Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,900 and sell its old washer for $2,100. The new washer will last for 6 years and save $1,900 a year in expenses. The opportunity cost of capital is 18%, and the firm’s tax rate is 21%.

a. If the firm uses straight-line depreciation over a 6-year life, what are the cash flows of the project in years 0 to 6? The new washer will have zero salvage value after 6 years, and the old washer is fully depreciated. (Negative amounts should be indicated by a minus sign.)

b. What is project NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. What is NPV if the firm investment is entitled to immediate 100% bonus depreciation? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $46,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $11,500. The grill will have no effect on revenues but will save Johnny’s $23,000 in energy expenses. The tax rate is 30%.

Required:

a. What are the operating cash flows in each year?
b. What are the total cash flows in each year?
c. Assuming the discount rate is 12%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?

PLEASE FILL UP THE TABLE BELOW

You are a business development officer of ABC bank. An existing client of yours told you about Mr Mark Angelo who is presently banking with MMM bank. You were told that Mr Angelo is a very rich and influential client who could be approached to move his business to your bank should you be able to offer him favourable rates. During your initial contact with Mr Angelo he indicated that he is not looking for another banker but that you should provide him with a proposal which he can consider.

MARK ANGELO

STATEMENT OF FINANCIAL POSITION AS AT 1 SEPTEMBER 20XX

You as a banker identified three types of finance that can be taken over by your bank if he can be convinced to change his bank:

• Mortgage bonds over his fixed properties
• Finance (instalment sale agreements) over his vehicles
• Overdraft facility.

You also identified the residential properties and vineyard farm, the vehicles and the fixed deposit as the most suitable types of collateral. Answer the following questions for each of the three prominent types of collateral identified:

i.              Can the bank easily obtain effective control or custody over the asset?

                ii.             Can the bank realise the asset quickly and with little expense?

                iii.            What is the possibility that the collateral can become worthless?

Complete the table to answer this question. Substantiate your answers with good reasons.

Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 7.4 percent and the standard deviation was 16.4 percent. a. What is the probability that your return on this asset will be less than –6.1 percent in a given year? Use the NORMDIST function in Excel® to answer this question. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What range of returns would you expect to see 95 percent of the time? (Enter your answers for the range from lowest to highest. 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.) c. What range of returns would you expect to see 99 percent of the time? (Enter your answers for the range from lowest to highest. 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.)

Why can the empirical evidence for book-to-market and size effects be treated as a violation to the CAPM?

Margarite's Enterprises is considering a new project. The project will require $325,000 for new fixed assets, S160,000 for additional inventory and $ 35,000 for additional accounts receivable. Short term debt is expected to increase by $ 100,000 and long- term debt is expected to increase by $ 300,000. The project has a 5- year life. The fixed assets will be depreciated straight-line io a zero book value over the life of the project . At the end of the project , the fixed assets can be sold for 25% of their original cost. The net working capital returns to its original level at the end of the project . The project is expected to generate annual sales of $ 554,000 and costs of $ 430,000 . The tax rate is 35 % and the required rate of return is 15%.

A- What is the amount of the after-tax cash flow from the sale of the fixed assets at the end of this project?

B- What is the cash flow recovery from net working capital at the end of this project?

C- What is the annual OCF?

can you explain without excel specially C

evenue forecasting is an extremely important function of the budget process. What are some of the reasons forecasting appears to have become more difficult over the past several decades and what are the consequences of (ADDRESS BOTH) underestimating and overestimating revenues.

What caused the changes in Nestle for the past three years? What business decisions may have caused the change?

1. You run an investment advice consulting operation. Vanguard sends you a booklet about their mutual fund investing options. They think you may be interested in a fund that invests only in natural resource companies (primarily oil and gas), a fund that invests in only socially responsible companies or an index fund that mimics the S&P 500. Ten year performance information is as follows:

Natural Resource Fund: Expected Return = 16.2% with standard deviation of 30.2%

Socially Responsible Fund: Expected Return = 4.8% with a standard deviation of 1.5%

S&P 500 Index Fund: Expected Return = 6.1% with a standard deviation of 18.7%

The booklet states that the correlation between the Socially Responsible Fund and the S&P 500 Fund is -.46. The correlation between the S&P 500 and the Natural Resource Fund is .68. The correlation between the Socially Responsible Fund and the Natural Resource Fund is -.07.

Determine the covariance between each pair of funds.

Analyze a set of possible portfolios of pairs of investments. First, analyze portfolios that are half one fund and half another (Example: 50% in S&P 500, 50% in Natural Resource). Repeat this for each 50-50 combination of funds. Second, consider portfolios that are 75% one fund and 25% another.

1. What is the slope of the security market line (SML)? What is the intercept?

2. Describe relationship between a debt ratio and the firm's value?

How does a company decide whether or not to pay dividends? As an investor, do you think you would prefer a company that paid a lot of dividends, or hardly any? What factors in your personal life situation would change whether you want to receive dividends? What companies did you find that do not pay dividends? Why do you think they don’t?

Peter Piper is a​ 35-year-old bank executive who has just inherited a large sum of money. Having spent several years in the​ bank's investments​ department, he's well aware of the concept of duration and decides to apply it to his bond portfolio. In​ particular, Elliot intends to use $ 1 million of his inheritance to purchase 4 U.S. Treasury​ bonds:

1. An 8.55 %​, ​13-year bond​ that's priced at $ 1087.98 to yield 7.48 %.

2. A 7.801 %​, ​15-year bond​ that's priced at $ 1020.50 to yield 7.57 %.

3. A​ 20-year stripped Treasury​ (zero coupon)​ that's priced at $ 200.05 to yield 8.21 %.

4. A​ 24-year, 7.42 % bond​ that's priced at $ 950.76 to yield 7.88 %.

Note that these bonds are semiannual compounding bonds.

a. Find the duration and the modified duration of each bond.

b. Find the duration of the whole bond portfolio if Elliot puts $ 250000 into each of the 4 U.S. Treasury bonds.

c. Find the duration of the portfolio if Elliot puts $ 330000 each into bonds 1 and 3 and $ 170 comma 000 each into bonds 2 and 4.

d. Which portfolio b or c should Elliot select if he thinks rates are about to head up and he wants to avoid as much price volatility as​ possible? Explain. From which portfolio does he stand to make more in annual interest​ income? Which portfolio would you​ recommend, and​ why?

Mary has $6,000 on her credit card, which charges an APR of 22% and Mike has a credit card that charges an APR of 15% and he carries a balance of $4,000. They pay the minimum payment each month on their credit cards, the amount specified on the credit card statements.

Question: How many years would it take to pay off their credit cards if they each were to pay $250 each month and not charge anything further on it?