Eugene and Karen want to retire in 20 years. Both make good money, and want to put aside enough funds for a comfortable retirement. Their current household expenditures (excluding savings) are about $75,000 a year, and they expect to spend about 125% of that in retirement (125% equals a multiplier factor of 1.25.) They estimate their combined Social Security benefits will equal $20,000 a year in today’s dollars and that they’ll receive another combined $35,000 yearly from their company pension plans. They believe future inflation will be about 3% a year, that they’ll be able to earn about 12% on their investments before retirement, and about 8% afterward. Determine how big their investment nest egg will have to be and how much they’ll have to save yearly to accumulate the needed amount within the next 20 years.

(Cost of debt) Temple-Midland, Inc. is issuing a $1,000 par value bond that pays 8.1% annual interest and matures in 15 years. Investors are willing to pay $948 for the bond and Temple faces a tax rate of 32%. What is Temple's after-tax cost of debt on the bond?

      Blore Inc., a U.S.-based MNC, has screened several targets. Based on economic and political considerations, only one eligible target remains in Malaysia. Blore would like you to value this target and has provided you with the following information:

• Blore expects to keep the target for three years, at which time it expects to sell the firm for 300 million Malaysian ringgit (MYR) after any taxes.
• Blore expects a strong Malaysian economy. The estimates for revenue for the next year are MYR200 million. Revenues are expected to increase by 8% in each of the following two years.
• Cost of goods sold is expected to be 50% of revenue.
• Selling and administrative expenses are expected to be MYR30 million in each of the next three years.
• Depreciation expenses are expected to be MYR20 million per year for each of the next three years.
• No other fixed costs are expected.
• The Malaysian tax rate on the target's earnings is expected to be 35 percent.
• The target will need MYR7 million in cash each year to support existing operations.
• The target's stock price is currently MYR30 per share. The target has 9 million shares outstanding.
• Any remaining cash flows will be remitted by the target to Blore Inc. Blore uses the prevailing exchange rate of the Malaysian ringgit as the expected exchange rate for the next three years. This exchange rate is currently $.25.
• Blore's required rate of return on similar projects is 20 percent.

1. Prepare a worksheet to estimate the value of the Malaysian target based on the information provided.
2. Prepare a worksheet to estimate the value of the acquisition assuming the Ringitt depreciates to$.20/ringitt in years 2 and 3.

Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as follows:

The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $490,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price? Round your answers to the nearest dollar. Loss should be indicated by a minus sign.

1. $5.25 per share?

   $  

2. $5.75 per share?

   $  

3. $4.25 per share?

   $  

Medium Size Mart, Inc. is considering a project with the following cash flows:

Initial cash outlay = $2,100,000

After–tax net operating cash flows for years 1 to 3 = $775,000 per year

Additional after–tax terminal cash flow at the end of year 3 = $600,000

Compute the profitability index of this project if Medium Mart’s WACC is 10%. Enter your answer rounded to two decimal places. For example, if your answer is 123.45% or 1.2345 then enter as 1.23 in the answer box.

U.S. Treasury 30 year maturity, zero coupon bonds are currently selling in the marketplace with a yield to maturity of 7.00%. Even though the bonds have a coupon rate of 0.00%, please assume semi–annual compounding, which is the bond market convention? If inflation increased unexpectedly, forcing the nominal required rate of return on these Treasury bonds to increase by 1.75% to 8.75%, by what dollar amount would the current market price of these bonds decrease?  

Treynor Pie Company is a food company specializing in high-calorie snack foods. It is seeking to diversify its food business and lower its risks. It is examining three companies—a gourmet restaurant chain, a baby food company, and a nutritional products firm. Each of these companies can be bought at the same multiple of earnings. The following represents information about all the companies.
  

a-1. Compute the coefficient of variation for each of the four companies. (Enter your answers in millions (e.g., $100,000 should be entered as ".10"). Round your answers to 3 decimal places.)
  

a-2. Which company is the least risky?
  

• Nutritional products company

• Treynor Pie Company

• Baby food company

• Gourmet restaurant

a-3. Which company is the most risky?
  

• Baby food company

• Nutritional products company

• Treynor Pie Company

• Gourmet restaurant

b. Which of the acquisition candidates is most likely to reduce Treynor Pie Company's risk?
  

• Gourmet restaurant

• Nutritional products company

• Baby food company

Thumbs up guaranteed

how important is process efficiency to competitive advantage?

Joe’s trading company has the following projected financial results for 2018:

•           $4,200,000 sales

            $3,000,000 cost of goods sold

•           $600,000 capital (fixed asset) expenditures

•           $300,000 owner’s equity

•           $200,000 depreciation (same for tax and book purposes)

•           $50,000 increase in inventory

•           $40,000 decrease in accounts receivable

•           $60,000 increase in accounts payable

•           $500,000 overhead expenses (excluding Depreciation)

•           $ 80,000 interest expense

•           35% effective tax rate.

Please calculate the following

1. Joe’s cash flow:
2. Joe’s net income for 2013:
3. Gross Margin %:
4. Profit Margin %:

Admitting New Partners Who Buy an Interest and Contribute Assets

The capital accounts of Trent Henry and Tim Chou have balances of $162,500 and $117,200, respectively. LeAnne Gilbert and Becky Clarke are to be admitted to the partnership. Gilbert buys one-fifth of Henry’s interest for $37,400 and one-fourth of Chou’s interest for $25,800. Clarke contributes $39,700 cash to the partnership, for which she is to receive an ownership equity of $39,700.

a1. Journalize the entry to record the admission of Gilbert. For a compound transaction, if an amount box does not require an entry, leave it blank.

a2. Journalize the entry to record the admission of Clarke.

b. What are the capital balances of each partner after the admission of the new partners?

If Wild Widgets, Inc., were an all-equity company, it would have a beta of .90. The company has a target debt-equity ratio of .60. The expected return on the market portfolio is 11 percent and Treasury bills currently yield 3.3 percent. The company has one bond issue outstanding that matures in 26 years, a par value of $2,000, and a coupon rate of 6 percent. The bond currently sells for $2,130. The corporate tax rate is 24 percent. a. What is the company’s cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the company’s cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the company’s weighted average cost of capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Con-Agra is one of the world’s largest packaged foods companies. Take a look at it (google it): CAG (NYSE). What does the beta tell you about Con-Agra?

1. What is beta, how is it calculated, why is it relevant (or where it is not)?
2. How relevant do you feel it is with respect to Con-Agra? What does it tell you about Con-Agra?
3. Would your answer be different if the question was not about Con-Agra but instead, was about Lyft (LYFT) (NASDAQ)?