1. It is January 1 2020 and you have recently started a new company, GreenDrone, that produces flying drones for garden maintenance. You are still at the product development stage but would like to evaluate the financial feasibility of the project. Here are some information about the company: - R&D expenditures. In order to develop the drones, you need to hire an engineer for 5 years at an annual salary of $96,000. The salary is paid monthly at the end of the month in equal amounts, i.e. 96,000/12 per month for the first year. To stay competitive, you expect you will have to grow the annual salary at a rate of 3%, starting the next year. The engineer contract starts today, i.e., on January 1 2020. - Production cost. Once the product is developed in 5 years (January 1 2025), you will start the production of your drones. Each product is expected to cost $265 to produce. The cost is to be paid to the supplier at the beginning of a month. - Pricing and sales. You plan to sell the drones for $325 a unit over the next three years, i.e., until January 1 2028. All sales for products produced in a month are collected at the end of the month. The appropriate discount rate r is 5%, annually compounded. Denoting the quantity of drones sold in a month by Q. How many drones do you need to sell per month to make this project profitable (i.e., generate a positive NPV)?

Burlington has tracked daily sales of coats for the three locations below:

Question Set 1. Using only the Chicago sales data, generate the following sales forecasts:

1. Naïve forecasts (using the deseasonalized sales data) for January 5th through January 30^th. You will need to adjust the sales data to remove the seasonality effects. (6pts)

2. Four-day moving average forecasts for January 8^th through January 30^th. (3pts)

3. Twelve-day moving average forecasts for January 16^th through January 30^th. (3pts)

Note that, for example, you will not be able to make a four-day moving average forecast for January 7^th since four previous sales figures are required.

Suppose you have $30,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $50 per share. You notice that a put option with a $50 strike is available with a premium of $3.00. Calculate your percentage return on the put option for the six-month holding period if the stock price declines to $46 per share. (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your 6-month return as a percent rounded to 2 decimal places.)   

Percentage Return _________%

1. Lancaster Real Estate Company was founded 25 years ago by the current CEO, Robert Lancaster. The company purchases real estate, including land and buildings, and rents the property to tenants. The company has shown a profit every year for the past 18 years, and the shareholders are satisfied with the company’s management. Prior to founding Lancaster Real Estate, Robert was the founder and CEO of a failed alpaca farming operation. The resulting bankruptcy made him extremely averse to debt financing. As a result, the company is entirely equity financed, with 8 million shares of common stock outstanding. The stock currently trades at $37.80 per share.

Lancaster is evaluating a plan to purchase a huge tract of land in the southeastern United States for $85 million. The land will subsequently be leased to tenant farmers. This purchase is expected to increase Lancaster’s annual pretax earnings by $14.125 million in perpetuity. Jennifer Weyand, the company’s new CFO, has been put in charge of the project. Jennifer has determined that the company’s current cost of capital is 10.2 percent. She feels that the company would be more valuable if it included debt in its capital structure, so she is evaluating whether the company should issue debt to entirely finance the project. Based on some conversations with investment banks, she thinks that the company can issue bonds at par value with a 6 percent coupon rate. From her analysis, she also believes that a capital structure in the range of 70 percent equity/30 percent debt would be optimal. If the company goes beyond 30 percent debt, its bonds would carry a lower rating and a much higher coupon because the possibility of financial distress and the associated costs would rise sharply. Lancaster has a 23 percent corporate tax rate (state and federal).

If Lancaster wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain.

As someone who wishes to begin saving for retirement, what is your investment strategy? (In what types of investments would you be looking to place your hard earned money? Again, please be specific)

A proposed cost-saving device has an installed cost of $660,000. The device will be used in a five-year project but is classified as three-year MACRS (MACRS Table) property for tax purposes. The required initial net working capital investment is $51,500, the marginal tax rate is 34 percent, and the project discount rate is 13 percent. The device has an estimated Year 5 salvage value of $76,500. What level of pretax cost savings do we require for this project to be profitable? Pretax savings $

The Shield Corporation has BB-rated bonds with a yield to maturity of 6.40% APR. A U.S Treasury, with the same maturity, currently has a yield to maturity of 4.14% APR. Both bonds pay semi-annual coupons at a 6.24% APR and have 5.00 years until maturity. (assume $1,000 face value)

What is the current price of the Shield Corporation bond?

What is the current price of the Treasury bond?

A 30-year loan of 1100 is repaid with payments at the end of each year.

Each of the first fifteen payments equals 155% of the amount of interest due. Each of the last fifteen payments is X.

The lender charges interest at an annual effective rate of 8%. Calculate X

a. 57

b. 65

c. 77

d. 82

e. 46

. Define each of the following types of credit market instruments and identify one common example of each type: (a) simple loan; (b) fixed payment loan; (c) coupon bond; (d) discount bond. (e) Are loans and bonds credit and/or debt instruments? Briefly explain.

Examine the stock market changes in the recent years, especially after the credit crisis in 2007-08. What has happened to the stock market? Do you find the market volatile?

Excel Business & Finance

You are going to contribute some money to your retirement fund at the beginning of this year and each of the next 39 years. You have the following assumptions:
I. Initial balance for year 1 is assumed to be 0. II. Suppose during Year 1, your salary is $40,000 and your salary increases by 5 percent each year until your retirement. III. You want to contribute the same percentage of your salary each year while you are working for your retirement.
IV. When you retire in 40 years, you plan to withdraw $100,000 per year for 20 years (starting year 41) and will not make any contribution to your retirement during the 20 years.
You also Assume the following retirement investment portfolio:
I. First 20 years of your investing, the investments will earn 10 percent per year V. During all other years, your investments will earn 5 percent per year
Part I: Assume all contributions and withdrawals occur at the beginning of the year before investment returns are received, please set up the retirement problem to find out the minimum percentage of your salary you should save for your retirement in order for you to make the withdrawals.
Part II: Assume that withdrawals occur at the end of each year after the investment returns are received and contributions occur at the beginning of each year before the investment returns are received, please set up the retirement problem to find out the minimum percentage of your salary you should save for your retirement in order for you to make the withdrawals.

A project will produce an operating cash flow of $7,300 a year for three years. The initial investment for fixed assets will be $11,600, which will be depreciated straight-line to zero over the asset's 4-year life. Ignore bonus depreciation. The project will require an initial $500 in net working capital plus an additional $500 every year with all net working capital levels restored to their original levels when the project ends. The fixed assets can be sold for an estimated $2,500 at the end of the project, the combined tax rate is 23 percent, and the required rate of return is 12 percent. What is the net present value of the project?