With an MBA degree, Natasha expects to be promoted to a managerial position in her current firm. The managerial position pays $20,000 a year more than her current position. She expects that this salary differential will also grow at a rate of 3% per year for as long as she keeps working. The evening program, which will take three years to complete, costs $25,000 per year, due at the beginning of each of her three years in school. Because she will attend classes in the evening, Natasha doesn’t expect to lose any income while she is earning her MBA if she chooses to undertake the MBA.
* If Natasha lacked the cash to pay for her tuition upfront, she could borrow the money. More intriguingly, she could sell a fraction of her future earnings, an idea that has received attention from researchers and entrepreneurs; see M. Palacios, Investing in Human Capital: A Capital Markets Approach to Student Funding, Cambridge University Press, 2004.
In: Finance
Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently run out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.
Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,600 per month, and the rent is $2,600 per month. In addition, she must make a tax payment of $11,000 in December. The current cash on hand (on December 1) is $700, but Koehl has agreed to maintain an average bank balance of $5,000 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)
The estimated sales and purchases for December, January, and February are shown below.
Purchases during November amounted to $110,000.
Sales Purchases
December $140,000 $40,000
January 48,000 40,000
February 58,000 40,000
Prepare a cash budget for December, January, and February.
I. Collections and Purchases:
December January February
Sales $ $ $
Purchases $ $ $
Payments for purchases $ $ $
Salaries $ $ $
Rent $ $ $
Taxes $ --- ---
Total payments $ $ $
Cash at start of forecast $ --- ---
Net cash flow $ $ $
Cumulative NCF $ $ $
Target cash balance $ $ $
Surplus cash or loans needed $ $ $
Suppose Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.)
In: Finance
A proposed cost-saving device has an installed cost of $670,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $49,000, the marginal tax rate is 30 percent, and the project discount rate is 8 percent. The device has an estimated Year 5 salvage value of $74,000. What level of pretax cost savings do we require for this project to be profitable? MACRS schedule (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
In: Finance
Your task is to determine the WACC for a healthcare organization. Your deliverable is a brief report in which you state your determination of WACC, describe and justify how you determined the number, and provide a relevant discussion of your findings. Chapter 7 covers the basic concepts of WACC. Refer to the WACC formula at the bottom of page 341: WACC = Kd(1-t)(D / V) + Ke(E/V) Company HCA Healthcare (Stock Ticker Symbol: HCA) Assumptions: HCA has a cost of debt of 6%, a corporate tax rate of 40%, and a debt weight of 60%. HCA has a cost of equity of 11.4% and an equity weight of 40%.
Submit the following: Write a 350- to 700-word report that contains the following elements:
• Your calculated WACC. Describe how you used the assumptions to calculate the WACC.
• What does HCA’s WACC indicate? How could decision makers use this information?
• How would an increase in equity or debt impact the WACC?
• US corporate tax rates were reduced to 21% starting in 2018. Recalculate your WACC based on the new tax rates. Describe the impact of changes in corporate tax rates on HCA’s WACC. • Is a higher WACC good or bad? Support your answer.
Include the math used for your calculations.
In: Finance
In: Finance
Swanton Industries is expected to pay a dividend of $5 per year for 10 years and then increase the dividend to $10 per share for every year thereafter. The required rate of return on this stock is 20 percent. What is the estimated stock price for Swanton?
In: Finance
After 18 years, how much money will we have for the university education for our 3 children? If we invest in the given below option:
Current savings to be invested = $20,000
semi-monthly contribution of $150 at the end of each period, set aside for the next 18 years = $150 (semi-monthly contribution)
average annual rate of return compounded semi-monthly = 8%
Please use (display + name) the excel function/ formula for all questions
| Ans. University savings plan | |
| APR | 8.00% |
| period rate | |
| current savings | |
| semi-monthly contributions | -$150.00 |
| #periods | |
| Amount available after 18 years: |
Q2)
We have 3 children. Our objective is to give each child $25,000 at the beginning of each year of their engineering college ($75,000 in total per year) for 4 years. How much money would we need to have available in our university education savings fund 18 years from now based on an annual interest rate of 8%? (Also compounded semi-monthly).
Please use (display + name) the excel function/ formula for all questions
| Ans 2. money needed in fund | |
| period rate | |
| payments | -$75,000.00 |
| #periods | |
| Amount needed 18 years from now: |
Ques 3. If our semi-monthly contribution of $150 is not enough to meet our target, how much would we have to contribute to the university savings fund on a semi-monthly basis? (to have the required amount needed when children start college).
Please use (display + name) the excel function/ formula for all questions
| Ans 3. required contribution | |
| period rate | |
| #periods | |
| Required semi-monthly contribution: |
In: Finance
You have conducted your economic analysis of the US markets and determined that the US is likely to be in a contractionary phase. Which of the following stock types should you be most likely to overweight in your portfolio?
Group of answer choices
A. cyclical stocks
B. growth stocks
C. technology stocks
D. defensive stocks
In: Finance
Use the following tables to complete the critical thinking assignment.
Best Buy Co., Inc.
Income Statement
| 2/3/2018 | 1/28/2017 | 1/30/2016 | 1/31/2015 | |
| Revenue | ||||
| Total Revenue | 42,151,000 | 39,403,000 | 39,528,000 | 40,339,000 |
| Cost of Revenue | 32,275,000 | 29,963,000 | 30,334,000 | 31,292,000 |
| Gross Profit | 9,876,000 | 9,440,000 | 9,194,000 | 9,047,000 |
| Operating Expenses | ||||
| Selling General and Administrative | 7,911,000 | 7,493,000 | 7,612,000 | 7,550,000 |
| Operating Income or Loss | 1,965,000 | 1,947,000 | 1,582,000 | 1,497,000 |
| Income from Continuing Operations | ||||
| Add Total Other Income/Expenses Net | -148,000 | -131,000 | -272,000 | -110,000 |
| Interest Expense | 75,000 | 72,000 | 80,000 | 90,000 |
| Income Before Tax | 1,742,000 | 1,744,000 | 1,230,000 | 1,297,000 |
| Income Tax Expense | 818,000 | 609,000 | 503,000 | 141,000 |
| Add Discontinued Operations | 1,000 | 21,000 | 90,000 | -13,000 |
| Net Income | 925,000 | 1,156,000 | 817,000 | 1,143,000 |
Best Buy Co., Inc.
Balance Sheet
| 2/3/2018 | 1/28/2017 | 1/30/2016 | 1/31/2015 | |
| Current Assets | ||||
| Cash And Cash Equivalents | 1,101,000 | 2,240,000 | 1,976,000 | 2,432,000 |
| Short Term Investments | 2,196,000 | 1,848,000 | 1,384,000 | 1,539,000 |
| Net Receivables | 1,049,000 | 1,347,000 | 1,162,000 | 1,280,000 |
| Inventory | 5,209,000 | 4,864,000 | 5,051,000 | 5,174,000 |
| Other Current Assets | 274,000 | 217,000 | 313,000 | 1,047,000 |
| Total Current Assets | 9,829,000 | 10,516,000 | 9,886,000 | 11,472,000 |
| Long Term Investments | 0 | 13,000 | 27,000 | 3,000 |
| Property Plant and Equipment | 2,421,000 | 2,293,000 | 2,346,000 | 2,295,000 |
| Goodwill | 425,000 | 425,000 | 425,000 | 425,000 |
| Intangible Assets | 18,000 | 18,000 | 18,000 | 57,000 |
| Other Assets | 356,000 | 591,000 | 817,000 | 993,000 |
| Deferred Long Term Asset Charges | 159,000 | 317,000 | 510,000 | 574,000 |
| Total Assets | 13,049,000 | 13,856,000 | 13,519,000 | 15,245,000 |
| Current Liabilities | ||||
| Accounts Payable | 4,873,000 | 4,984,000 | 4,450,000 | 5,030,000 |
| Short/Current Long Term Debt | 499,000 | 0 | 350,000 | 0 |
| Other Current Liabilities | 1,043,000 | 944,000 | 975,000 | 1,609,000 |
| Total Current Liabilities | 7,817,000 | 7,122,000 | 6,925,000 | 7,777,000 |
| Long Term Debt | 648,000 | 1,158,000 | 1,168,000 | 1,492,000 |
| Other Liabilities | 805,000 | 704,000 | 877,000 | 901,000 |
| Total Liabilities | 9,437,000 | 9,147,000 | 9,141,000 | 10,250,000 |
| Stockholders' Equity | ||||
| Total Stockholder Equity | 3,612,000 | 4,709,000 | 4,378,000 | 4,995,000 |
Using the attached financial statements for Best Buy Co., Inc. complete the financial statement analysis and ratio analysis by answering the questions below.
a. Calculate the return on assets (ROA) for Best Buy Co., Inc. using the DuPont System of Analysis over the past four years.
b. Discuss the overall ROA result, along with each of the components.
c. Calculate the return on equity (ROE) for Best Buy Co., Inc. using the Modified DuPont System of Analysis over the past four years.
d. Discuss the overall ROE result, along with each of the components.
e. Provide a summary of your findings over the four years.
In: Finance
Step 1. 4% of Capital Balance Approach.
Use the managing retirement distributions worksheet to
calculate Faye’s annual retirement income possibilities and inheritance, using a beginning-of-the-year
withdrawal from ages 65-94 by withdrawing 4% of her capital the first year and with the remainder of
her account earning 4% annual after-tax return. Retirement income should increase by 3% annually
across retirement to keep pace with inflation. Start with a 4% withdrawal, but if it is not enough, then
reduce downward until the projections are adequate for her lifespan (i.e. start initial withdrawal at
4.0%, 3.9%, 3.8%, etc) Faye starts with 2,000,000 in her retirement account.
In: Finance
Assume today is December 31, 2013. Barrington Industries expects
that its 2014 after-tax operating income [EBIT(1 – T)] will be $450
million and its 2014 depreciation expense will be $70 million.
Barrington's 2014 gross capital expenditures are expected to be
$100 million and the change in its net operating working capital
for 2014 will be $20 million. The firm's free cash flow is expected
to grow at a constant rate of 4.5% annually. Assume that its free
cash flow occurs at the end of each year. The firm's weighted
average cost of capital is 9%; the market value of the company's
debt is $2.95 billion; and the company has 190 million shares of
common stock outstanding. The firm has no preferred stock on its
balance sheet and has no plans to use it for future capital
budgeting projects. Using the corporate valuation model, what
should be the company's stock price today (December 31, 2013)?
Round your answer to the nearest cent. Do not round intermediate
calculations.
$ per share?
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below.
| Year | 1 | 2 | 3 | 4 | 5 |
| FCF | -$22.04 | $38.1 | $43.5 | $51.2 | $56.7 |
The weighted average cost of capital is 12%, and the FCFs are
expected to continue growing at a 5% rate after Year 5. The firm
has $25 million of market-value debt, but it has no preferred stock
or any other outstanding claims. There are 19 million shares
outstanding. What is the value of the stock price today (Year 0)?
Round your answer to the nearest cent. Do not round intermediate
calculations.
$ per share?
In: Finance
NBCUniversal Media has a bond outstanding that matures in 22 years. If its market price is $1,153.87 and it yields 3.64%, what is the bond's coupon rate? Step by step answer pls.
In: Finance
P12-4 (similar to) Basic scenario analysis Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. Project A Project B Initial investment 12,500 12,500 (CF 0CF0) Outcome Annual cash inflows (CF CF ) Pessimistic $880 $1,550 Most likely 1,690 1,690 Optimistic 2,420 1,790 a. Determine the range of annual cash inflows for each of the two projects. b. Assume that the firm's cost of capital is 10.5 %10.5% and that both projects have 17-year lives. Construct a table showing the NPVs for each project for each of the possible outcomes. Include the range of NPVs for each project. c. Do parts (a) and (b) provide consistent views of the two projects? Explain. d. Which project do you recommend? Why? a. The range of annual cash inflows for project A is $nothing.
In: Finance
List 10 trade trends and explain the importance of trade trends to international business? Also explain which trends impact the businesses most?
No palagirsm please
In: Finance
Bruno's is analyzing two machines to determine which one it should purchase. The company requires a rate of return of 14.6 percent and uses straight-line depreciation to a zero book value over a machine's life. Ignore bonus depreciation and taxes. Machine A has a cost of $318,000, annual operating costs of $8,700, and a life of 3 years. Machine B costs $247,000, has annual operating costs of $9,300, and a life of 2 years. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should Bruno's purchase and why?
Machine A; because it will save the company about $13,406 a year
Machine A; because it will save the company about $18,100 a year
Machine B; because it will save the company about $16,510 a year
Machine B; because it will save the company about $11,609 a year
Machine B; because it will save the company about $13,406 a year
In: Finance