(Cash conversion cycle​) Historical data for the​ firm's sales, accounts​ receivable, inventories, and accounts payable for the Crimson Mfg. Company​ follows:

   2014   2015   2016   2017   2018
Sales   4,346   5,220   7,947   11,699   18,461
Receivables   602   811   1,086   1,368   2,268
Acounts payable   443   683   682   1,554   2,409
Inventories   341   456   655   378   354

a. Calculate​ Crimson's days of sales​ outstanding, days of payables​ outstanding, and days of sales in inventory for each of the 5 years. ​(Assume a​ 365-day year. Hint​: Assume that the​ firm's cost of goods sold equals​ 70% of​ sales.) What has Crimson accomplished in its atempts to better manage its investments in account receivable and​ inventory? ​(Round to two decimal​ places.)

b. Calculate​ Crimson's cash conversion cycle for each of the 5 years. Evaluate the​ firm's overall management of its working capital. Assume a​ 365-day year.

Days of sales outstanding​ (DSO)

2014........2015........2016........2017.......2018
? ? ? ? ?

Annual percentage yield​) Compute the cost of the following trade credit terms using the compounding​ formula, or effective annual rate. Note​: Assume a​ 30-day month and​ 360-day year.

a. 2​/5​, net 45

b. 4​/10​, net 30

c. 2​/10​, net 60

d. 4​/10​, net 30

Chad was offered two options for a car he was purchasing:

• Lease option: Pay lease amounts of $400 at the beginning of every month for 4 years. At the the end of 4 years, purchase the car for $10,500.

• Buy option: Purchase the car immediately for $23,500.

The money is worth 7.70% compounded monthly.

a. What is the Discounted Cash Flow (DCF) for the lease option?

b. Which is the better option?

Lease Option or Buy Option

15.In a limited liability partnership (LLP)

a.a partner may avoid liability for the malpractice of other partners.

b.a partner who commits malpractice is automatically expelled from the partnership under the UPA.

c.the maximum number of partners is limited by the law of most states.

d.it is deemed unethical to employ non-professionals.

17.A limited liability company

a.is presumed to be member managed.

b.is presumed to be manager managed.

c.may not have members who are foreign nationals under federal law.

d.can have a duration of no more than 25 years under the law of most states.

19.A syndicate

a.cannot be incorporated under the law of most states.

b.is a type of criminal(organized crime) organization.

c.is an investment group formed to finance a particular project.

d.is an income tax avoidance device.

A small business owner visits his bank to ask for a loan. The owner states that he can repay a loan at $2,200 per month for the next three years and then $1,200 per month for two years after that. If the bank is charging customers 10.25 percent APR, how much would it be willing to lend the business owner? (Do not round intermediate calculations and round your final answer to 2 decimal places.) What is the present value?

STEPHENSON REAL ESTATE RECAPITALIZATION Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. 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 Stephenson 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. Stephenson 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 Stephenson’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. Stephenson has a 23 percent corporate tax rate (state and federal).

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

2. Suppose Stephenson decides to issue debt to finance the purchase. What will the market value of the Stephenson Real Estate Company be if the purchase is financed with debt?

3. What is the price per share of the firm’s stock? (Hint: Stock price per share = Total equity / # of outstanding shares)

X-Treme vitamin company is considering two investments,both of which cost$20000.The Firm's cost of capital is 15 percent.The cash flows are as follows.

Instructions:

I. What is the payback period for each project?    Which project would you accept based on the payback period?

II.What is the discounted payback period for each project?   which project would you accept on the discounted payback criterion?

III. Calculate The NPV of each Project?     Which project would you choose based on NPV criterion ?

IV.Based on the IRR criteria which project would you choose if they were mutually exclusive?

Your company has been approached to bid on a contract to sell 5,200 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $3.9 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $435,000 to be returned at the end of the project, and the equipment can be sold for $385,000 at the end of production. Fixed costs are $610,000 per year, and variable costs are $83 per unit. In addition to the contract, you feel your company can sell 13,000, 15,100, 18,700, and 11,200 additional units to companies in other countries over the next four years, respectively, at a price of $189. This price is fixed. The tax rate is 23 percent, and the required return is 12 percent. Additionally, the president of the company will undertake the project only if it has an NPV of $125,000. What bid price should you set for the contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,640,000; the new one will cost, $1,975,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $420,000 after five years. The old computer is being depreciated at a rate of $344,000 per year. It will be completely written off in three years. If we don’t replace it now, we will have to replace it in two years. We can sell it now for $540,000; in two years, it will probably be worth $156,000. The new machine will save us $368,000 per year in operating costs. The tax rate is 24 percent, and the discount rate is 11 percent.

a-1. Calculate the EAC for the the old computer and the new computer. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

a-2. What is the NPV of the decision to replace the computer now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

NPV and IRR   Benson Designs has prepared the following estimates for a​ long-term project it is considering. The initial investment is

23,260

and the project is expected to yield​ after-tax cash inflows of

7000

per year for

5

years. The firm has a cost of capital of

11%.

a.  Determine the net present value​ (NPV) for the project.

b.  Determine the internal rate of return​ (IRR) for the project.

c.  Would you recommend that the firm accept or reject the​ project?

Consider price quotes and characteristics for two different bonds:

At the same time, you observe the spot rates for the next three years:

Demonstrate whether the price for either of these bonds is consistent with the quoted spot rates. Under these conditions, recommend whether Bond A or Bond B appears to be the better purchase. Do not round intermediate calculations. Round your answers to the nearest cent.

The non-arbitrage price of Bond A: $____

The non-arbitrage price of Bond B: $____

____ appears to be the better purchase.

You are considering a project that will require an initial outlay of $54,200. This project has an expected life of 5 years and will generate after-tax flows to the company as a whole of $20,608 at the end of each year over its 5-year life. In addition to the $20, 608 cash flow from operations during the fifth and final year, there will be an additional cash outflow of $23,608 at the end of the fifth and final year associated with the removal of environmental waste, making the cash flow in year 5 equal to $-3,000. Given a required rate of return of 15 %

a. Calculate the IRR.

b. Calculate the net present value (NPV).

c. Calculate the MIRR.

d. Based on the answers above, should the project be accepted? Explain.

Year 0 1 2 3 FTF(Mil) -100 50 100 70 Suppose? Alcatel-Lucent has an equity cost of capital of 10%?, market capitalization of $10.80 ?billion, and an enterprise value of $14.4 billion. Suppose? Alcatel-Lucent's debt cost of capital is 6.1% and its marginal tax rate is 35%.

a. What is? Alcatel-Lucent's WACC?

b. If? Alcatel-Lucent maintains a constant? debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown? here,? c. If? Alcatel-Lucent maintains its? debt-equity ratio, what is the debt capacity of the project in part ?(b?)? . What is? Alcatel-Lucent's WACC? ?Alcatel-Lucent's WACC is ______%. ?(Round to two decimal? places.)

b. If? Alcatel-Lucent maintains a constant? debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown? here, LOADING... ?? The NPV of the project is ?$________million.???(Round to two decimal? places.)

c. If? Alcatel-Lucent maintains its? debt-equity ratio, what is the debt capacity of the project in part ?(b?)? The debt capacity of the project in part ?(b?) is as? follows:???(Round to two decimal? places.) Year 0 1 2 3 Debt capacity ?$_______million ?$________million ?$_________million ?$_________million

Client X operates in the US currently and is planning to expand operations globally next year. As a result, management is considering preparing financial statements in accordance with IFRS rather than with US GAAP. Client X contacted you for clarification and recommendations regarding the following issues: How the use of the LIFO method to value its inventories will be impacted if a switch to financial statements prepared in compliance with IFRS will be made. Whether interest cost on construction of a new warehouse may be included in the cost of the new warehouse. In what instances should goodwill be adjusted for impairment? Provide a 150- word overview of each issue, followed by solid responses supported by research and proper citing.