Cupid Company sells boxes of chocolates. They currently offer two different types, heart shaped and cupid shaped. They sell 8,750 cupid shaped boxes for $18.75 and 10,000 heart shaped boxes for $15.00 each. Cupid Company has $18,000 of fixed costs (non-plant). Both boxes currently have an extremely manual manufacturing process. The cupid shaped box costs $7.50 each to make, comprised of $1.50 in variable overhead, $2.10 in direct materials, direct labor cost $8.15 per hour and it takes employees 28.72 minutes per box. The heart shaped box costs $6.00 each to make, comprised of $1.50 in variable overhead, $1.58 in direct materials, $8.15 per hour for direct labor; it takes employees 21.5 minutes per box.

One of the employees, Venus, proposed a cost savings plan. Her plan was to purchase a new chocolate picking machine, which would cut direct labor by 40%. The machine costs $785,000 and would last the company 6 years with a $20,000 salvage value. They would be able to sell the machine at the end of six years for $35,000.

Venus was discussing her plan with a co-worker, Aphrodite. Aphrodite believed that sales were currently constrained by available space and labor. She believed that in addition to reducing labor costs, Cupid Company would also be able to increase sales of each style by 5%. Additionally, she proposed a new product be offered; chocolate flower bouquets. The company would be able to see 3,200 units at $30 each. The cost would be $10.50 per bouquet, comprised of $1.50 in variable overhead, $7.00 in direct materials, $8.15 per hour for direct labor and it takes employees 14.73 minutes per bouquet. Additionally, fixed costs would increase by $5,000.

Cupid Company's desired rate of return is 15%, has a 30% tax rate and they use straight-line depreciation for all plant assets. All numbers provided are pre-tax.

For Venus' proposal show the annual cash flows and the NPV of the project. (On Excel Sheeet please)

1. ) Suppose a stock had an initial price of $37 per share, paid a dividend of $0.3 per share during the year, and had an ending share price of $50. Compute the percentage total return. Enter the answer in 4 decimals.

2. ) Calculate the arithmetic average of the following returns.

Year Return

1 0.18

2 0.08

3   0.11

4   -0.05

5 0.3

Enter the answer with 4 decimals.

3.) Calculate the standard deviation of the following returns.

Year Return

1 -0.18

2 -0.06

3   -0.09

4   0.21

5 0.08

Enter the answer with 4 decimals.

4. ) Calculate the variance of the following returns.

Year Return

1 -0.16

2 0.08

3   -0.08

4   0.14

5 -0.02

Enter the answer with 4 decimals.

One of the more difficult issues in the discussion between the entrepreneur and Venture Capital firm is the topic of Control. How are you going to advise your friend on a potential demand coming from the Venture Capital Fund on investing in the firm only upon gaining control in the company?

Briefly discuss the business of wholesale banking, including the main products and services, as well as the customer base. What are the key challenges in the wholesale banking market?

Assume a company has issued an 8-year zero coupon bond with a yield of 6% and a par value of $1000.

a. What is the bond price?

b. What is the duration of the bond?

c. Based on duration, what is the estimated bond price if interest rates rise to 7%?

d. Determine the new price exactly if interest rates rise to 7%?

RET Inc. currently has one product, low-priced stoves. RET Inc. has decided to sell a new line of medium-priced stoves. Sales revenues for the new line of stoves are estimated at $20 million a year. Variable costs are 80% of sales. The project is expected to last 10 years. Also, non-variable costs are $2,000,000 per year. The company has spent $3,000,000 in research and a marketing study that determined the company will lose (cannibalization) $4 million in sales a year of its existing low-priced stoves. The production variable cost of the existing low-priced stoves is $2 million a year.

The plant and equipment required for producing the new line of stoves costs $20,000,000 and will be depreciated down to zero over 20 years using straight-line depreciation. It is expected that the plant and equipment can be sold (salvage value) for $12,000,000 at the end of 10 years. The new stoves will also require today an increase in net working capital of $3,000,000 that will be returned at the end of the project.

The tax rate is 30 percent and the cost of capital is 10%.

1. What is the initial outlay (IO) for this project?

2. What is the annual Earnings before Interests, and Taxes (EBIT) for this project?

3. What is the annual net operating profits after taxes (NOPAT) for this project?

4. What is the annual incremental net cash flow (operating cash flow: OCF) for this project?

5. What is the remaining book value for the plant at equipment at the end of the project?

6. What is the cash flow due to tax on salvage value for this project? Enter a negative # if it is a tax gain. For example, if your answer is a tax on capital gains of $3,004.80 then enter -3,005 ; if your answer is a tax shelter from a capital loss of $1,000,20 then enter 1,000

7. What is the project's cash flow for year 10 for this project?

8. What is the Net Present Value (NPV) for this project?

Here are the abbreviated financial statements for Planner’s Peanuts: INCOME STATEMENT, 2019 Sales $ 5,000 Cost 3,900 Net income $ 1,100 BALANCE SHEET, YEAR-END 2018 2019 2018 2019 Assets $ 7,500 $ 8,000 Debt $ 833 $ 1,000 Equity 6,667 7,000 Total $ 7,500 $ 8,000 Total $ 7,500 $ 8,000 Assets are proportional to sales. If the dividend payout ratio is fixed at 50%, calculate the required total external financing for growth rates in 2020 of

(a) 20%,

(b) 25%, and

(c) 30%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.4%. The probability distributions of the risky funds are:   

The correlation between the fund returns is .0214.

Suppose now that your portfolio must yield an expected return of 13% and be efficient, that is, on the best feasible CAL.

a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

proportion invested in t bills:

b-2. What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Stocks:

Bonds:

b-1. What is the proportion invested in the T-bill fund?

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.2%. The probability distributions of the risky funds are:

The correlation between the fund returns is 0.0308.

What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.)

Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 7,200 pairs of sunglasses at a price of $167 each and a variable cost of $119 each. The equipment necessary for the project will cost $375,000 and will be depreciated on a straight-line basis over the 7-year life of the project. Fixed costs are $330,000 per year and the tax rate is 35 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?

A) −$5,200

B) −$4,680

C) $4,680

D) −$4,212

E) $4,212

A stock has the following stock information:

What is the arithmetic average of this stock?

The unlevered cost of capital of a given firm is given by 20%, while its debt is given by $75,000,000. The pre-tax cost of debt (equal to the risk-free rate) is given by 10%. The levered value of the firm is given by $200,000,000, while its equity value is given by $125,000,000. The tax rate is 20%. The WACC of this firm is given by:

Group of answer choices

15.5%

16.5%

17.5%

18.5%

Return for the entire period is

​(Round to two decimal​ places.)

You must evaluate a proposal to buy a new milling machine. The base price is $192,000, and shipping and installation costs would add another $7,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $134,400. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $5,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $40,000 per year. The marginal tax rate is 35%, and the WACC is 14%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.

1. How should the $5,000 spent last year be handled?
   1. The cost of research is an incremental cash flow and should be included in the analysis.
   2. Only the tax effect of the research expenses should be included in the analysis.
   3. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initial investment outlay.
   4. Last year's expenditure is considered as an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.
   5. Last year's expenditure is considered as a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.
   
   -Select-IIIIIIIVVItem 1

2. What is the initial investment outlay for the machine for capital budgeting purposes, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent.
   $

3. What are the project's annual cash flows during Years 1, 2, and 3? Round your answer to the nearest cent. Do not round your intermediate calculations.

   Year 1 $

   Year 2 $

   Year 3 $

4. Should the machine be purchased?
   -Select-YesNoItem 6

Explain the importance of calculating the beta value of individual stocks in estimating the risk tolerance of investors? Explain with examples.