Trevi Corporation recently reported an EBITDA of $31,200 and $9,700 of net income. The company has $6,700 interest expense, and the corporate tax rate is 35 percent. What was the company’s depreciation and amortization expense?

Assume that you buy 200 shares of the Mulligan Corp. on Margin at a price of $75 per share. Your broker requires 60% initial margin and 35% minimum maintenance margin.

Assume that instead, you sell short 200 shares of Mulligan at $75 per share with a 50% margin requirement. (7 points total)

a) Assume that the price has increased to $88 one month later. What is the remaining equity in your account and what rate of return have you earned on the initial investment?

b) Now do the same as in part a assuming the price has fallen to $54 per share.

c) If the minimum maintenance margin on the short sale is 30%, at what stock price would a margin call be made?

A) An excerpt from Johnson & Johnson:

“As of December 31, 2017, the balance of deferred net gains on derivatives included in accumulated other comprehensive income was $70 million after-tax. The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period.”

What is meant by “reclassified into earnings”? What type of hedging transaction is mentioned?

B) Caesar’s Casino (WILL NOT BE GRADED. WE WILL SOLVE THIS IN CLASS)

On January 1, 2015, Ceasar’s Casino, a public business entity (Ceasar’s or the “Company”), executed a $250 million revolving credit facility with Uber Bank AG (Uber). The rate of interest on the credit facility is USD LIBOR + 650 basis points (bps) for the first two years. Ceasar’s has a choice of 1M-, 3M-, and 6M-USD LIBOR each time it draws down on the credit facility. Interest payments on the borrowing are settled on the basis of the LIBOR tenor selected (e.g., if Ceasar’s selects three-month USD LIBOR as the referenced rate, interest is due every three months on that borrowing). Principal borrowed is typically due five years from the drawdown date, but each drawdown will contain a specified maturity date.

Upon finalizing the terms of the credit facility, Ceasar’s immediately drew down $50 million on January 1, 2015, at 3M-USD-LIBOR + 650 bps, due on December 31, 2019. Ceasar’s’s interest rate risk management policy requires that at least 75 percent of its outstanding debt be fixed rate (either directly or indirectly through the use of derivatives). To maintain compliance with its policy, Ceasar’s entered into an interest rate swap to “convert” the borrowing from variable to fixed interest.

The Company designated the interest rate swap as a hedge of forecasted interest payments associated with changes in 3M-USD-LIBOR on the first previously unhedged $50 million of 3M-USD-LIBOR based debt. The Company has no other debt. Specifically, Ceasar’s executed the following interest rate swap transaction:

• Notional amount: $50 million

• Trade date: January 1, 2015

• Effective date: January 1, 2015

• Maturity date: December 31, 2019

• Pay leg: 8.0 percent

• Receive leg: 3M-USD-LIBOR + 650 bps

• Initial LIBOR: 1.00 percent

• Payment dates: Each March 31, June 30, September 30, and December 31

• Variable reset dates: Quarterly, each March 31, June 30, September 30, and December 31.

Questions

1. Define the type of hedge that Ceasar’s would need to designate. In other words, are these cash flow hedges, fair value hedges, or net investment hedges?

2. Determine the journal entries to account for the hedging relationship between January 1, 2015 and June 30, 2015. Use the details below to aid in entry determination, and assume that the hedging relationship is perfectly effective.

Date                             3M-USD-LIBOR       Swap Fair Value

March 31, 2015           1.00% (reset 12/31)     $250,000

June 30, 2015              1.10% (reset 03/31)     $750,000

David purchased an immediate annuity with a single $50,000 premium payment. He elects to receive income payments on a quarterly basis. When will his income begin? (Search Chapter 3) a. in one month b. in three months c. in six months d. in one year 22. Nikki purchased a fixed deferred annuity with a $10,000 premium payment. The contract offers a one-time bonus feature of 4 percent. Which of the following statements is true? (Search Chapter 3) a. The insurer will credit Nikki's contract with an additional $400. b. The insurer will add an additional 4 percent to the contract's death benefit. c. The insurer will increase the contract's guaranteed minimum rate of return by 4 percent during the first year. d. Nikki can withdraw an additional 4 percent of the contract's accumulated value without surrender charge. 23. At what point are a nonqualified annuity's earnings subject to income tax? (Search Chapter 3) a. when they are credited to the contract b. when they are withdrawn from the contract c. when they exceed the amount of premium deposited d. never 24. Troy purchased a deferred annuity for $100,000, naming himself and his wife as joint annuitants and his daughter, Trudy, as beneficiary. Ten years later, the contract had grown to $235,000, and Troy decided to annuitize under a joint and survivor life payout. He and his wife had received income totaling $50,000 when Troy died. How much will daughter Trudy receive at Troy's death? (Search Chapter 4) a. $0 b. $100,000 c. $135,000 d. $180,000 25. At the age of 68, Donna elected a straight life income option for the payout of her $150,000 deferred annuity. She received monthly payments for three years, totaling $42,000, and then she died. How much will her beneficiary receive? (Search Chapter 4) a. $150,000 b. $108,000 c. $42,000 d. $0

Fiat

Fiat is an Italian car manufacturer based in Italy. The company was founded in 1899, and has grown to become the world's ninth largest car maker, and the largest in Italy. The company is best known for producing small, economical family cars. Fiat designed cars are manufactured worldwide, and the company has factories in Brazil, Poland and Argentina, and has licensing agreements with many other countries, including Russia, India, Pakistan and China. The company has tended to buy out its component suppliers and also minimized the number of suppliers it deals with. This creates greater security of supply and reduces costs, in some cases dramatically.

The Products Although Fiat has a reputation for small, cheap cars, the company has won the prestigious European Car of the Year Award 12 times in 40 years, more often than any other manufacturer. Fiat has also made a major breakthrough in its engine technology, developing an engine (the Fiat 500 model) that has the lowest emissions in the world. In addition, the car is extremely economical to run

Emerging Markets Fiat has made a decision to focus on emerging countries. Since cars sold in these countries need to be simple to maintain and operate, they tend to have fewer features (e.g. often do not have air-conditioning), so Fiat is well-placed to exploit these opportunities. Re-engineering the cars to have fewer features is obviously a great deal cheaper than adding features, so development costs can be minimized.

Promotion on Communications Fiat has concluded an agreement with the British School of Motoring (BSM), which is the UK's largest driving school. BSM uses Fiats for teaching people to drive, and in exchange Fiat provides the cars at a heavily discounted rate, and also offers special deals for graduates of BSM. Fiat's website emphasizes the 'fun' aspects of driving a Fiat. The company believes that Italians have a fun-loving approach to life, and that this is reflected in the design and performance of the cars.

During 2009, the car scrappage scheme adopted throughout Europe (by which governments subsidized the replacement of old cars with new ones in order to stimulate the economy) provided a major boost to Fiat, at a time when the worldwide recession was damaging sales. However, Fiat faces a number of challenges in the next few years. The relative strength of the euro has eroded the firm's competitive price advantage, the rising price of steel worldwide has raised costs, and the entry of
Japanese and Korean manufacturers into Europe has increased competition in Fiat's traditional markets.

The Future As people become more environmentally aware, and as governments worldwide look to bring in legislation to reduce greenhouse gases, Fiat is well placed, with its fuel efficient, cheap-to-run, economical cars. In addition, Fiat's expertise in creating engines that can run on alternative fuels also gives the company an advantage over competitors.

1-Conduct SWOT analysis for Fiat?

2-Discuss the factors Fiat should consider before deciding the price of their cars?

3-Produce 2 objectives for Fiat in 2012?

4- Recommend How Fiat should coordinate its marketing mix in order to maintain its competitive position during an economic recession?

5-Discuss 2 promotional techniques that Fiat can use to promote its cars?

Apply the PESTEL framework for Africa the continent?

On March 11, 20XX, the existing or current (spot) one-year, two-year, three-year, and four-year zero-coupon Treasury security rates were as follows:

₁R₁ = 2.23%, ₁R₂ = 2.55%, ₁R₃ = 2.79%, ₁R₄ = 2.90%

Using the unbiased expectations theory, calculate the one-year forward rates on zero-coupon Treasury bonds for years two, three, and four as of March 11, 20XX. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

Calculate the tax bill on $75,000 in taxable income:

A $12,439.50

B $14,089.50

C $16,800.00

D $17,600.00

How much would you bring home after taxes on the next $10,000 (above $75,000) in taxable income?

A $7,650

B $7,700

C $7,750

D $7,800

How would Net Working Capital (NWC) be affected if Accounts Payable decreased?

A Decrease in NWC

B Increase in NWC

C No Change

(Try to work this question WITHOUT using Excel, get answer by using the formula and show the calculations in detail)

Question (Retirement planning)

You have just graduated Hofstra University at age 22. You hard work has paid off as you already have a job as an investment banker at Goldman Sachs waiting for you. You plan to work continuously until age 65 and retire exactly on that day. You expect to live until exactly 90 and enjoy your golden years and leave you heirs NOTHING. Assume your investments earn 8% per year.

You plan to contribute $10,000 to your retirement fund every year on your birthday starting at age 23. Your last deposit will be at exactly age 65 and your first withdrawal will be at age 66. Your last withdrawal will be at the moment you die at age 90.

Ignore all tax considerations for this problem. Consider the effect of inflation. Assume inflation averages 4% per year.
(i) How much you will be able to spend each year in retirement?

FV (deposits) = PV (withdrawals)
NOTE: This could be at any time period but t=65 is particularly convenient

(ii) How much will you be able to spend each year in retirement if you begin deposits at age 30?

(iii) How much larger do your deposits have to be if deposits start at age 30 to equal your answer in part (i)?

Consider that you are 35 years old and have just changed to a new job. You have $146,000 in the retirement plan from your former employer. You can roll that money into the retirement plan of the new employer. You will also contribute $6,800 each year into your new employer’s plan. If the rolled-over money and the new contributions both earn a return of 6 percent, how much should you expect to have when you retire in 30 years?

Sig, Inc., wishes to maintain a growth rate of 12 percent per year and a debt-equity ratio of .6. The profit margin is 4.9 percent, and the ratio of total assets to sales is constant at 1.66. What dividend payout ratio is necessary to achieve this growth rate under these constraints? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32.) Is this growth rate possible? Yes No What is the maximum sustainable growth rate possible given these constraints? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions.

Consider the case of Blue Hamster Manufacturing Inc.:

Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Lambda is 11.3%, but he can’t recall how much Blue Hamster originally invested in the project nor the project’s net present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Lambda. They are:

The CFO has asked you to compute Project Lambda’s initial investment using the information currently available to you. He has offered the following suggestions and observations:

Given the data and hints, Project Lambda’s initial investment is   , and its NPV is   (rounded to the nearest whole dollar).

A project’s IRR will   if the project’s cash inflows decrease, and everything else is unaffected.

After graduating from UTD at age 25, John got his first job at Goldman Sachs with an annual salary of $60,000 a
year and a one-time signing bonus of $25,000. He bought a car using his signing bonus. Goldman Sachs offers a
401K retirement investment plan that will match employee’s contribution up to 10%. For example if John invests
1% in the 401K account, Goldman Sachs will put in another 1% into his account. John is expecting an annual
salary increase of 2.4% (APR on a monthly base. For simplicity, assume that the growth will start in the second
month). Suppose, the 401K investment plan will earn him an annual return of 8.4% (APR on a monthly base).
(Assume the beginning of age 25 is month 0 and salary is paid at the end of each month, i.e., beginning of age 65 is
the last period)
(a) What percentage of salary should John invest in his 401K account in order for him to have $2 million in the
account when he retires in 40 years?
(b) At the same contribution rate, if he retires in 35 years instead, how many percent less money will John have?
(c) Instead of buying a nice car, he brought a used car for $10,000, and saved the rest of signing bonus in a separate
investment account for retirement that pays 9.6% annual interest (APR on a monthly base). If John wants to
have $2 million when he retires in 35 years, what percentage of salary should John invest in his 401K account?After graduating from UTD at age 25, John got his first job at Goldman Sachs with an annual salary of $60,000 a
year and a one-time signing bonus of $25,000. He bought a car using his signing bonus. Goldman Sachs offers a
401K retirement investment plan that will match employee’s contribution up to 10%. For example if John invests
1% in the 401K account, Goldman Sachs will put in another 1% into his account. John is expecting an annual
salary increase of 2.4% (APR on a monthly base. For simplicity, assume that the growth will start in the second
month). Suppose, the 401K investment plan will earn him an annual return of 8.4% (APR on a monthly base).
(Assume the beginning of age 25 is month 0 and salary is paid at the end of each month, i.e., beginning of age 65 is
the last period)
(a) What percentage of salary should John invest in his 401K account in order for him to have $2 million in the
account when he retires in 40 years?
(b) At the same contribution rate, if he retires in 35 years instead, how many percent less money will John have?
(c) Instead of buying a nice car, he brought a used car for $10,000, and saved the rest of signing bonus in a separate
investment account for retirement that pays 9.6% annual interest (APR on a monthly base). If John wants to
have $2 million when he retires in 35 years, what percentage of salary should John invest in his 401K account?

YIELD TO MATURITY

A firm's bonds have a maturity of 8 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 4 years at $1,144, and currently sell at a price of $1,265.82.

1. What is their nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.
   
   %
   
2. What is their nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places.
   
   %
   
3. What return should investors expect to earn on these bonds?
   
   1. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.
   2. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC.
   3. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.
   4. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM.
   5. Investors would expect the bonds to be called and to earn the YTC because the YTM is less than the YTC.