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.

The CAPM’s Security Market Line (SML) equation examines the relationship between a security’s market risk and its required rate-of-return. Explain the importance of this relationship from a Finance Management perspective. Explain how market perceptions of risk affect the required rate of return on investment. Explain with examples.

Here are the abbreviated financial statements for Planner’s Peanuts:

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.)

Olympic Corp sold an issue of bonds with a 15-year maturity, a $1,000 face value, and a 10% coupon rate with interest being paid semiannually. The market rate of interest when the bonds were issued was 10%. Two years after the bonds were issued, the market rate rose to 13%. The most recent common-stock dividend for Olympic Corp was $3.45 per share. Due to its stable sales and earnings, the firm’s management predicts dividends will remain at the current level for the foreseeable future.

1) Are these bonds a premium or a discount bond?

2) Calculate the selling price for the bonds at the following time periods:

1) Time of issue

2) Two years after issue

3) Five years after issue

3) Calculate the selling price for the bonds at the following time periods assuming annual interest payments:

1) Two years after issue

2) Five years after issue

4) If the required return is 7%, what is the value of the common stock for Olympic Corp?

What is the role of diversification in an asset portfolio? Explain with examples.

What is the weighted average cost of capital (WACC)? Explain with examples.

and Why is it different from the rate of return to investors? Explain with examples.

Gill Bates graduated from university six years ago with an undergraduate degree in finance. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Canada University or America University. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Gill currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $65,000 per year, expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Gill has a savings account with enough money to cover the entire cost of his MBA program. The Faculty of Management at Canada University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $70,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3,000 per year. Gill expects that after graduation from Canada, he will receive a job offer for about $110,000 per year, with a $20,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent. The School of Business at America University began its MBA program 16 years ago and is less well known than Canada University's Faculty of Management. America University offers an accelerated, one-year program, with a tuition cost of $85,000 to be paid upon graduation. Books and other supplies for the program are expected to cost $4,500. Gill thinks that he will receive an offer of $92,000 per year upon graduation, with an $18,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29 percent. Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Gill also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.5 percent. 1. Assuming all salaries are paid at the end of each year, which is the best option for Gill—from a strictly financial standpoint.

the Stanley company sold a $1000 par value, noncallable bond several years ago that now has 10 years to maturity and a 8.00% annual coupon that is paid semiannually. the bond currently sells for $922 and the tax rate is 30%. What is the component cost of debt for use in the WACC calculation? a. 6.28% b. 5.46% c. 5.65% d. 6.45% e. 7.03%

Farmington Enterprises stock trades for $42.50 per share. It is expected to pay a $2.50 dividend at year end, and the dividend is expected to grow at a constant rate of 6% a year. What is the company's cost of common equity from reinvesting earnings? a. 11.54% b. 11.65% c. 11.88% d. 12.13% e. 12.35%

Refer to the data for Farmington Enterprise in Question 2. The before-tax cost of debt is 7.50%, and the tax is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from reinvested earnings? a. 7.43% b. 7.55% c. 7.89% d. 8.48% e. 8.56%

Problem 5-3 Order Books (LO2, CFA1)

The following order book exists for a particular stock. The last trade on the stock was at $55.63.

a.  If you place a market buy order for 100 shares, at what price will it be filled? (Round your answer to 2 decimal places.)

b. If you place a market sell order for 100 shares, at what price will it be filled? (Round your answer to 2 decimal places.)

c. Suppose you place a market order to buy 300 shares. At what price will it be filled? Choose the appropriate answer.

• 100 shares at $55.70 and 200 shares at $55.69

• 300 shares at $55.63

• 100 shares at $55.65 and 200 shares at $55.66

• 300 shares at $55.70

Ralph wants to quit his job and move to Hawaii on December 25, 2015. Once there, he anticipates that he will need to make annual withdrawals of 14500 dollars (starting on December 25, 2016) to supplement his income from working as a cabana boy, and he wants the money to last 10 years (i.e. he'll make 10 withdrawals total). His plan is to make annual deposits, starting on December 25, 2000 and ending on December 25, 2015, into an account paying 9.2 percent effective interest. How large should each deposit be for Ralph to realize his goal?

You are required to produce a table showing bond valuesand the impact of changes in interest rate over the lifeof a bond and a diagram demonstrating the link between the changes in values(due to changes in interest rate) and time to maturity. The bond has a face value of $1,000, pays a coupon rate of 7% p.a paid annually and it is issued with 10 years to maturity. All calculations should be executed in excel.Your table should show the following:The value of the bond, year by year(from dateof issue until its maturity), assuming all other things remain the same. The value of the bond, year by year, from date of issue until its maturity, assuming that market interest rate increasesby 1.5%(hence yield to maturity increases by 1.5%), all other things remain the same.The potential%change in value, year by year, from the date of issue until its maturity.The % change in value demonstratesthe impact of the increasein interest rate on the bond value (or interest rate risk), for each year of maturity.From your table produce a diagram that demonstrates the relationship between% change in value and time to maturity. The initial market interest rate (yield to maturity) to be used is 12%. You must also show your formulas used

william brown is 30 years and wants to retire when he is 65. so far he has saved (1) $6,240 in an ira account in which his money is earning 8.3 percent annually and (2) $5,630 in a money market account in which he is earning 5.25 percent annually. william wants to have $1 million when he retires. starting next year, he plans to invest the same amount of money every year until he retires in a mutual fund in which he expects to earn 7.72 percent annually. how much will william have to invest every year to achieve his savings goal?

4. Cross City Tunnel (CCT) Ltd currently has 5 million shares on issue each with a market price of $2.50. CCT also has $7 million of debt. The Chief Financial Offer is considering changing the capital structure by repaying $3 million of debt using funds raised from an equity issue. The interest rate on debt is 10% p.a. and the company tax rate is 30%.

   Calculate EPS for both the current and the proposed capital structures at a projected EBIT level of $3.7 million. Which capital structure is preferable if this is the expected level of EBIT?