Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $16 million; it will last for 8 years. Both systems entail $1 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm’s tax rate is 30%, and the discount rate is 15%. Either machine will be replaced at the end of its life.

a. What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places.)

b. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places.)

Abe's Steakhouse is the largest upscale steakhouse company in the United States, based on total company- and franchisee-owned restaurants. The company's menu features a broad selection of high-quality steaks and other premium offerings. Assume the information below is from a recent annual report:

a. Common stock, $0.01 par value; 100,090,000 shares authorized; 23,563,356 issued and outstanding at the end of the current year, 23,385,356 issued and outstanding at the end of last year.

b. Additional paid-in capital: $194,389,000 at the end of the current year and $169,431,000 at the end of last year.

c. Retained earnings / (accumulated deficit): ($82,397,000) at the end of last year.

d. In the current year, net income was $53,983,000 and a cash dividend of $7,138,000 was paid.

Required:

Prepare the stockholders’ equity section of the balance sheet to reflect the above information for the current year and last year. (Amounts to be deducted should be indicated with a minus sign.)

or 20Y8, Raphael Frame Company prepared the sales budget that follows.

At the end of December 20Y8, the following unit sales data were reported for the year:

For the year ending December 31, 20Y9, unit sales are expected to follow the patterns established during the year ending December 31, 20Y8. The unit selling price for the 8" × 10" frame is expected to increase to $27 and the unit selling price for the 12" × 16" frame is expected to increase to $29, effective January 1, 20Y9.

Required:

1. Compute the increase or decrease of actual unit sales for the year ended December 31, 20Y8, over budget. Use the minus sign to indicate a decrease in amount and percent. Round percents to the nearest whole percent.

2. Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 20Y9, compute the unit sales volume to be used for preparing the sales budget for the year ending December 31, 20Y9. Use the minus sign to indicate a decrease in percent. Round budgeted units to the nearest whole unit.

3.  Prepare a sales budget for the year ending December 31, 20Y9.

After reviewing the topic of short selling in your text, and researching the topic of short selling on your favorite web browser or library, please respond to the following Discussion topics: What are the processes of buying a stock on margin and short selling? What are the advantages and benefits of buying stock on margin and short selling?

Are there any differences that you see in the companies listed on the NASDAQ from the companies listed on the NYSE? Post anything else you found of interest while exploring the NYSE and NASDAQ websites. Compare and Contrast the NYSE and the NASDAQ.

Based on the following information, determine the Return on Equity. Provide your answer in decimal form with three significant digits.

Brandon is an analyst at a wealth management firm. One of his clients holds a $5,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table:

Brandon calculated the portfolio’s beta as 0.818 and the portfolio’s expected return as 8.4990%.

Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Baque Co. The risk-free rate is 4%, and the market risk premium is 5.50%.

According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Do not round your intermediate calculations.)

0.6778 percentage points

1.0776 percentage points

0.9994 percentage points

0.8690 percentage points

Analysts’ estimates on expected returns from equity investments are based on several factors. These estimations also often include subjective and judgmental factors, because different analysts interpret data in different ways.

Suppose, based on the earnings consensus of stock analysts, Brandon expects a return of 6.13% from the portfolio with the new weights. Does he think that the required return as compared to expected returns is undervalued, overvalued, or fairly valued?

Undervalued

Overvalued

Fairly valued

Suppose instead of replacing Atteric Inc.’s stock with Baque Co.’s stock, Brandon considers replacing Atteric Inc.’s stock with the equal dollar allocation to shares of Company X’s stock that has a higher beta than Atteric Inc. If everything else remains constant, the portfolio’s beta would _____Increase/decrease.

Grade It Now

Save & Continue

Continue without saving

Australian corporate bonds can now be issued with the same prospectus as for previous issues, simplifying the process.

As a result, the corporate bonds' yield __________ while the stock of bonds in the financial system ___________.

A.

increases; decreases

B.

increases; increases

C.

decreases; increases

D.

decreases; decreases

Superserv Inc. intends to acquire new equipment for $10 million and has an estimated life of 5 years and a salvage value of $800K.  The new equipment is expected to allow additional annual sales of $5 million over the next 5 years.  The associated additional annual operating costs are expected to be $3 million, while the interest on debt issued to finance the project is $1.5 million.   In addition, working capital will increase by $1.2 million at the outset. The project's cost of capital is 10%.  The firm's tax rate is 40%.  The annual depreciation charge on the new machine is $2 million.  What is the project's NPV? ($-2.5753m)

Solve this without excel, please.

Jason purchased 8% quarterly bonds that have a par value of $20,000 and a maturity date
8 years from now. What is the price that Jason can sell the bonds four years from now if
he wants to get a 12% rate compounded quarterly on his investment?

You are a portfolio manager of a risky portfolio with an expected rate of return of 14% and a standard deviation of 28%. The T-bill rate is 4%. Suppose your client decides to invest in your risky portfolio a proportion (y) of his total investment budget so that his overall portfolio will have an expected return of 10%.

a. What is the proportion y ?
b. What will be the standard deviation of your client’s portfolio ?
c. What is the Sharpe ratio ?
d. Suppose your client is wondering if he should switch his money in your fund to a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 9% with a standard deviation of 25%. Show your client the maximum fee you could charge (as a percent of the investment in your fund deducted at the end of the year) that would still leave him at least as well off investing in your fund as in the passive one. (Hint: The fee will lower the slope of your client’s CAL by reducing the expected return net of the fee.) ?

Consider the following mutually exclusive projects:

Whichever project you choose, if any, you require 6 percent return on your investment.

What is the payback period for Project A?

What is the payback period for Project B?

What is the discounted payback period for project A?

What is the discounted payback period for project B?

What is the NPV for project A?

What is the NPV for project B?

What is the IRR for Project A?

What is the IRR for Project B?

What is the profitability index for Project A?

What is the profitability index for Project B?

The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 12% per year for the next 6 years and then decreasing the growth rate to 6% per year forever after. The company just paid its annual dividend in the amount of $1.46 per share. What is the current value of one share if the required rate of return is 8%?  ENTER YOUR ANSWER WITH TWO DECIMAL PLACEs (e.g., 12.25). ROUND TO THE NEAREST CENT. DO NOT USE THE DOLLAR SIGN ($) IN YOUR ANSWER.

**only work out using step by step not excel or any other program!! **

Last year Janet purchased a $1,000 face value corporate bond with an 11% annual coupon rate and a 30-year maturity. At the time of the purchase, it had an expected yield to maturity of 13.84%. If Janet sold the bond today for $925.66, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places.