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?

1. You are trying to estimate Cost of Capital for MGM Enterprises in question 1, and the EV change in question 2, the company that operates in two businesses, with the following breakdown:

The company is trading at its fair value, has no cash and $ 1 billion ($1000 in millions) in debt outstanding. The marginal tax rate is 30%. The risk free rate is 1.5%. ERP, 5.5%. Default risk is 2%

1. Estimate WACC. Hint: first calculate the weighted unleveled beta, then average levered beta for the company.

1. 	MOVIES	CASINOS
   ENTERPRISE VALUE IN MIILIONS	$1500	$1500
   UNLEVERED BETA	0.9	0.6

2. Now assume that MGM plans to sell its Casinos for its fair value, hold half the proceeds as a cash balance and use the remaining half to pay a special dividend. Estimate the value change in the company Hint: First, Estimate the levered beta after the transaction, calculate WACC and then the change in Enterprise Value. Default risk goes up to 3%. The marginal tax rate is 30%. The risk free rate is 1.5%. ERP, 5.5%.

What is the Enterprise Value change due to the restructuring?

Riverbed Inc., a manufacturer of steel school lockers, plans to purchase a new punch press for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The Engineering Department has determined that each vendor’s punch press is substantially identical and each has a useful life of 20 years. In addition, Engineering has estimated that required year-end maintenance costs will be $940 per year for the first 5 years, $1,940 per year for the next 10 years, and $2,940 per year for the last 5 years. Following is each vendor’s sales package.

Vendor A: $53,000 cash at time of delivery and 10 year-end payments of $17,520 each. Vendor A offers all its customers the right to purchase at the time of sale a separate 20-year maintenance service contract, under which Vendor A will perform all year-end maintenance at a one-time initial cost of $10,000.

Vendor B: Forty semiannual payments of $8,980 each, with the first installment due upon delivery. Vendor B will perform all year-end maintenance for the next 20 years at no extra charge.

Vendor C: Full cash price of $164,000 will be due upon delivery.

Assuming that both Vendors A and B will be able to perform the required year-end maintenance, that Riverbed’s cost of funds is 10%, and the machine will be purchased on January 1, compute the following:

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The present value of the cash flows for vendor A. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

The present value of the cash flows for vendor B. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

The present value of the cash flows for vendor C. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

NABICA Manufacturing sells its finished product for an average of $35 per unit with a variable cost per unit of $21. The company has fixed operating costs of $1,050,000.

(a) Calculate the firm's operating breakeven point in units.

(b) Calculate the firm's operating breakeven point in dollars.

(c) Using 100,000 units as a base, what is the firm's degree of operating leverage?