Assume that you are preparing a budget for your department or organization. Outline the steps you would take to prepare the budget, providing specific examples for each step.

 Zetatron is an all-equity firm with 100 million shares outstanding, which are currently trading for $7.50 per share. A month ago, Zetatron announced it will change its capital structure by borrowing $100 million in short-term debt, borrowing $100 million in long-term debt, and issuing $100 million of preferred stock. The $300 million raised by these issues, plus another $50 million in cash that Zetatron already has, will be used to repurchase existing shares of stock. The transaction is scheduled to occur today. Assume perfect capital markets.

What is the market value balance sheet for Zetatron

i. Before this transaction?

ii. After the new securities are issued but before the share repurchase?

iii. After the share repurchase?

At the conclusion of this transaction, how many shares outstanding will Zetatron have, and what will the value of those shares be?

Market Value Balance Sheet After Each Stage of Zetatron's Leveraged Recapitalization ($ millions)

Pension funds pay lifetime annuities to recipients. If a firm will remain in business indefinitely, the pension obligation will resemble a perpetuity. Suppose, therefore, that you are managing a pension fund with obligations to make perpetual payments of $1.3 million per year to beneficiaries. The yield to maturity on all bonds is 14.0%.

a. If the duration of 5-year maturity bonds with coupon rates of 10.0% (paid annually) is four years and the duration of 20-year maturity bonds with coupon rates of 5% (paid annually) is 11 years, how much of each of these coupon bonds (in market value) will you want to hold to both fully fund and immunize your obligation? (Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place.)

b. What will be the par value of your holdings in the 20-year coupon bond? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Jeter, the vice-president of finance, has given you the following information and has asked you to compute the weighted average cost of capital. The company currently has outstanding a bond with a 11.3 percent coupon rate and another bond with an 8.9 percent rate. The firm has been informed by its investment banker that bonds of equal risk and credit rating are now selling to yield 12.2 percent. The common stock has a price of $67 and an expected dividend (D1) of $1.87 per share. The historical growth pattern (g) for dividends is as follows:

$ 1.42

1.56

1.71

1.87

The preferred stock is selling at $87 per share and pays a dividend of $8.30 per share. The corporate tax rate is 30 percent. The flotation cost is 3.0 percent of the selling price for preferred stock. The optimal capital structure for the firm is 30 percent debt, 10 percent preferred stock, and 60 percent common equity in the form of retained earnings.

a. Compute the historical growth rate. (Do not round intermediate calculations. Round your answer to the nearest whole percent and use this value as g. Input your answer as a whole percent.)

b. Compute the cost of capital for the individual components in the capital structure. (Use the rounded whole percent computed in part a for g. Do not round any other intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

c. Calculate the weighted cost of each source of capital and the weighted average cost of capital. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

You are given the following information for Lightning Power Co. Assume the company's tax rate is 24 percent.

Debt: 14,000 6.3 percent coupon bonds outstanding, $1,000 par value, 29 years to maturity, selling for 107 percent of par; the bonds make semiannual payments.

Common Stock: 470,000 shares outstanding, selling for $65 per share; beta is 1.16.

Preferred stock: 20,500 shares of 4.1 percent preferred stock outstanding, currently selling for $86 per share. The par value is $100 per share.

Market: 7 percent market risk premium and 5.2 percent risk-free rate.

What is the company's WACC?

Masterson, INC., has 7 million shares of common stock outstanding. The current share price is $83, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value os $140 million, has a coupon rate of 6 percent, and sells for 94 percent of par. The second issue has a face value of $125 million, has a coupon rate of 5 percent, and sells for 105 percent of par. The first issue matures in 25 years, the second in 8 years. Both bonds make semiannual coupon payments.

a. What are the company's capital structure weights on a book value basis?

b.What are the company's capital structure weights on a market value basis?

c.Which are more relevant, the book or market value weights?

Kingston Corp. is considering a new machine that requires an initial investment of $550,000 installed, and has a useful life of 8 years. The expected annual after-tax cash flows for the machine are $89,000 during the first three years, $95,000 during years 4 through 6 and $105,000 during the last two years.

(1) Develop the timeline.

(2) Calculate the internal rate of return (IRR).

(3) Calculate the net present value (NPV) at the following required rates of return: a. 3%, b. 4%, c. 8%, d. 9%.

(4) Using IRR and NPV criterion, comment if the project should be accepted or rejected at each of the required rates of return in question (3).

(5) Plot the net present value (NPV) profile with NPV on the Y-axis, and rates of return on the X-axis.

Guardian Inc. is trying to develop an asset-financing plan. The firm has $490,000 in temporary current assets and $390,000 in permanent current assets. Guardian also has $590,000 in fixed assets. Assume a tax rate of 30 percent.

a. Construct two alternative financing plans for Guardian. One of the plans should be conservative, with 70 percent of assets financed by long-term sources, and the other should be aggressive, with only 56.25 percent of assets financed by long-term sources. The current interest rate is 12 percent on long-term funds and 8 percent on short-term financing. Compute the annual interest payments under each plan.
  

b. Given that Guardian’s earnings before interest and taxes are $370,000, calculate earnings after taxes for each of your alternatives.
  

c. What would the annual interest and earnings after taxes for the conservative and aggressive strategies be if the short-term and long-term interest rates were reversed?
  

discuss the concepts of liquidity, solvency and DSO's as they pertain to cash-flows and the overall health of a business.

PLEASE SOLVE ONLY USING EXCEL

Samuel agreed to pay $550,000 for a house. He made a $125,000 down payment and financed the balance using a 30-year, 6 % per annum compounded monthly conventional loan.

a) How much were his monthly payments? b) If he sold the house for $750,000 after 5 years, how much equity did he have in the house? c) How much is his contribution to his loan (Principal and Interest)?

Suppose that the daily simple returns of a stock in one week were -0.4%, 0.8%, 1.3%, -1.5%, and 0.9%. What are the corresponding daily log returns? What is the weekly simple return of the stock?

Please refer to the information for Celebrity Auto Parts above. What was Celebrity’s EVA in 2017?

Multiple Choice

• −$30 million

• −$360 million

• $765 million

• −$135 million

• None of the options are correct.

Elliot Karlin 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 8.59 %​, ​13-year bond​ that's priced at $ 1,092.14 to yield 7.47 %.

2. A 7.784 %​, ​15-year bond​ that's priced at $ 1023.51 to yield 7.52 %.

3. A​ 20-year stripped Treasury​ (zero coupon)​ that's priced at $ 197.76 to yield 8.27 %.

4. A​ 24-year, 7.49 % bond​ that's priced at $ 965.54 to yield 7.81 %. 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 $ 250,000 into each of the 4 U.S. Treasury bonds.

c. Find the duration of the portfolio if Elliot puts $ 380,000 each into bonds 1 and 3 and $ 120,000 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? The duration and modified duration can be calculated using a​ spreadsheet, such as Excel. It gives the precise duration measure because it avoids the​ rounding-off errors, which are inevitable with manual calculations.

Bond​ 1: 13​ years, 8.59 %​, priced to yield 7.47 %.

The duration of this bond is ____ years.  ​

The modified duration of this bond is ____ years.  

Bond​ 2: 15​ years, 7.784 % priced to yield 7.52 %.

The duration of this bond is ____ years. 

The modified duration of this bond is ____ years.  

Bond​ 3: 20​ years, zero​ coupon, priced to yield 8.27 %.

The duration of this bond is ____ years.  

The modified duration of this bond is ____ years.  

Bond​ 4: 24​ years, 7.49 %​, priced to yield 7.81 %.

The duration of this bond is ____ years.  ​

The modified duration of this bond is _____ years.  ​

b. Find the duration of the whole bond portfolio if Elliot puts $ 250,000 into each of the 4 U.S. Treasury bonds.

The duration of this portfolio is ____ years.  

c. Find the duration of the portfolio if Elliot puts $ 380,000 each into bonds 1 and 3 and $ 120,000 each into bonds 2 and 4.

The duration of this portfolio is ____ years.  ​

d. Which portfolio - the portfolio in part b or the portfolio in part c - should Elliot select if he thinks rates are about to head up and he wants to avoid as much price volatility as​ possible?  ​(Choose the best answer​ below.)

A. He should invest in the portfolio in part b. The portfolio in part c has a higher duration than the portfolio in part b. If rates are about to​ rise, then it is safer to invest in the portfolio in part b​, because it would be less price volatile than the other portfolio.

B. He should invest in either portfolio. The portfolio in part c has a higher duration than the portfolio part b. If rates are about to​ rise, then it is equally safe to invest in either​ portfolio, because both portfolios would be equally price volatile.

C. He should invest in the portfolio in part c. The portfolio in part b has a higher duration than the portfolio in part c. If rates are about to​ rise, then it is safer to invest in the portfolio in part c​, because it would be less price volatile than the other portfolio.

D. He should invest in the portfolio in part c. The portfolio in part c has a higher duration than the portfolio in part b. If rates are about to​ rise, then it is riskier to invest in the portfolio in part b​, because it would be more price volatile than the other portfolio.

Please explain how to calculate in excel....