A certain company;s cash flows are expected to grow at a rate of 20% for the next seven years before tapering off to a constant growth rate of 5% forever. The current year's cash flow is $35,000. If the firm's cost of capital is 25%, what should its fair market value be? Please show work

3. What was the Fed’s announced monetary policy decision at the June 18-19, 2019 FOMC meeting? What rationale did the fed give for its decision? What hints did they give toward their outlook on the future? How did the financial markets receive their decision? You should be able to find the answer to all of these questions in one or two news reports following the meeting or in the press release issued by the fed.

Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

1. $500 per year for 16 years at 14%.

2. $250 per year for 8 years at 7%.

3. $1,000 per year for 16 years at 0%.

4. Rework previous parts assuming they are annuities due.

   Present value of $500 per year for 16 years at 14%:   

   Present value of $250 per year for 8 years at 7%:

   Present value of $1,000 per year for 16 years at 0%:

Return on a risk-free investment is 3 percent and the expected market return is 6 percent. Annualized stdev of the return on the market is 15 percent.

Project 1: IRR = 7 percent. SD(ri) = .45 Corr (Ri, Rm) = .25

Project 2: IRR = 11 percent. SD(ri) = .30 Corr (Ri, Rm) = .90

Please find and graph the security market line

Please find the index of systematic risk of each project and plot the IRR combinations on a graph and rank the projects according to a measure of their total risk and then their index of systematic risk.

Kingston Kiteboards Incorporated (KKI) has been experiencing very strong demand for its products as kite-boarding continues to take away market share from windsurfing. The company is considering a new facility to manufacture an improved line of kites and another facility to produce a new line of boards. The company estimates that the new kite facility will cost $1,250,000 to construct in Year 0 with a salvage value of $150,000 in Year 12. The board manufacturing facility will cost $1,500,000 in Year 0 with a salvage value of $200,000 in Year 12. Combined annual revenue for the new kites and boards is expected to be $800,000 with annual combined operating costs of $300,000 each year. Management has identified a piece of land where both facilities could be built that could be purchased for $500,000 in Year 0. The management team estimates that the land may be sold for the same value of $500,000 at the end of Year 12. The company uses a discount rate of 10% and a tax rate of only 15%. Assume that the CCA rate of 20% can be applied to the land and the manufacturing facilities.

Use the present value tax shield approach to determine the net present value (NPV) of combined project involving both new manufacturing facilities. Should KKI proceed with the investment using these assumptions?

Easy Car Corp. is a grocery store located in the Southwest. It paid an annual dividend of ​$2.00 last year to its shareholders and plans to increase the dividend annually at the rate of 3.0​%. It currently has 1,000,000 common shares outstanding. The shares currently sell for ​$17 each. Five years ago, Easy Car Corp. issued 30,000 semiannual 27-year bonds with a coupon rate of 8​% and a par value of ​$1,000. The bonds currently have a yield to maturity​ (YTM) of 9%. What is the weighted average cost of capital (WACC) for Easy Car Corp. if the corporate tax rate is 40%?

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 25 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 11 percent, and the company just paid a dividend of $1.15, what is the current share price? Answer is $39.08. Can you just show all work on how to get that number?

Manzana Inc. is buying a piece of equipment. The equipment costs $2,000,000. The equipment is considered for tax purposes as a 5-year MACRS class. If the equipment is sold at the end of 6 years for $400,000, what is the after-tax cash flow from the sale of this asset (termination value of the equipment)? The marginal tax rate is 40 percent.

The annual expense percentage for a 5-year MACRS property from year 1 to 6 respectively are: 20.00%; 32.00%; 19.20%; 11.52%; 11.52: and 5.76%.

Explain how the following users of financial statements might utilize the financial ratios:

• Managers
• Boards of Directors
• Short term lenders
• Stockholders

Which ratios would each group be interested in?

2. Analysis of an expansion project

Companies invest in expansion projects with the expectation of increasing the earnings of its business.

Consider the case of Garida Co.:

Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs:

This project will require an investment of $15,000 in new equipment. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 40%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project’s net present value (NPV) would be when using accelerated depreciation.

Determine what the project’s net present value (NPV) would be when using accelerated depreciation. (Note: Round your intermediate calculations to the nearest whole number.)

$59,441

$39,627

$49,534

$56,964

Now determine what the project’s NPV would be when using straight-line depreciation. ____________

Using the ___(straight-line or accelerated)___ depreciation method will result in the highest NPV for the project.

No other firm would take on this project if Garida turns it down. How much should Garida reduce the NPV of this project if it discovered that this project would reduce one of its division’s net after-tax cash flows by $300 for each year of the four-year project?

$791

$931

$559

$1,024

A loan of $50,000 is made today. This loan will be repaid by a first smaller repayment, followed by 15 level repayments, i.e., there are 16 repayments in total.

The first smaller repayment will occur exactly 3 years from today and each subsequent repayment (starting from the first level repayment) will occur exactly 1 year after the previous repayment. Explicitly, the final repayment will occur exactly 18 years from today.

If the interest being charged on this loan is 4.8% per annum compounded half-yearly, and the first smaller repayment is $570,

(c) Calculate the amount of the level repayments.

Daily Enterprises is purchasing a $ 10.2 million machine. It will cost $ 50,000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. The machine will generate incremental revenues of $ 3.8 million per year along with incremental costs of $ 1.2 million per year. If​ Daily's marginal tax rate is 35 %​, what are the incremental earnings​ (net income) associated with the new​ machine?

The information below pertains to Barkley Company for 2019.

a. Net income for 2019 was $300,000.

b. $500,000 of 8% 10-year convertible bonds issued at 97 ($1,000 face per bond); each bond is convertible into 40 shares of common stock, were outstanding the entire period. The discount is being amortized on a straight-line basis.

c. $700,000 of 6% convertible, cumulative preferred stock, $100 par value, which was issued at $104; each share is convertible into 4 shares of common stock were outstanding the entire period.

d. 100,000 shares of $10 par value common stock was outstanding at the beginning of 2019. On July 29, an additional 20,000 shares were issued. On September 15, a 20% stock dividend was declared and issued. On December 1, 6,000 shares were reacquired as treasury stock.

e. Tax rate for 2019 of 30%

f. Average market price of common stock $25 per share for the year

g. Outstanding incentive stock option include options (granted at the beginning of 2018 with a 2 year vesting period) to purchase 8,000 shares of common stock at $20 per share.

Note: the conversion ratios and exchange rates for convertible bonds, preferred stock and options are shown on an as adjusted basis after the stock dividend. Instructions:

1. Compute the basic earnings per share. Show supporting calculations.

2. Compute the diluted earnings per share. Show supporting calculations. 3. Indicate which earnings per share figure(s) Barkley Company would report on its 2019 income statement.

Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $49,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $12,250. The grill will have no effect on revenues but will save Johnny’s $24,500 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?