At year-end 2014, total assets for Microloft Inc. were $1.4 million and accounts payable were $380,000. Sales, which in 2014 were $2.7 million, are expected to increase by 25% in 2015. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Microloft typically uses no current liabilities other than accounts payable. Common stock amounted to $435,000 in 2014, and retained earnings were $290,000. Microloft plans to sell new common stock in the amount of $85,000. The firm’s profit margin on sales is 6%; 60% of earnings will be retained. How much new long-term debt financing will be needed in 2015 (Hint: AFN – New stock equals new long-term debt)

In a few sentences, please explain how you can save more money. What actions can you take to save more money? How can you distinguish between your “needs” and your “wants”?

Too young inc has a bond outstanding with a coupon rate of 6.8 percent and semiannual payments. the bond currently sells for 949 and matures in 25 years. the par value is 1000. what is the companys pre tax cost of debt

Assume a common stock currently just paid a dividend of $5 per share. The stock’s current price is $50 per share. It is estimated that the dividend will grow at a constant rate of 6% per year forever. What is the cost of equity?

Raymond Mining Corporation has 10.1 million shares of common stock outstanding, 450,000 shares of 5% $100 par value preferred stock outstanding, and 175,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $49 per share and has a beta of 1.55, the preferred stock currently sells for $98 per share, and the bonds have 15 years to maturity and sell for 116% of par. The market risk premium is 8.9%, T-bills are yielding 4%, and Raymond Mining’s tax is 38%.

a. What is the firm’s market value capital structure? (Enter your answers in whole dollars.)

b. If Raymond Mining is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 3 decimal places.)

Discount rate              %

NPV

Project L costs $50,000, its expected cash inflows are $14,000 per year for 9 years, and its WACC is 9%. What is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

$

1. You are going to invest $18,000 equally in a portfolio consisting of Assets Z, D, and W, as follows: Calculate the beta of the portfolio containing assets ZDW.

1. 1.60
2. 2.40
3. 2.00
4. 1.50

Beechtree Furniture Company is considering adding a new line to its product mix. The production line would be set up in unused space in Beechtree’s main plant. The machinery’s invoice price would be approximately $250,000; another $15,000 in shipping charges would be required; and it would cost an additional $18,000 to install the equipment. Further, the firm’s inventories would have been increased by $22,000 to handle the new line. The machinery has an economic life of 4 years and will be the depreciated fully using the straight-line method. The machinery is expected to have a salvage value of $10,000 after 4 years of use. The new line would generate $72,000 in incremental sales and $48,000 in incremental costs (before taxes and excluding depreciation) in each of the next 4 years. The firm’s tax rate is 25 percent, and its overall weighted average cost of capital is 12 percent.

A. What is Beechtree's net investment outlay on this project (yr 0)?

b. What are the net cash flows for the first year (yr 1) of the project?

C. If the project is terminated at the end of yr 4 and the machine is sold for the expected salvage value, what is the net cash flow at the time the project is terminated?

Berkshire Building Services generated $98 million in sales during the current year, and its year-end total assets were $118 million. Also, at year-end, current liabilities were $5,895,000 consisting of $3,144,000 of accounts payable, $1,572,000 of accruals, and $1,179,000 of notes payable. The firm’s profit margin was 7% and payout ratio was 38%. The firm considered itself at full capacity in the current year. Looking ahead to next year, estimate the additional funds needed if the firm intends to grow sales by 8%.

1. A corporation is assessing the risk of two capital budgeting proposals. The financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows which are given in the following table below. The firm’s cost of capital is 10 percent. If the projects have five-year lives, the range of the net present value for Project B is approximately __________.

1. $254,894
2. $37,908
3. $303,263
4. $80,000

Compute the NPV for Project M if the appropriate cost of capital is 9 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.)

Project M Time: 0 1 2 3 4 5 Cash flow: –$1,800 $510 $640 $680 $760 $260

16.  Problem 19.17 (Foreign Capital Budgeting)

Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2,000 and a cash inflow the following year of $2,400. Sandrine estimates that its risk-adjusted cost of capital is 11%. Currently, 1 U.S. dollar will buy 0.85 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding 2%, while similar securities in Switzerland are yielding 1%.

1. If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round the net present value to the nearest cent and rate of return to two decimal places.

   NPV = $  

   Rate of return =   %

2. What is the expected forward exchange rate 1 year from now? Do not round intermediate calculations. Round your answer to two decimal places.

     Swiss franc (SF_r) per U.S. $

3. If Sandrine undertakes the project, what is the net present value and rate of return of the project for Sandrine? Do not round intermediate calculations. Round the net present value to the nearest cent and rate of return to two decimal places.

   NPV =   Swiss francs

   Rate of return =   %

You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year Fund Market Risk-Free

2011 –20.0 % –38.5 % 1 %

2012 25.1 20.9 4

2013 13.8 13.6 2

2014 7.4 8.4 6

2015 –2.04 –4.2 2

What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

You’ve collected the following information from your favorite financial website.

According to your research, the growth rate in dividends for SIR for the next five years is expected to be 20 percent. Suppose SIR meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.25 percent indefinitely. Assume investors require a return of 14 percent on SIR stock.

According to the dividend growth model, what should the stock price be today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
Current stock price            $

Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued?