1. Future values for various compounding frequencies Delia Martin has $10,000 that she can deposit in any of three savings accounts for a 3-year period. Bank A compounds interest on an annual basis, bank B compounds interest twice each year, and bank C compounds interest each quarter. All three banks have a stated annual interest rate of 4%.

   1. What amount would Ms. Martin have after 3 years, leaving all interest paid on deposit, in each bank?

   2. What effective annual rate (EAR) would she earn in each of the banks?

   3. On the basis of your findings in parts a and b, which bank should Ms. Martin deal with? Why?

   4. If a fourth bank (bank D), also with a 4% stated interest rate, compounds interest continuously, how much would Ms. Martin have after 3 years? Does this alternative change your recommendation in part c? Explain why or why not.

Bob Tate is the director of strategy for a small truck delivery company. The company operates a fleet of 100 trucks. Of these, 36 trucks will need to be replaced this year. Bob has two choices, either diesel or green trucks. The following are the facts for each possibility:

For EACH diesel truck: Cost = $175K; life, 3 years (the trucks lose value quickly after 3 years of operations as the mileage reaches 200K); salvage value at end of three years, $50K; annual operating costs, $90K.

For EACH green truck: Cost = $220K; life, 4 years; salvage value at end of four years, $100K; annual operating costs, $75K.

Which choice should Bob make, diesel or green if the cost of capital is 10%; you may assume that the time period covered by this decision is 12 years IF you wish, and you can ignore the other 64 of the 100 trucks in the fleet? (Ignore taxes, depreciation, and ignore diversification.)

Ann and Suzan are classmates who graduated with business degrees from Athabasca University. Ann inherited $50,000 from her father. She considers forming a 10-year business partnership with Suzan. To join the partnership, Ann needs to invest $50,000. She believes her portion of the partnership will generate the following profits at a discount rate of 4%.

a) Calculate the Net Present Value (NPV).

b) Instead of forming a partnership with Suzan, Ann has the option to buy a government bond. Ann expects to receive $150 per year for each of the next ten years, and then receive a principle repayment of $50,000. What is the value of a coupon bond that pays $150 per year for each of the next ten years? Assume the rate is 5%.

c) Suppose Ann has the option to buy a new motor home for $25,000 and sell it for $15,000 after six years. Alternatively, she can lease the motor home for $250 per month for six years and return it at the end of the six years. For simplification, assume that lease payments are made yearly instead of monthly and pay at the beginning of each year. If the interest rate, r, is 3.5%, is it better to lease or buy the motor home?

(PLEASE MAKE ANSWER CLEAR) Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.82 million barrels per year in 2016, but production is declining at 9% per year for the foreseeable future. Costs of production, transportation, and administration add up to $25.20 per barrel. The average oil price was $65.20 per barrel in 2016.

PP has 7.2 million shares outstanding. The cost of capital is 11%. All of PP’s net income is distributed as dividends. For simplicity, assume that the company will stay in business forever and that costs per barrel are constant at $25.20. Also, ignore taxes.

a. Assume that oil prices are expected to fall to $60.20 per barrel in 2017, $55.20 per barrel in 2018, and $50.20 per barrel in 2019. After 2019, assume a long-term trend of oil-price increases at 7% per year. What is the ending 2016 value of one PP share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Share value₂₀₁₆ = ?

b-1. What is PP’s EPS/P ratio? (Do not round intermediate calculations. Round your answer to 3 decimal places.)

EPS/P ratio = ?

b-2. Is it equal to the 11% cost of capital?

DRK, Inc., has just sold 240,000 shares in an initial public offering. The underwriter’s explicit fees were $144,000. The offering price for the shares was $32, but immediately upon issue, the share price jumped to $33.00.

a. What is the total cost to DRK of the equity issue?

b. Is the entire cost of the underwriting a source of profit to the underwriters?

___ Yes

___No

Blades, Inc. Case Decisions to Use International Financial Markets As a financial analyst for Blades, Inc., you are reasonably satisfied with Blades’ current setup of exporting “Speedos” (roller blades) to Thailand. Due to the unique arrangement with Blades’ primary customer in Thailand, forecasting the revenue to be generated there is a relatively easy task. Specifically, your customer has agreed to purchase 180,000 pairs of Speedos annually, for a period of 3 years, at a price of THB4,594 per pair. The current direct quotation of the dollar-baht exchange rate is $.024. The cost of goods sold incurred in Thailand (due to imports of the rubber and plastic components from Thailand) runs at approximately THB2,871 per pair of Speedos, but Blades currently only imports materials sufficient to manufacture about 72,000 pairs of Speedos. Blades’ primary reasons for using a Thai supplier are the high quality of the components and the low cost, which has been facilitated by a continuing depreciation of the Thai baht against the U.S. dollar. If the dollar cost of buying components becomes more expensive in Thailand than in the United States, Blades is contemplating providing its U.S. supplier with the additional business. Your plan is quite simple; Blades is currently using its Thai-denominated revenues to cover the cost of goods sold incurred there. During the last year, excess revenue was converted to U.S. dollars at the prevailing exchange rate. Although your cost of goods sold is not fixed contractually as the Thai revenues are, you expect them to remain relatively constant in the near future. Consequently, the baht-denominated cash inflows are fairly predictable each year because the Thai customer has committed to the purchase of 180,000 pairs of Speedos at a fixed price. The excess dollar revenue resulting from the conversion of baht is used either to support the U.S. production of Speedos if needed or to invest in the United States. Specifically, the revenues are used to cover cost of goods sold in the U.S. manufacturing plant, located in Omaha, Nebraska. Ben Holt, Blades’ CFO, notices that Thailand’s interest rates are approximately 15 percent (versus 8 percent in the United States). You interpret the high interest rates in Thailand as an indication of the uncertainty resulting from Thailand’s unstable economy. Holt asks you to assess the feasibility of investing Blades’ excess funds from Thailand operations in Thailand at an interest rate of 15 percent. After you express your opposition to his plan, Holt asks you to detail the reasons in a detailed report.

1.)Construct a spreadsheet to compare the cash flows resulting from two plans. Under the first plan, net baht-denominated cash flows (received today) will be invested in Thailand at 15 percent for a 1-year period, after which the baht will be converted to dollars. The expected spot rate for the baht in 1 year is about $.022 (Ben Holt’s plan). Under the second plan, net baht-denominated cash flows are converted to dollars immediately and invested in the United States for 1 year at 8 percent. For this question, assume that all baht-denominated cash flows are due today. Does Holt’s plan seem superior in terms of dollar cash flows available after 1 year? Compare the choice of investing the funds versus using the funds to provide needed financing to the firm.

consider a 20 year ,10% annual pay bond with a full price of ksh.112 and can be called n five years at ksh. 102 and can also be called at par in 7 years

required.
1.Yield to maturity
2.Yield to first call
3.Yield to second call

Contract Manufacturing, Inc., is considering two alternative investment proposals. The first proposal calls for a major renovation of the company’s manufacturing facility. The second involves replacing just a few obsolete pieces of equipment in the facility. The company will choose one project or the other but not both. The cash flows associated with each project appear below and the firm discounts project cash flow at 15%:

Year: 0 ; 1 ; 2 ; 3 ; 4 ; 5

Renovate : -$9,000,000 ; 3,000,000 ; 3,000,000 ; 3,000,000 ; 3,000,000 ;  3,000,000

Replace: -$2,400,000 ; 200,000 ; 800,000 ; 200,000 ; 200,000 ; 200,000

Overall, You should find conflicting recommendations based on various criteria. Why is this occurring?

The management team of Accent Group Limited have received a proposal from the manager of Hype DC. This proposal concerns a major upgrade to Hype DC's stores to improve the customer experience. Key details relating to this proposal include:

• The initial cost will be $22 million. This cost will be depreciated using the straight line method over the 5 year life of the upgrade.
• During year 1, the firm will increase marketing costs by $2.0 million to promote the store upgrades.
• Over the five year life of the project, it is expected that the upgrade will increase the firm's sales by $18 million per year. On average, cost of sales is 45% of revenue.
• The firm will need to higher additional staff over the life of the project to help to deal with the increased sale volume. In year 1, the firm's staffing costs will increase by $1.0 million. These costs will increase by 3.5% p.a.
• The upgrade is expected to increase the firm's energy costs by $500,000 in year 1. This increase will be ongoing across the life of the project and will increase by 6% p.a.
• Upgraded stores will include an old shoe recycling drop off zone. This recylcing program will cost $75,000 in year 1. These costs will increase by 2% p.a.
• At the end of year 3, the firm will spend $1.5 million on a minor refurbishment to the stores.

The firm’s tax rate is 30%. The firm requires a 16% required rate of return on all potential investments.

1. Provide an overview of the key environmental and social factors that the firm should consider in evaluating the proposal
2. Discuss how sensitive your recommendations are to changes in assumptions in regards to the financial impact of the new capital investment. In your discussion, include examples which illustrate how changes to at least two assumptions impact the financial analysis .

The management team of Accent Group Limited have received a proposal from the manager of Hype DC. This proposal concerns a major upgrade to Hype DC's stores to improve the customer experience. Key details relating to this proposal include:

• The initial cost will be $22 million. This cost will be depreciated using the straight line method over the 5 year life of the upgrade.
• During year 1, the firm will increase marketing costs by $2.0 million to promote the store upgrades.
• Over the five year life of the project, it is expected that the upgrade will increase the firm's sales by $18 million per year. On average, cost of sales is 45% of revenue.
• The firm will need to higher additional staff over the life of the project to help to deal with the increased sale volume. In year 1, the firm's staffing costs will increase by $1.0 million. These costs will increase by 3.5% p.a.
• The upgrade is expected to increase the firm's energy costs by $500,000 in year 1. This increase will be ongoing across the life of the project and will increase by 6% p.a.
• Upgraded stores will include an old shoe recycling drop off zone. This recylcing program will cost $75,000 in year 1. These costs will increase by 2% p.a.
• At the end of year 3, the firm will spend $1.5 million on a minor refurbishment to the stores.

The firm’s tax rate is 30%. The firm requires a 16% required rate of return on all potential investments.

1. Provide an overview of the key environmental and social factors that the firm should consider in evaluating the proposal
2. Discuss how sensitive your recommendations are to changes in assumptions in regards to the financial impact of the new capital investment. In your discussion, include examples which illustrate how changes to at least two assumptions impact the financial analysis .

Which of the following is true about real estate pricing?

1. Real estate prices are always the same as the value of the real estate.
2. Real estate prices are a function of the value of the real estate.
3. Real estate prices are clearly observable in the market.
4. Real estate prices can be influenced by the number of buyers and sellers active in the market.

What type of easement is usually used for commercial purposes?

1. Appurtenant easement
2. Negative easement
3. Gross Easement.
4. Dominant Easement

10) All estates provide equal rights to its owners.

True/False

11) Externalities only affect real estate values negatively.

True/False

12) An easement creates the right to use while adverse possession can create the right to ownership.

True/False

Edwards Construction currently has debt outstanding with a market value of $430,000 and a cost of 6 percent. The company has an EBIT of $25,800 that is expected to continue in perpetuity. Assume there are no taxes.

a. What is the value of the company’s equity and the debt-to-value ratio? (Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

b. What is the equity value and the debt-to-value ratio if the company's growth rate is 4 percent? (Do not round intermediate calculations. Round your equity value to 2 decimal places, e.g., 32.16, and round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

c. What is the equity value and the debt-to-value ratio if the company's growth rate is 5 percent? (Do not round intermediate calculations. Round your equity value to 2 decimal places, e.g., 32.16, and round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

You’ve been asked to evaluate a project. Your estimates say that the first cashflow of $120k will occur one year from today. You believe the cashflows will increase by 4% per year for 4 additional years. After that point, the cashflows will remain the same for 5 years. The upfront cost to take the project is $950k, and the appropriate discount rate is 6%. What is the project’s NPV? PLEASE POST THE ANSWER IN THE EQUATION FORMAT - NO NEED TO SOLVE FOR ACTUAL NUMBER.

You are thinking of purchasing an annuity with annual payments of $400. However, unlike previous annuities you’ve seen, this one pays the initial payment of $400 today (not important, but the technical term for this is an annuity due). The annuity pays a total of 12 payments. If the discount rate is 6%, what is the present value of the product?