Arthur buys $2,200.00 worth of stock. Six months later, the value of the stock has risen to $2,500.00 and Arthur buys another $1,000.00 worth of stock. After another eight months, Arthur’s holdings are worth $3,100.00 and he sells off $800.00 of them. Ten months later, Arthur finds that his stock has a value of $2,300.00.

Compute the annual dollar-weighted yield for Arthur over the two-year period.

Write your answer as a percentage, rounded to three decimal places.

Jane is the financial manager for Alpha Corporation. She has been asked to perform a lease-versus-purchase analysis on a new printing machine. The machine costs $360,000 and will be depreciated using the straightline method with zero residual value over five years. Alternatively, the company can lease the machine with year-end payments of $95,000 over five years. The company’s tax rate is 35% and its before-tax cost of borrowing is 10%.

Required:

a) Given the above information, calculate the net advantage to leasing (NAL) for Alpha Corporation to obtain the new printing machine, assuming the company will use its own reserves rather than borrowing from the bank. Which option would you recommend? Explain.

b) Suppose only $300,000 purchase price of the machine is borrowed from OUHK Bank. Should Alpha Corporation change its buy or lease decision on the printing machine? Discuss.

c) Please comment on the following remark: ‘Leasing is a zero sum game between the lessee and lessor.’

d) Briefly discuss the reasons for firms to lease even if NALs are negative.

Suppose a company is looking to hedge a risk in the derivatives market. What, fundamentally, is the difference between hedging in the futures market vs. the options market? Which would you choose for a given situation? Provide examples.

A Japanese company has a bond outstanding that sells for 93 percent of its ¥100,000 par value. The bond has a coupon rate of 6 percent paid annually and matures in 16 years. What is the yield to maturity of this bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

FINANCIAL CALCULATOR CALCULATIONS ONLY

This is all one question, thank you so much in advance!

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $200,000, and it would cost another $30,000 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 $100,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $13,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $73,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.

1. What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent. Negative amount should be indicated by a minus sign.
   $

2. 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 $

3. If the WACC is 13%, should the spectrometer be purchased?

This is all one question, thank you so much in advance.

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 $575,000 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 $265,000. The old machine is being depreciated by $115,000 per year, using the straight-line method.

The new machine has a purchase price of $1,100,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $120,000. 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 $205,000 will be realized if the new machine is installed. The company's marginal tax rate is 35%, and it has a 12% WACC.

1. What initial cash outlay is required for the new machine? Round your answer to the nearest dollar. Negative amount should be indicated by a minus sign.
   $
   
2. Calculate the annual depreciation allowances for both machines and compute the change in the annual depreciation expense if the replacement is made. Round your answers to the nearest dollar.

   Year	Depreciation Allowance, New	Depreciation Allowance, Old	Change in Depreciation
   1	$	$	$
   2
   3
   4
   5

3. What are the incremental net cash flows in Years 1 through 5? Round your answers to the nearest dollar.

   Year 1	Year 2	Year 3	Year 4	Year 5
   $	$	$	$	$

4. Should the firm purchase the new machine? Yes or No?

This is all one question, thank you so much in advance!

You must evaluate a proposal to buy a new milling machine. The base price is $102,000, and shipping and installation costs would add another $10,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $61,200. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $7,500 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 $52,000 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?

X Company is considering the purchase of a new processor that costs $200,000. Shipping and setup costs for the processor are estimated to be $15,000. X’s working capital requirement is expected to increase by $17,000 when the new processor begins operation and is expected to be fully recoverable at the end of the project. The processor’s useful life is expected to be 5 years and its salvage value at that point is estimated to be $25,000. Estimated revenues and expenses before tax for each year are shown in the table below.

The processor will be depreciated to a zero book value using the following annual depreciation rates that are applied to the original installed cost.

Assume a tax rate of 35% and a cost of capital of 12%. Show the calculations for the initial outlay and the CFAT for each year. Then use your financial calculator to find the NPV and IRR for the project. Based on the NPV and IRR, should company X invest in the new processor?

Check Answers: Initial Investment: $232,000, NPV = -$15,574

St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. The new welder will cost $181,000 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $26,000 to $82,000 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 40%, and the project cost of capital is 14%. Should the old welder be replaced by the new one? Do not round intermediate calculations. Round your answer to the nearest cent. Negative value, if any, should be indicated by a minus sign.

The NPV of the project is $ _______ ?  

Old welder -Select-should be replaced.

A Canadian company issues an 8-year term bond with face value of​ $1,000 and​ 6% coupon rate. If the market prevailing effective rate of interest is​ 5.75%, what is the price an investor will have to​ pay? Note: The bond pays a​ $60 coupon​ (or interest) payment at the end of each of the 8 years and pays the face value at the end of the 8 years.

A.​$1,150.00

B.​$1,200.00

C.​$1,015.85

D.​$1,215.00

Procter and Gamble​ (PG) paid an annual dividend of $ 1.62$1.62 in 2009. You expect PG to increase its dividends by 8.1 %8.1% per year for the next five years​ (through 2014), and thereafter by 2.9 %2.9% per year. If the appropriate equity cost of capital for Procter and Gamble is 7.3 %7.3% per​ year, use the​ dividend-discount model to estimate its value per share at the end of 2009.

The price per share is ​$____?  (Round to the nearest​ cent.)

Non-constant growth model:
Do=$2.00 required return on equity= 5%

g= 9% n=1,2

g=7% n=3,4

g=3% n=5 and thereafter

No spreadsheet, worked out