12. Assume the BonBon Candy Company is a constant growth company whose last dividend was $3,00 and whose dividend is expected to grow indefinitely at 6% rate. It normally discounts all cash flow at 10% .

a. what is the firm’s expected dividend stream over the next three years ?

b. what is the firm’s current stock price ?

c. what is the stoch’s expected value one year from now ?

d. what are the following :

      i. the expected dividend yield during first year ?

      ii. the capital gain yield during the first year ?

      iii. the total return during the first year ?

e. now assume that the stock is currently selling at $79.50 . what is the expected rate of return on the stock?

f. what would the stock price be if its dividends were expected to have zero growth?

How much debt is too much for an organization, and should more users of organizational data use the combined degree of operating leverage versus operational and/or financial? min 200 words

DFB, Inc. expects earnings next year of $5.53 per share, and it plans to pay a $3.05 dividend to shareholders (assume that is 1-year from now). DFB will retain $2.48 per share of its earnings to reinvest in new projects that have an expected return of 15.1% per year.

Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year.

a. What growth rate of earnings would you forecast for DFB?

1. 2.3%

2. 3.4%

3. 4.5%

4. 5.6%

5. None of the above

b. If DFB's equity cost of capital is 11.1% and growth rate is 6.8%, what price would you estimate for DFB stock?

1. $47.60

2. $58.71

3. $69.82

4. $70.93

5. None of the above

c. Suppose instead that DFB paid a dividend of $4.05 per share at the end of this year and retained only $1.48 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesting in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its dividend?

1. $57.04, DFB should raise dividends because it will result in a higher stock price.

2. $57.04, DFB should not raise dividends because it will result in a lower stock price.

3. $60.25, DFB should not raise dividends because it will not result in a higher stock price.

4. $68.15, DFB should raise dividends because it will result in a higher stock price.

5. $68.15, DFB should not raise dividends because it will not result in a higher stock price.

Assume a corporation has earnings before depreciation and taxes of $104,000, depreciation of $42,000, and that it has a 30 percent tax bracket.

a. Compute its cash flow using the following format. (Input all answers as positive values.)
  

b. How much would cash flow be if there were only $16,000 in depreciation? All other factors are the same.
  

c. How much cash flow is lost due to the reduced depreciation from $42,000 to $16,000?
  

PLEASE HELP!!!

Two years ago you took out a mortgage at 4.5%. The initial balance of the loan was $200,000 and it was for 25 years (300 months.) Today, you observe that you could take out a new loan at 4.25% (with a 300 month term), but you would have to pay $5,000 in closing and other fees.

What is the current value of the loan (liability from your perspective)?

*Note: The answer is $195,579.52. I want to know how to get the answer with a financial calculator.

You have just sold your house for $1,000,000 in cash. Your mortgage was originally a 30-year mortgage with monthly payments and an initial balance of $800,000. The mortgage is currently exactly 18½ years old, and you have just made a payment. If the interest rate on the mortgage is 5.25% (APR), how much cash will you have from the sale once you pay off the mortgage?

Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section.

Heavy Metal Corporation is expected to generate the following free cash flows over the next five​ years:
(in millions)

Year 1 : 54.4

Year 2: 66.2

Year 3: 79.5

Year 4: 73.6

Year 5: 80.2

Thereafter, the free cash flows are expected to grow at the industry average of 4.5% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.6%​:

a.  Estimate the enterprise value of Heavy Metal.

b.  If Heavy Metal has no excess​ cash, debt of $304 ​million, and 41 million shares​ outstanding, estimate its share price.

7. One of your neighbors, Mr. and Mrs. Schekel, ( an elderly couple that always bring cookies when they visit ) has been very interested in hearing about your experiences at university. They would like to send their granddaughter to your university in 8 years’ time. You estimate that tuition will be $45,000 the first year , and the tuition will grow at 1.26% annually. They estimate it will take her 5 years to complete her undergraduate and MBA degrees, provided she attends summer school . they would also like to bestow a gift of $15,000 to her upon her graduation from the MBA program. How much must your clients deposit today, assuming an intrest rate of 6% in order to send their granddaughter to your university and provide her with the graduation present ?

Show time line . use uneven cash flow method

8. The schkels also have another granddaughter of whom they are very proud. They are considering offering her the following :

a. $40,000 today or

b. $45,000 towards a house down payment when she marries 2 years from now when her fiance finishes medical school. Assuming an intrest rate of 5% , which offer should the granddaughter accept ?

9. Another neighbor, Mr Ruble, is considering depositing $1,500 at the end of each year for five years in a saving account that pays 3.5% per year . you recommend that he deposit the funds at the beginning of each year. Calculate and demonstrate the change in value that will accrue to Mr.Ruble. Explain why there is a change in value .

Question 4

HMK Enterprises would like to raise $10 million to invest in capital expenditures. The company plans to issue 5-year bonds with a face value of $1,000 and a coupon rate of 6.52% (annual payments). The following table summarizes the yield to maturity for 5-year (annual-payment) coupon corporate bonds of various ratings:

a. Assuming the bonds will be rated AA, what will be the price of the bonds?

a. $856.32

b. $987.45

c. $999.66

d. $1,008.77

e. $1,019.88

b. How much of the total principal amount of these bonds must HMK issue to raise $10.0million today, assuming the bonds are AA rated? (Because HMK cannot issue a fraction of a bond, assume that all fractions are rounded to the nearest whole number.)

a. $5,605,000

b. $6,322,000

c. $7,243,000

d. $8,803,000

e. $9,914,000

c. What must be the rating of the bonds for them to sell at par?

1. AAA grade

2. AA grade

3. A grade

4. BBB grade

5. BB grade

d. Suppose that when the bonds are issued, the price of each bond is $958.38. What is the likely rating of the bonds? Are they junk bonds?

1. AAA grade, they are not junk bonds

2. AA grade, they are not junk bonds

3. A grade, they are not junk bonds

4. BBB grade, they are junk bonds

5. BB grade, they are junk bonds

Do you agree with the statement below? Why or why not?

“Given the inflation in Venezuela was well above 10,000% in 2017, Venezuela should adopt a cryptocurrency such as Bitcoin as a national currency?”

Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $120,000 if credit were extended to these new customers. Of the new accounts receivable generated, 6 percent will prove to be uncollectible. Additional collection costs will be 3 percent of sales, and production and selling costs will be 71 percent of sales. The firm is in the 15 percent tax bracket.

a. Compute the incremental income after taxes.

b. What will Johnson’s incremental return on sales be if these new credit customers are accepted? (Input your answer as a percent rounded to 2 decimal places.)

c. If the accounts receivable turnover ratio is 4 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson’s incremental return on new average investment be? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

(ONLY NEED STOCK C ANSWERS)

Consider the following three stocks:

Stock A is expected to provide a dividend of $10.40 a share forever.

Stock B is expected to pay a dividend of $5.40 next year. Thereafter, dividend growth is expected to be 2.00% a year forever.

Stock C is expected to pay a dividend of $5.40 next year. Thereafter, dividend growth is expected to be 18.00% a year for five years (i.e., years 2 through 6) and zero thereafter.

a-1. If the market capitalization rate for each stock is 8.00%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b-1. If the market capitalization rate for each stock is 5.00%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Assume that Atlas Sporting Goods Inc. has $810,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 12 percent, but with a high-liquidity plan the return will be 9 percent. If the firm goes with a short-term financing plan, the financing costs on the $810,000 will be 6 percent, and with a long-term financing plan the financing costs on the $810,000 will be 7 percent.

a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix.

b. Compute the anticipated return after financing costs with the most conservative asset-financing mix.

c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.

d. If the firm used the most aggressive asset-financing mix described in part a and had the anticipated return you computed for part a, what would earnings per share be if the tax rate on the anticipated return was 30 percent and there were 20,000 shares outstanding? (Round your answer to 2 decimal places.)

e-1. Now assume the most conservative asset-financing mix described in part b will be utilized. The tax rate will be 30 percent. Also assume there will only be 5,000 shares outstanding. What will earnings per share be? (Round your answer to 2 decimal places.)

e-2. Would the conservative mix have higher or lower earnings per share than the aggressive mix?

• Lower

• Higher

Please concisely answer the following questions on Sarbanes-Oxley and Dodd-Frank.

1. Describe each Act, their major components and their impacts.
2. Why did Congress pass each Act?

3. Describe the issues these Acts have solved and the problems they have caused.

4. Should Sarbanes-Oxley and/or Dodd-Frank be modified, repealed, replaced, or left alone? Support your answer.

This exercise parallels the machine-purchase decision for the Mendoza Company that is discussed in the body of the chapter. Assume that Mendoza is exploring whether to enter a complementary line of business. The existing business line generates annual cash revenues of approximately $4,350,000 and cash expenses of $3,675,000, one-third of which are labor costs. The current level of investment in this existing division is $12,800,000. (Sales and costs of this division are not affected by the investment decision regarding the complementary line.)
  
Mendoza estimates that incremental (noncash) net working capital of $34,000 will be needed to support the new business line. No additional facilities-level costs would be needed to support the new line—there is currently sufficient excess capacity. However, the new line would require additional cash expenses (overhead costs) of $434,000 per year. Raw materials costs associated with the new line are expected to be $1,360,000 per year, while the total labor cost is expected to double.
  
The CFO of the company estimates that new machinery costing $3,700,000 would need to be purchased. This machinery has a six-year useful life and an estimated salvage (terminal) value of $592,000. For tax purposes, assume that the Mendoza Company would use the straight-line method (with estimated salvage value considered in the calculation).

Assume, further, that the weighted-average cost of capital (WACC) for Mendoza is 14% (after-tax) and that the combined (federal and state) income tax rate is 45%. Finally, assume that the new business line is expected to generate annual cash revenue of $3,975,000.