| Year | A | B | C |
| 0 | -10,000 | -13,000 | -15,000 |
| 1 | 5,000 | 5,000 | 7,000 |
| 2 | 6,000 | 2,000 | 2,000 |
| 3 | 7,000 | 6,000 | 1,000 |
| 4 | 2,000 | 1,000 | 5,000 |
| 5 | 1,000 | 7,000 | 6,000 |
Which projects will the firm accept if the payback period is three years? Which projects will the firm accept if the discounted payback period is three years?
Discount rate is 7%
In: Finance
In: Finance
How are cash flows for a project estimated?
what are the investment rules?
In: Finance
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $270,000, and it would cost another $54,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $108,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $14,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $74,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.
What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent.
In Year 1 $
In Year 2 $
In Year 3 $
In: Finance
| Click here to read the eBook: Analysis of an Expansion Project
NEW PROJECT ANALYSIS You must evaluate a proposal to buy a new milling machine. The base price is $159,000, and shipping and installation costs would add another $13,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $103,350. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $10,000 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 $47,000 per year. The marginal tax rate is 35%, and the WACC is 13%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
|
In: Finance
According to the article, the business roundtable came up with a declaration that “…companies should no longer advance only the interests of shareholders. Instead, the group said, they must also invest in their employees, protect the environment and deal fairly and ethically with their suppliers.” One argument for the new declaration is that actually investing in other stakeholders maximizes shareholder value. Explain in what way can investing in the environment maximize shareholder value
In: Finance
What is the general relationship among operating leverage, financial leverage, and the total leverage of the firm? Do these types of leverage complement one another? Why or why not?
In: Finance
Why is working capital management one of the most important and time-consuming activities of the financial manager? Explain net working capital.
In: Finance
The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $550,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for $280,000. The old machine is being depreciated by $110,000 per year, using the straight-line method.
The new machine has a purchase price of $1,125,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $125,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. It is expected to economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective bottles. In total, an annual savings of $215,000 will be realized if the new machine is installed. The company's marginal tax rate is 35%, and it has a 12% WACC.
| Year | Depreciation Allowance, New | Depreciation Allowance, Old | Change in Depreciation |
| 1 | $ | $ | $ |
| 2 | |||
| 3 | |||
| 4 | |||
| 5 |
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| $ | $ | $ | $ | $ |
In: Finance
In: Finance
Use the following tables to complete the critical thinking assignment.
Best Buy Co., Inc.
Income Statement
| 2/3/2018 | 1/28/2017 | 1/30/2016 | 1/31/2015 | |
| Revenue | ||||
| Total Revenue | 42,151,000 | 39,403,000 | 39,528,000 | 40,339,000 |
| Cost of Revenue | 32,275,000 | 29,963,000 | 30,334,000 | 31,292,000 |
| Gross Profit | 9,876,000 | 9,440,000 | 9,194,000 | 9,047,000 |
| Operating Expenses | ||||
| Selling General and Administrative | 7,911,000 | 7,493,000 | 7,612,000 | 7,550,000 |
| Operating Income or Loss | 1,965,000 | 1,947,000 | 1,582,000 | 1,497,000 |
| Income from Continuing Operations | ||||
| Add Total Other Income/Expenses Net | -148,000 | -131,000 | -272,000 | -110,000 |
| Interest Expense | 75,000 | 72,000 | 80,000 | 90,000 |
| Income Before Tax | 1,742,000 | 1,744,000 | 1,230,000 | 1,297,000 |
| Income Tax Expense | 818,000 | 609,000 | 503,000 | 141,000 |
| Add Discontinued Operations | 1,000 | 21,000 | 90,000 | -13,000 |
| Net Income | 925,000 | 1,156,000 | 817,000 | 1,143,000 |
Best Buy Co., Inc.
Balance Sheet
| 2/3/2018 | 1/28/2017 | 1/30/2016 | 1/31/2015 | |
| Current Assets | ||||
| Cash And Cash Equivalents | 1,101,000 | 2,240,000 | 1,976,000 | 2,432,000 |
| Short Term Investments | 2,196,000 | 1,848,000 | 1,384,000 | 1,539,000 |
| Net Receivables | 1,049,000 | 1,347,000 | 1,162,000 | 1,280,000 |
| Inventory | 5,209,000 | 4,864,000 | 5,051,000 | 5,174,000 |
| Other Current Assets | 274,000 | 217,000 | 313,000 | 1,047,000 |
| Total Current Assets | 9,829,000 | 10,516,000 | 9,886,000 | 11,472,000 |
| Long Term Investments | 0 | 13,000 | 27,000 | 3,000 |
| Property Plant and Equipment | 2,421,000 | 2,293,000 | 2,346,000 | 2,295,000 |
| Goodwill | 425,000 | 425,000 | 425,000 | 425,000 |
| Intangible Assets | 18,000 | 18,000 | 18,000 | 57,000 |
| Other Assets | 356,000 | 591,000 | 817,000 | 993,000 |
| Deferred Long Term Asset Charges | 159,000 | 317,000 | 510,000 | 574,000 |
| Total Assets | 13,049,000 | 13,856,000 | 13,519,000 | 15,245,000 |
| Current Liabilities | ||||
| Accounts Payable | 4,873,000 | 4,984,000 | 4,450,000 | 5,030,000 |
| Short/Current Long Term Debt | 499,000 | 0 | 350,000 | 0 |
| Other Current Liabilities | 1,043,000 | 944,000 | 975,000 | 1,609,000 |
| Total Current Liabilities | 7,817,000 | 7,122,000 | 6,925,000 | 7,777,000 |
| Long Term Debt | 648,000 | 1,158,000 | 1,168,000 | 1,492,000 |
| Other Liabilities | 805,000 | 704,000 | 877,000 | 901,000 |
| Total Liabilities | 9,437,000 | 9,147,000 | 9,141,000 | 10,250,000 |
| Stockholders' Equity | ||||
| Total Stockholder Equity | 3,612,000 | 4,709,000 | 4,378,000 | 4,995,000 |
Choose one of the following two assignments to complete this week. Do not do both assignments. Identify your assignment choice in the title of your submission.
Option #1: Ratio Analysis and Interpretation
Using the attached financial statements for Best Buy Co., Inc. complete the financial statement analysis and ratio analysis by answering the questions below.
a. Calculate average collection period, total asset turnover, inventory turnover, and days in inventory.
b. Assess the activity of the firm, using your calculations in part a, over the four year period.
c. Calculate the gross profit margin, operating margin, and net profit margin.
d. Assess the profitability of the firm, using your calculations in part c, over the four year period.
In: Finance
A mail-order firm processes 6,000 checks per month. Of these, 70 percent are for $50 and 30 percent are for $82. The $50 checks are delayed three days on average; the $82 checks are delayed four days on average. Assume 30 days per month.
a-1. What is the average daily collection float? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
a-2. How do you interpret your answer?
b-1. What is the weighted average delay? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b-2. Calculate the average daily float. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
c. How much should the firm be willing to pay to eliminate the float? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
d. If the interest rate is 6 percent per year, calculate the daily cost of the float. (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
e. How much should the firm be willing to pay to reduce the weighted average float by 2 days? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
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A 20-year maturity $1,000 par value 9% coupon bond paying coupons annually is callable in five years at a call price of $1,050. The bond currently sells at a yield to maturity of 8%. What is the yield to call?
please show full steps of the work. thank you!!!
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| A7X Corp. just paid a dividend of $1.45 per share. The dividends are expected to grow at 30 percent for the next 8 years and then level off to a growth rate of 8 percent indefinitely. |
|
If the required return is 12 percent, what is the price of the stock today?
|
In: Finance
|
Fun With Finance is considering a new 3-year expansion project that requires an initial fixed asset investment of $6.318 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $491,400. The project requires an initial investment in net working capital of $702,000. The project is estimated to generate $5,616,000 in annual sales, with costs of $2,246,400. The tax rate is 34 percent and the required return on the project is 15 percent. |
| Required: | |
| (a) | What is the project's year 0 net cash flow? |
| (Click to select) -7,020,000 -6,669,000 -6,318,000 -7,722,000 -7,371,000 | |
| (b) | What is the project's year 1 net cash flow? |
| (Click to select) 3,086,975 2,645,978 2,939,976 2,792,977 3,233,974 |
| (c) | What is the project's year 2 net cash flow? |
| (Click to select) 2,645,978 2,939,976 3,086,975 2,792,977 3,233,974 |
| (d) | What is the project's year 3 net cash flow? |
| (Click to select) 4,164,615 3,767,985 4,362,930 3,966,300 3,569,670 |
| (e) | What is the NPV? |
| (Click to select) 2,758,049 385,824 367,452 -1,309,807 394,627 |
In: Finance