A7X Corp. just paid a dividend of $1.35 per share. The dividends are expected to grow at 30 percent for the next 7 years and then level off to a growth rate of 8 percent indefinitely. If the required return is 14 percent, what is the price of the stock today?

$77.47

$75.92

$60.94

$79.02

$.14

1.

You must evaluate a proposal to buy a new milling machine. The base price is $128,000, and shipping and installation costs would add another $16,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $44,800. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $3,000 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 $49,000 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. 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.
   2. The cost of research is an incremental cash flow and should be included in the analysis.
   3. Only the tax effect of the research expenses should be included in the analysis.
   4. 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.
   5. 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.
   
   -Select-

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?
   -Select-Yes or No

2.

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $290,000, and it would cost another $58,000 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 $101,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $10,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $76,000 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 14%, should the spectrometer be purchased?
   -Select-Yes or No

The background information and instruction of the question is provided below, and i only asked for solving the table 4 and table 5, thank you

Scenario 2:

Considering the calculations you have done so far, you need to attend to a number of import and export transactions for goods that companies in the United States expressed interest in.

The first transaction is for the import of good quality wines from France, since a retail liquor trading chain customer in the United States, for who you have been doing imports over the past five years has a very large order this time. The producer in France informed you that the current cost of the wine that you want to import is €2,500,000. The wine in France can be shipped to the United States immediately but you have three months to conduct payment.

The second transaction is for the export of 3d printers manufactured in the U.S.A. The country where it will be exported to is Britain. The payment of £2,500,000 for the export to Britain will be received twelve months from now.

You consider different transaction hedges, namely forwards, options and money market hedges.

You are provided with the following quotes from your bank, which is an international bank with branches in all the countries:

Forward rates:

Bank applies 360 day-count convention to all currencies (for this assignment apply 360 days in all calculations).

Annual borrowing and investment rates for your company:

Bank applies 360 day-count convention to all currencies. Explanation – e.g. 3 month borrowing rate on $ = 2.687%. This is the annual borrowing rate for 3 months. If you only borrow for 3 months the interest rate is actually 2.687%/4 = 0.67175% (always round to 5 decimals when you do calculations). Furthermore, note that these are the rates at which your company borrows and invests. The rates are not borrowing and investment rates from a bank perspective.

Option prices:

Bank applies 360 day-count convention to all currencies. (Students also have to apply 360 days in all calculations). Option premium calculations should include time value calculations based on US $ annual borrowing interest rates for applicable time periods e.g. 3 month $ option premium is subject to 2.687%/4 interest rate.)

Please solve only table 4 and table 5

Table 4: France import cost with option hedge:

Table 5: France: Exchange rate hedges compared:

Which hedging technique should be applied? ________________________________

16. Cost of trade credit

Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which affect the cost of asset of sale for the buyer as well as the seller.

Consider this case:

Free Spirit Industries Inc. buys on terms of 2.5/15, net 45 from its chief supplier.

If Free Spirit receives an invoice for $1,545.78, what would be the true price of this invoice?

$2,110.00

$1,281.07

$1,507.14

$1,582.50

The nominal annual cost of the trade credit extended by the supplier is ____________ . (Note: Assume there are 365 days in a year.)

The effective annual rate of interest on trade credit is ______________

Suppose Free Spirit does not take advantage of the discount and then chooses to pay its supplier late—so that on average, Free Spirit will pay its supplier on the 50th day after the sale. As a result, Free Spirit can decrease its nominal cost of trade credit by___________% by paying late.

Singh Development Co. is deciding whether to proceed with Project X. The cost would be $12 million in Year 0. There is a 50% chance that X would be hugely successful and would generate annual after-tax cash flows of $7 million per year during Years 1, 2, and 3. However, there is a 50% chance that X would be less successful and would generate only $1 million per year for the 3 years. If Project X is hugely successful, it would open the door to another investment, Project Y, which would require an outlay of $13 million at the end of Year 2. Project Y would then be sold to another company at a price of $26 million at the end of Year 3. Singh’s WACC is 9%.

1. If the company does not consider real options, what is Project X’s expected NPV? Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to three decimal places.
   $   million
2. 
   
3. What is X’s expected NPV with the growth option? Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to three decimal places.
   $   million
4. 
   
5. What is the value of the growth option? Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to three decimal places.
   $   million

Wii Brothers, a game manufacturer, has a new idea for an adventure game. It can market the game either as a traditional board game or as an interactive DVD, but not both. Consider the following cash flows of the two mutually exclusive projects for the company. Assume the discount rate is 9 percent. Year Board Game DVD 0 –$ 800 –$ 1,900 1 610 1,350 2 500 950 3 130 400

a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) d. What is the incremental IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

1.How does Economic exposure to exchange rate movements affect the capital budgeting of a firm? Provide an example?

2a. Give an example of how a firm might be affected by translation exposure

2b. Give an example of how a firm might be affected by transaction exposure.

3.

When the dollar strengthens, the reported consolidated earnings of U.S.-based MNCs are ____ affected by translation exposure. When the dollar weakens, the reported consolidated earnings are ____ affected.

a. favorably; favorably affected but by a smaller degree

b. favorably; favorably affected by a higher degree

c. unfavorably; favorably affected

d. favorably; unfavorably affected

4.

Dubas Co. is a U.S.-based MNC that has a subsidiary in Germany and another subsidiary in Greece. Both subsidiaries frequently remit their earnings back to the parent company. The German subsidiary generated a net outflow of €2,000,000 this year, while the Greek subsidiary generated a net inflow of €1,500,000. What is the net inflow or outflow as measured in U.S. dollars this year? The exchange rate for the euro is $1.05.

a. $3,675,000 outflow

b. $525,000 outflow

c. $525,000 inflow

d. $210,000 outflow

5.

Volusia, Inc. is a U.S.-based exporting firm that expects to receive payments denominated in both euros and Canadian dollars in one month. Based on today's spot rates, the dollar value of the funds to be received is estimated at $500,000 for the euros and $300,000 for the Canadian dollars. Based on data for the last fifty months, Volusia estimates the standard deviation of monthly percentage changes to be 8 percent for the euro and 3 percent for the Canadian dollar. The correlation coefficient between the euro and the Canadian dollar is 0.30.

What is the portfolio standard deviation?

a. 3.00%.

b. 5.44%.

c. 17.98%.

d. none of the above

6.

Consider an MNC that is exposed to the Taiwan dollar (TWD) and the Egyptian pound (EGP). 25% of the MNC's funds are Taiwan dollars and 75% are pounds. The standard deviation of exchange movements is 7% for Taiwan dollars and 5% for pounds. The correlation coefficient between movements in the value of the Taiwan dollar and the pound is .7. Based on this information, the standard deviation of this two-currency portfolio is approximately:

a. 5.13%.

b. 2.63%.

c. 4.33%.

d. 5.55%.

7.

Treck Co. expects to pay €200,000 in one month for its imports from Greece. It also expects to receive €250,000 for its exports to Italy in one month. Treck Co. estimates the standard deviation of monthly percentage changes of the euro to be 3 percent over the last 40 months. Assume that these percentage changes are normally distributed. Using the value-at-risk (VAR) method based on a 95% (z=1.65) confidence level, what is the maximum one-month loss in dollars if the expected percentage change of the euro during next month is -2%? Assume that the current spot rate of the euro (before considering the maximum one-month loss) is $1.23.

a. -$38,468

b. -$21,371

c. -$17,097

d. -$4,274

Assume that I can borrow money at a rate of 10% per year, but that I only earn 2% per year on money I loan. A friend has recently offered me an investment opportunity; make a $5,000 investment today and receive a guaranteed $5,400 in one year. I currently have $10,000 in the bank, but I plan on consuming $9,000 – meaning that I only have $1,000 that I could invest. Can/should make the investment? How much consumption would I need to be willing to forego to make the investment? (Another way to think about this is what is the maximum amount that I would be willing to borrow to take the investment?)

The newly elected president Susan implements some policies with the intention of boosting income. She succeeds at her goal, since households experience an increase in their incomes. Firms, however, become more cautious about the future of the policies. They think that the policies are only temporal and expect economic conditions to worsen in the future.

a. What is the effect on interest rates of such policies?

b. What is the effect on the number of loans?

Joe Dokes retired today with $1,000,000 in his retirement nest egg.   If he followed a cash flow matching immunization strategy using zero coupon treasuries (STRIPS, CATS, or the like), for how many years could he take out $100,000 given the following yields on zero coupons, an approximation of their levels on 8/16/19?   What would you advise Mr. Dokes to do in order to prolong the life of his nest egg?

XYZ Company is considering purchasing a piece of equipment costing $400,000. It has a useful life of 4years and will be depreciated straight-line to zero, after which it will be scrapped for $30,000. This piece of equipment will save $150,000 per year in pretax operating costs during its useful life but requires an initial investment in NWC of $36,000. XYZ Company has a 21% tax rate and a required rate of return of 12%

What is the annual Operating Cash Flow (OCF) of this piece of equipment in Years 1-4?

What is the Year 4IATCF (Income After-Tax Cash Flow)?

What is the NPV of purchasing this piece of equipment?

Should XYZ Company take on this project?

What is the project's EAC?

Five years ago, Miguel invested a stock with price $35 per share. The stock price at the end of every year is as the following. Assumes no dividends paid during these years. Year Price 0 35 1 37 2 36 3 40 4 42 5 45 a) What was Migule’s holding period return on this stock for last five years? b) What was Migule’s annual internal rate of return? c) What was the standard deviation of returns of Migule’s investment?