PLEASE SHOW CALCULATOR INPUTS

Reynolds Metals is considering a project with a life of 4 years that will produce annual operating cash flows of $57,000. During the life of the project, inventory will be lowered by $28,000, accounts receivable will increase by $15,000 and accounts payable will increase by $6,000. The project requires the purchase of equipment at an initial cost of $104,000 that will be depreciated straightline to a zero book value over the life of the project. Ignore bonus depreciation The equipment will be salvaged at the end of the project creating an aftertax cash inflow of $22,000. At the end of the project, net working capital will return to its normal level. What is the NPV of this project given a required return of 16%?

28) You have come up with a forecast of your future earnings. You believe you will earn:

• $20,000 next year (one-year from now);
• $40,000 two years from now;
• $60,000 three years from now; and,
• $100,000 four years from now and every year there-after for another 29 years (30 such years in total)

Assume your earnings in all of these years are received as one lump-sum payment at the end of every year. Assume your personal discount rate is 8%.

What is the present value of your estimated future income?

* I need to be able to show my work, the steps to understand the question.

Based on your current employment, discuss what you believe are some of the key industry trends that will have an impact on your organization’s budget. If you are not currently employed, discuss the key industry trends for the industry or position you would like to pursue after you complete your degree.

Brewsters is considering a project with a life of 5 years and an initial cost of $120,000. The discount rate for the project is 12%. The firm expects to sell 2,100 units a year at a net cash flow per unit of $20. The firm will have the option to abandon this project after 3 years at which time it could sell the project for $50,000. The firm is interested in knowing how the project will perform if the sales forecasts for years 4 and 5 of the project are revised such that there is a 50% chance the sales will be either 1,400 or 2,500 units a year. What is the NPV of this project given these revised sales forecasts (consider the option to abandon in your analysis)?

A new 5-year project has expected sales of 3,400 units, plus or minus 8%; variable costs per unit of $22, plus or minus 2%; annual fixed costs of $47,000, plus or minus 2%; annual depreciation of $33,000; and a sale price of $45 a unit, plus or minus 3%. The project initially requires $165,000 of fixed assets and $42,000 of net working capital. At the end of the project, the net working capital will be recouped and the fixed assets will produce an aftertax cash inflow of $35,000. The tax rate is 21% and the discount rate is 14%. What is the NPV of the optimistic scenario

3. Income statement

The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm’s gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders.

The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm’s revenues and expenses to the period in which they were incurred, not necessarily when cash was received or paid. Investors and analysts use the information given in the income statement and other financial statements and reports to evaluate the company’s financial performance and condition.

Consider the following scenario:

Cold Goose Metal Works Inc.’s income statement reports data for its first year of operation. The firm’s CEO would like sales to increase by 25% next year.

Complete the Year 2 income statement data for Cold Goose, then answer the questions that follow. Round each dollar value to the nearest whole dollar.

Given the results of the previous income statement calculations, complete the following statements:

suppose that you have the following bonds:

1-year ZCB, face value 1, priced at 0.98

2 year ZCB, face value 1, priced at 0.95

3-year ZCB, face value 1, priced at 0.92

4-year ZCB, face value 1, priced at 0.88

A life insurance company anticipates the following payments: $100 in one year, $250 in two years, $300 in three years, and $350 in four years..

What answer is closest to the total present value of the life insurance company’s anticipated payments? a) $880 b) $900 c) $920 d) $950 e) $980 f) $1000

8. What answer is closest to the duration of the life insurance company’s anticipated payments? a) 2.0 year b) 2.5 years c) 3.0 years d) 3.5 years e) 4.0 years

9. Given your calculation above, if you were interested in matching the life insurance company’s assets to its liabilities so that small interest rate changes would change the asset present values by about the same amount as the payment present values, and you had the present value of the payments to invest, would you rather invest in the 1-year ZCB or the 3-year ZCB?

As a homeowner in the City of Bloomington you are interested in calculating the Effective Property Tax

Rate you expect to pay on your property. Based on the following information, calculate the ETR of your

property for

BOTH

of the following scenarios. It is fine to work in groups but you must turn in your work

and your work only.

Scenario 1)

You know from government legislation that the legal tax rate on your property is 2.4% and the city’s

assessed value of your property is $145,000. However, your property is currently on the market for only

$60,500 due to a significant downturn in the housing market.

What is your Effective Property Tax Rate?

Scenario 2)

You know from government legislation that the legal tax rate on your property is 2.4% and the city’s

assessed value of your property is $145,000. However, your property is currently on the market for

$175,000 due to a recent boom in the housing market.

What is your Effective Property Tax Rate?

Analysis:

Compare and analyze the two ETRs. How did the change in market value affect the property ETR?

Would you prefer your home to be undervalued or overvalued by government assessors before you pay

your property taxes?

Axtel Company has the following financial statements.

In addition, Axtel retired stock for $1,000,000 and paid a dividend of $1,727,000. Depreciation for the year was $1,768,000. Calculate the ratios for the Axtel Company. Assume Axtel had leasing costs of $7,267,000 and amortization of $1,416,000 in 20X1, and had 1268000 shares of stock outstanding that were valued at $28.75 per share at year end. The firm must also make principal repayments of $1,012,000 on its outstanding debt this year. Assume 360 days in a year. Round your answers to two decimal places.

Part 1) Discuss the relationship between hospitals' profitability and their performance at managing two components of working capital: accounts receivable, measured in terms of hospitals' average collection periods, and accounts payable, measured in terms of hospitals' average payment periods.

Part 2) How would you describe the composition and purpose of responsibility centers?

Bergman Corp. has experienced zero growth over the last seven years, paying an annual dividend of $2.00 per share. Investors generally expect this performance to continue. Bergman stock is currently selling for $24.39. The risk-free rate is 3.0%, and Bergman's beta is 1.3.

a. Calculate the return investors require on Bergman's stock

b. Calculate the market return

c. Suppose you think Bergman is about to announce plans to grow at 3.0% into the foreseeable future. You also believe investors will accept that prediction and continue to require the same return on its stock. How much should you be willing to pay for a share of Bergman's stock?

I and my husband Jatin have total amount of $150,000 in our savings account. We have 3 school going kids. We want to buy a new home, a new car and keep funds for children higher education.

We finalized to buy a home for $760,000. We may use $120,000 of our savings as a down payment on it. For balance financing the mortgage specialist/agent gave us the following options:

1. Option 1: a 25-year mortgage/loan, with semi-monthly payments (at the end of each period). The interest rate on the mortgage is 3.26% APR (annual percentage rate) compounded semi-annually.

Ques 1. What will the semi-monthly payment be on the Option 1 mortgage?

Please use (display + name) the excel function/ formula used for each yellow cell.

2. Option 2: a monthly payment of $2,900 to be made at the end of each period. The interest rate with this option would be 3.60% APR (annual percentage rate) compounded semi-annually.

Ques 2. How many years will Option 2 mortgage be amortized over? Please use (display + name) the available excel function/ formula in each yellow cell .

Ques 3. To buy a new car of $45,000 (including taxes). In exchange of our old car for $10,000 and $10,000 from our savings as a down payment, the car dealer would provide the $25,000 balance as a 5-year loan paid semi-monthly at 4.8% ANNUAL RATE compounded semi-monthly. What will the payment be on the loan for the car as per below information? Please use (display + name) the excel function/ formula used for each yellow cell.

It is your 25^th birthday (end of 25 years) and you decide that you want to retire on your 65^th birthday (end of 65 years - 40 years later). Your salary is $55,000 per year and you expect your salary to increase by 3% each year for the next 40 years. When you retire, you want your retirement fund to provide an annual payment equal to 80% of your salary at age 65 and to increase by 2% a year (to cover inflation) through the end of your retirement. You estimate your retirement will last 25 years (age 65-89 - 25 payments). You want to leave your children the sum of $750,000 when you die on your 90^th birthday. You do not want to work during your retirement and you are not counting on Social Security to provide anything during your retirement. Since you don't want to work during your retirement, you need to have all your money in the retirement fund on the day you retire (65 years old) and you also make the first retirement payment to yourself on your 65^th birthday. All calculations take place at the end of each year therefore you can use the rate tables.

Your expected rate of return (investment rate) for the entire period of time (65 years) is 5%. You are determined to save $15,000 a year for the first 20 years and $25,000 a year for the remaining 20 years until you retire.

1.      What will your salary be at age 65 (40 years from today)? How much is 80% of that salary (retirement goal) and how much income per year does your retirement fund need to provide if your needs increase by 2% a year?

2.      How much will you need in your retirement fund on the day you retire in order to receive the amounts in question #1 and leave the inheritance to your children? Show proof for the 26 payments (including inheritance) that you have enough in the fund?

3.      How much will you have saved (retirement fund) on the day you retire?

4.      If the answers to Questions #2 and #3 are different, how much are you either over or short in your retirement fund?

5.      If you are over or short in your account, how much should you have saved per year in order to have enough in your retirement fund? The assumption for this part of the problem is that you saved an equal amount per year (annuity) for the 40 years; not the $15,000 for the first 20 years and $25,000 for the remaining 20 years.

6.      If you were short in what you needed in the fund, how much could the actual retirement fund that you have in place provide you assuming you wanted an equal amount each year (annuity) and you still want to leave your children the $750,000 inheritance?

7.      You are too depressed by how much you have to save per year over the next 40 years so you decide to continue to have a good time and spend your money, and you don't start saving until you are 35 years old. For the next 30 years, you save $35,000 a year. How much will be in the fund on the day that you retire? How much will you have to save per year to have enough in your retirement fund on your 65^th birthday? All assumptions are the same (inflation and investment) as before.

8.      How much have you saved (invested) into the fund (excluding interest) if you start saving at 25 years old and how much have you saved (invested) into the fund (excluding interest) if you wait and start saving at 35 years old? How much more will you have in your retirement fund starting at 25 versus 35?

Suppose that a binomial tree has n steps, and the stock has initial price S0 and then at each step, its price can only move up by a factor u or down by a factor d. Let Sk, k = 0, 1, · · · , n, be the price of the stock at the end of the k-th step. Denote by τ time length between consecutive steps, and r the risk-free interest rate. Consider a call option with strike price K with maturity nτ .

(a) In the risk-neutral world, what is the probability that the stock moves down at each step?

(b) For n = 3, calculate the fair price for the option at current time corresponding to the initial node of the tree (please write out explicit formula).

Assume n = 10, τ = 1, r = 6%, S0 = 100, u = 1.1, d = 0.9, K = 110.

(c) In the risk-neutral world, find the probability that the stock price moves up five times and down four times in the first nine steps. What is the corresponding price value?