Dyrdek Enterprises has equity with a market value of $10.7 million and the market value of debt is $3.50 million. The company is evaluating a new project that has more risk than the firm. As a result, the company will apply a risk adjustment factor of 1.5 percent. The new project will cost $2.18 million today and provide annual cash flows of $571,000 for the next 6 years. The company's cost of equity is 11.03 percent and the pretax cost of debt is 4.87 percent. The tax rate is 39 percent. What is the project's NPV?

Strong Metals Inc. purchased a new stamping machine at the beginning of the year at a cost of $1,330,000. The estimated residual value was $70,000. Assume that the estimated useful life was five years and the estimated productive life of the machine was 300,000 units. Actual annual production was as follows:

Required:

1. Complete a separate depreciation schedule for each of the alternative methods.

a. Straight-line.

b. Units-of-production.

c. Double-declining-balance.

[The following information applies to the questions displayed below.]

At the beginning of the year, Plummer's Sports Center bought three used fitness machines from Brunswick Corporation. The machines immediately were overhauled, installed, and started operating. The machines were different; therefore, each had to be recorded separately in the accounts.

By the end of the first year, each machine had been operating 6,500 hours.

2. Prepare the entry to record depreciation expense at the end of Year 1, assuming the following. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Pool Corporation, Inc., reported in its recent annual report that "In 2010, our industry experienced some price deflation. . . . In 2011, our industry experienced more normalized price inflation of approximately 3.5% overall despite price deflation for certain chemical products.'' This suggests that in some years Pool’s overall inventory costs rise, and in some years they fall. Furthermore, in many years, the costs of some inventory items rise while others fall. Assume that Pool has only two product items in its inventory this year.

Purchase and sales data are presented below.

Required:

1. Compute cost of goods sold for each of the two items separately using the FIFO and LIFO inventory costing methods.

2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)?

Prompt: Identify a situation or strategy to use Time Value of Money or Interest Rates to capitalize on an opportunity. This can be personal, professional, or ways a company can benefit. Describe the situation or strategy and demonstrate how it's beneficial.

You are a financial analyst for Loch Motor Company and have been asked to determine the impact of alternative depreciation methods. For your analysis, you have been asked to compare methods based on a machine that cost $206,000. The estimated useful life is 12 years, and the estimated residual value is $46,160. The machine has an estimated useful life in productive output of 222,000 units. Actual output was 31,000 in year 1 and 27,000 in year 2.

Required:

1. For years 1 and 2 only, prepare separate depreciation schedules assuming: (Do not round intermediate calculations and round your final answers to the nearest dollar amount.)

a. Straight-line method.

b. Units-of-production method.

Operating Cash Flow The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: Projected sales $25 million Operating costs (not including depreciation) $9 million Depreciation $4 million Interest expense $4 million The company faces a 30% tax rate. What is the project's operating cash flow for the first year (t = 1)? Write out your answer completely. For example, 2 million should be entered as 2,000,000.

A self-employed worker operates a firewood-splitting service. He purchased a commercial-grade wood splitter for $5800. He used $400 of business capital and financed the balance at 5% per year for 3 years. The estimated values of the splitter for the next 6 years are $2200 after the first year of ownership, decreasing by $400 per year to year 5, after which the resale value remains at $600. Annual operating costs are expected to be $1000 the first year, increasing by 10% each year thereafter. He considers keeping the splitter at least 6 years. If money is worth 7% per year, for how many years should the splitter be retained? (Perform the Economic Minimum Life analysis for at least 12 years.) Spreadsheet solution required with a summary of what is being analyzed.

You want to evaluate three mutual funds using the Jensen measure for performance evaluation. The risk-free return during the sample period is 6%, and the average return on the market portfolio is 18%. The average returns, standard deviations, and betas for the three funds are given below.

The fund with the highest Jensen measure is

Multiple Choice

• Fund A.

• Fund B.

• Fund C.

• Funds A and B (tied for highest).

• Funds A and C (tied for highest).

Assume that an investment security has a mean return of 14% and standard deviation of 6%. What is the probability of making a loss (to the closest percent)?

A.2%; B.10%; C.1%; D.3%; E.5%

Both Bond Bill and Bond Ted have 5.8 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 25 years to maturity.
a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

b. If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of these bonds? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Which of the following statements regarding the predictive value of historical returns is true?

A. Historical returns can be useful in predicting the general direction of a market over a long period.

B. Macroeconomic forces can be predicted from past market performance.

C. All of these answers.

D. Systemic risk, which diminishes the predictive value of historic returns, is the risk of company failure.

Question 1

(a) How is Inventory Turnover Ratio calculated ? What might a sharp drop in inventory turnover tell us ?

(b) How do we calculate Days Sales Outstanding (DSO) ? What might a sharp increase in DSO tell us ?

(c) How do we calculate Operating Profit Margin? How might it be a better measurement of profitability than Net Profit Margin ?

(d) How do we calculate Current Ratio? What does it tell us?

The Scientific Store received an invoice for $6710.00 dated July 13, terms 5/10, 2/30,
n/90, for a shipment of skis. Calculate the partial payments made 20 July to reduce the
balance to $4000.00 Round to nearest 100th.

Written please.