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
Suppose Proctor & Gamble (P&G) is considering purchasing $ 10 million in new manufacturing equipment. If it purchases the equipment, it will depreciate it for tax purposes on a straight-line basis over five years, after which the equipment will be worthless. It will also be responsible for maintenance expenses of $ 1.00 million per year paid in each of the years 1 through 5. It can also lease the equipment under a true tax lease for $2.6 million per year for the five years, in which case the lessor will provide necessary maintenance. Assume P&G's tax rate is 30 % and its borrowing cost is 7.0 %
a. What is the NPV associated with leasing the equipment versus financing it with the lease-equivalent loan?
b. What is the break-even lease rate long—that is, what lease amount could P&G pay each year and be indifferent between leasing and financing a purchase?
In: Finance
Your sales and cost accounting team have come up with upper and lower bound estimates for sales, prices and costs as shown in the table below. You are considering a project that requires an initial investment of $10,000. t is depreciable over four years using the straight line depreciation. The discount rate is 10%. Your tax bracket is 34% and you receive a tax credit for negative earnings in the year in which the loss occurs.
| Base Case | Lower Bound | Upper bound | |
| Unit Sale | 3,000 | 2,750 | 3,250 |
| Price/unit | $14 | $13 | $16 |
| Variable cost/unit | $9 | $8 | $10 |
| Fixed costs | $9,000 | $8,500 | $10,000 |
a)What is the base NPV for the project
b)What is the worst case NPV for the project
c)What is the best case NPV for the project
d)What is the best case accounting break-even?
In: Finance
30-year maturity bond has a 5.3% coupon rate, paid annually. It sells today for $884.92. A 20-year maturity bond has a 4.8% coupon rate, also paid annually. It sells today for $890.5. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 6.3% and 15-year maturity bonds will sell at yields of 5.8%. Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 4.3%.
a. Calculate the (annualized) expected rate of return of the 30-year bond over the 5-year period. (Round your answer to 2 decimal places.)
b. What is the (annualized) expected return of the 20-year bond? (Round your answer to 2 decimal places.)
In: Finance
In: Finance
(Bond valuation relationships) The
1616-year,
$1 comma 0001,000
par value bonds of Waco Industries pay
77
percent interest annually. The market price of the bond is
$935935,
and the market's required yield to maturity on a comparable-risk bond is
66
percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond.
c. Should you purchase the bond?
a. What is your yield to maturity on the Waco bonds given the current market price of the bonds?
nothing%
(Round to two decimal places.)
In: Finance