Oriole Information Systems management is planning to issue 10-year bonds. The going market yield for such bonds is 9.300 percent. Assume that coupon payments will be made semiannually. Management is trying to decide between issuing an 9 percent coupon bond or a zero coupon bond. Oriole needs to raise $1 million.

What will be the price of an 9 percent coupon bond?

How many 9 percent coupon bonds would have to be issued?

What will be the price of a zero coupon bond?

How many zero coupon bonds will have to be issued?

Delta Partners is an investment firm specialising in corporate advice, particularly in regard to raising
finance and company valuation. One of its clients, Pagoda Industries Ltd, recently approached Delta
Partners seeking advice and assistance in regard to raising additional finance. Pagoda has now asked
Delta Partners for advice on whether to introduce a new product in its manufacturing division.
Pagoda Industries Ltd is a large company listed on the Australian Stock Exchange. It is a diversified
company with manufacturing and trading divisions operating in a number of industries. Pagoda’s
research department has developed a new information technology product which is expected to
appeal to the corporate market. Because of the rapid advances in information technology, the
product is expected to have a life of five years before it becomes obsolete. Consequently, the project
would be terminated after five years.
Pagoda has put together the following information about the product:
Cost of new plant and equipment $7,900,000
Transport and installation costs $100,000
Unit Sales:
Year Units Sold
1 70,000
2 120,000
3 140,000
4 80,000
5 60,000
Sales Price per Unit:
Years 1-4 $300
Year 5 $260
Variable Cost per Unit $180
Annual Fixed Costs $200,000
Net Working Capital:
An initial investment of $100,000 in net working capital is required to get the project started.
Additionally, net working capital equal to 10 per cent of the value of sales will be required each year
(including year one).
The plant and equipment are expected to have a salvage value of $500,000 at the end of the
project’s life. The company tax rate is 30 per cent. Pagoda’s required return for this project is 15 per
cent.
Required: As a financial analyst for Delta Partners you have been asked to:
a) Calculate the yearly cash flows and the yearly net after-tax cash flow associated with the
project
b) Calculate the Net Present Value (

The verbrugge publishing company's 2019 balance sheet and income statement are as follows

Balance Sheet

Current assets $300

Net Fixed Assets 200

Total assets 500

Current Liabilities $40

Advance Payments by customers $80

Noncallable preferred stock $6 coupon

$110 par value (1,000,000 shares) $110

Callable preferred stock, $10 coupon

no par, $100 call price (200,00) shares $200

Common stock, $2 par value

(5,000,000 shares) $10

Retained Earnings $60

Total liabilities and equity $500

Income Statement

Net Sales $540

Operating Expense $516

Net Operating income $24

Other income $4

EBT $28

Taxes(25%) $7

Net Income $21

Dividends on $6 preferred $6

Dividends on $10 preferred $2

Income available to common stockholders $13

Verbrugge and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the noncallable preferred will be exchanged for 1 share or $2.40 preferred with a par value of $35 plus on 8% subordinated income debenture with a par value of $75. The callable preferred issue with be retired with cash generated by reducing current assets.

a) Assume that the reorganization takes place and construct the projected balance. Show the new preferred stock at is par value. What is the total assets? For debt? For preferred stock?

b) Construct the projected income statement. What is the income available to common shareholders in the proposed recapitalization.

c) What were the total cash flows received by the noncallable preferred stockholders prior to the reorganization? What were the total cash flows to the original noncallable preferred stockholders after the reorganization? What was the new income to common stockholders before and after reorganization

d)Required pre-tax earnings are defined as the amount that is just large enough to meet fixed charges. What are the required pre-tax earnings before and after recapitalization?

e) How is the debt ration affected by reorganization? Suppose you treated preferred stock as debt and calculated the resulting debt ratios, How are these ratios affected? If you were a holder of Verbrugge's common stock, would you vote in favor or the reorganization? Why or Why not?

Your client is 37 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $7,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 6% in the future.

1. If she follows your advice, how much money will she have at 65? Do not round intermediate calculations. Round your answer to the nearest cent.

2. How much will she have at 70? Do not round intermediate calculations. Round your answer to the nearest cent.

3. She expects to live for 20 years if she retires at 65 and for 15 years if she retires at 70. If her investments continue to earn the same rate, how much will she be able to withdraw at the end of each year after retirement at each retirement age? Do not round intermediate calculations. Round your answers to the nearest cent.

   Annual withdrawals if she retires at 65:

   Annual withdrawals if she retires at 70:

Suppose that you invest $100 in an account for 20n years. This account will credit you 5% annual effective rate of interest for the first 5 years, 5% annual effective rate of discount for the send 5 years, 5% simple interest for the third 5 years, and 5% simple rate of discount for the last 5 years. How much will you have at the end of the 20 years?

*hint use equations for from these chapters*

Jan sold her house on December 31 and took a $30,000 mortgage as part of the payment. The 10-year mortgage has an 11% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year Jan must report on Schedule B of her IRS Form 1040 the amount of interest that was included in the two payments she received during the year.

a. What is the dollar amount of each payment Jan receives? Round your answer to the nearest cent.

b. How much interest was included in the first payment? Round your answer to the nearest cent.
How much repayment of principal was included? Do not round intermediate calculations. Round your answer to the nearest cent.

c. How much interest must Jan report on Schedule B for the first year? Do not round intermediate calculations. Round your answer to the nearest cent.
Will her interest income be the same next year?

d. If the payments are constant, why does the amount of interest income change over time?

What does working capital management encompass? What functional decisions are involved, and what underlying principle or trade-off influences the decision process?

1. 4. (Annuity payments) The Knutson Corporation needs to save $15 million to retire a $15 million mortgage that matures in 10years. To retire this mortgage, the company plans to put a fixed amount into an account at the end of each year for 10years. The Knutson Corporation expects to earn 5.7 percent annually on the money in this account.
   1. What equal annual contribution must the firm make to this account to accumulate the $15 million by the end of 10years?
   2. Prepare, on a spreadsheet, how the deposits will accumulate to $15 Million

You are to start a new job earning $10 000 / month, plus allowances to the sum of $2300.00/month.

You are on contract for 3 years after which a review will be done to determine your progress.

You are confronted with an offer to invest in real estate which would entail utilising some of your allowances to pay for it. The investment will require you to spend over a 5 year period to complete payment. How would you go about making a decision about what to do or not to do?

Based on the projections, Decker will have

3. (Annuity payments) Mr. Bills Preston, Esq., purchased a new house for $280,000. He paid $80,000 up front on the down payment and agreed to pay the rest over the next 25 years in 25 equal annual payments that include principal payments plus 6.2 percent compound interest on the unpaid balance.

1. What will these equal payments be?
2. Show on a spreadsheet how the loan will be paid off

The healthcare sector, on average, uses 30% debt financing in its long-term capital mix. Rank the following industries within the sector in descending order of debt usage. Justify your rankings.

Biotechnology

Facilities (hospitals and nursing homes)

Medical equipment and supplies

Pharmaceuticals

You can purchase a tract of land for $75,000 that you believe you can develop and sell as a residential development. Your development costs are $60,000 to be incurred immediately. You expect to sell all the lots in years 3-5 at a net income of $70,000, $85,000, and $68,000 respectively. Your required rate of return is 12 percent. Do you purchase the tract of land? (4 points)

CJ Lance Co. (Ch 10) CJ Lance Co. is considering two Mutually Exclusive Projects Project Alpha-1 is expected to generate cash flows of $3,250 each year of its 5 year life. The project will cost $11,000. Project Beta-2 is expected to produce $8,000 in cash flows per year. It also has a 5 year life, and costs $27,750. The Cost of Capital is 12% and these projects are of normal risk.

a. Calculate the NPV, IRR, and MIRR for each of the projects.

b. Given that they are mutually exclusive, which project should be selected based on each ranking method?

c. Now which project should be chosen? Why?