What will you still owe after the 13th year of a 15-year, $450,000 mortgage at 4.35% APR if you only make the minimum monthly payments?
A. $77,826
B. $114,827
C. $791,338
D. $78,201
Please work out the problem!
In: Finance
Management of Kevin Hall, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $290,200. They project that the cash flows from this investment will be $110,820 for the next seven years. If the appropriate discount rate is 14 percent, what is the IRR that Kevin Hall management can expect on this project? (Do not round discount factors. Round other intermediate calculations to 0 decimal places e.g. 15 and final answer to 2 decimal places, e.g. 5.25%.)
IRR is ----------
enter the IRR in percentages rounded to 2 decimal places
In: Finance
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $5,000,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,200,000 and that variable costs should be $225 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $575,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $332 per ton. The engineering department estimates you will need an initial net working capital investment of $480,000. You require a return of 11 percent and face a tax rate of 22 percent on this project. Calculate the accounting, cash, and financial break-even quantities
In: Finance
Covan, Inc. is expected to have the following free cash flow:
Year |
1 |
2 |
3 |
4 |
times times times••• |
FCF |
10 |
12 |
13 |
14 |
Grow by 5%per year |
a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 13%, what should be its stock price? (round to nearest cent)
b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? (round to nearest cent)
c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? (round to one decimal place)
In: Finance
Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently run out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.
Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,300 per month, and the rent is $3,000 per month. In addition, she must make a tax payment of $11,000 in December. The current cash on hand (on December 1) is $700, but Koehl has agreed to maintain an average bank balance of $4,000 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)
The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $100,000.
Sales | Purchases | |||
December | $180,000 | $35,000 | ||
January | 30,000 | 35,000 | ||
February | 50,000 | 35,000 |
I. Collections and Purchases: | ||||||
|
|
|
||||
Sales | $ | $ | $ | |||
Purchases | $ | $ | $ | |||
Payments for purchases | $ | $ | $ | |||
Salaries | $ | $ | $ | |||
Rent | $ | $ | $ | |||
Taxes | $ | --- | --- | |||
Total payments | $ | $ | $ | |||
Cash at start of forecast | $ | --- | --- | |||
Net cash flow | $ | $ | $ | |||
Cumulative NCF | $ | $ | $ | |||
Target cash balance | $ | $ | $ | |||
Surplus cash or loans needed | $ | $ | $ |
In: Finance
Suppose that you work for a U.S. senator who is contemplating writing a bill that would put a national sales tax in place. Because the tax would be levied on the sales revenue of retail stores, the senator has asked you to prepare a forecast of retail store sales for year 8, based on data from year 1 through year 7. The data are:
(c1p8) | Year | Retail Store Sales |
1 | $ 1,225 | |
2 | 1,285 | |
3 | 1,359 | |
4 | 1,392 | |
5 | 1,443 | |
6 | 1,474 | |
7 | 1,467 |
Use the naive forecasting model presented in this chapter to prepare a forecast of retail store sales for each year from 2 through 8.
Prepare a time-series graph of the actual and forecast values of retail store sales for the entire period. (You will not have a forecast for year 1 or an actual value for year 8.)
Calculate the MAPE for your forecast series using the values for year 2 through year 7. (please show how to plug in Excel)
In: Finance
Find and describe five (5) stocks or bonds from Caribbean based companies. For example you may pick 2 stocks and 3 bonds, you decide. Be sure to quote the latest stated price.
In: Finance
The adjacent table contains the details of four bonds currently traded in the market. Using this information calculate the no arbitrage price of a 3 year 8% annual coupon bond.
Maturity |
Price |
Coupon |
1 |
$ 97.29 |
4.00% |
2 |
$ 93.41 |
3.50% |
3 |
$ 94.00 |
5.00% |
4 |
$ 96.65 |
6.50% |
In: Finance
Lourdes Corporation's 15% coupon rate, semiannual payment, $1,000 par value bonds, which mature in 10 years, are callable 4 years from today at $1,075. They sell at a price of $1,359.25, and the yield curve is flat. Assume that interest rates are expected to remain at their current level.
years
select correcthe t number. ?
In: Finance
Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both bonds have 14 years to maturity, make semiannual payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? What if rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate risk of lower-coupon bonds?" PLEASE show how to solve using a calculator not excel
In: Finance
Ethics risk management is a key aspect of any business. Branch managers were able to manipulate the system for personal gain. Do you think there is a stronger or weaker response to unethical actions like these today?
Does it differ by audience (consumers, employees, managers, executives, government)?
In: Finance
A company is considering two mutually exclusive expansion plans. Plan A requires a $41 million expenditure on a large-scale integrated plant that would provide expected cash flows of $6.55 million per year for 20 years. Plan B requires a $13 million expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $2.91 million per year for 20 years. The firm's WACC is 9%.
Calculate each project's NPV. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Plan A: $ million
Plan B: $ million
Calculate each project's IRR. Round your answer to two decimal places.
Plan A: %
Plan B: %
By graphing the NPV profiles for Plan A and Plan B, approximate the crossover rate to the nearest percent.
%
Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places.
%
Why is NPV better than IRR for making capital budgeting decisions that add to shareholder value? The input in the box below will not be graded, but may be reviewed and considered by your instructor.
In: Finance
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend
$ 6.4$6.4
million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by
$ 8.8$8.8
million this year and
$ 6.8$6.8
million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochi's other products. As a result, sales of other products are expected to rise by
$ 1.6$1.6
million each year.Kokomochi's gross profit margin for the Mini Mochi Munch is
33 %33%,
and its gross profit margin averages
22 %22%
for all other products. The company's marginal corporate tax rate is
35 %35%
both this year and next year. What are the incremental earnings associated with the advertising campaign?
Complete the table below: (Round to the nearest dollar.)
Incremental Earnings Forecast |
Year 1 |
|
Sales of Mini Mochi Munch |
$ |
|
Other Sales |
$ |
1600000 |
Cost of Goods Sold |
$ |
|
Gross Profit |
$ |
|
Selling, General, and Admin. Expenses |
$ |
6400000 |
Depreciation |
0 |
|
EBIT |
$ |
|
Income tax at 35% |
$ |
|
Unlevered Net Income |
$ |
Year 2 :
In: Finance
Bodie Bonds is making his retirement plans. He currently has savings of $125,000. He hopes to retire in 15 years. His retirement expenses are expected to be $60,000 during the first year of retirement; Bodie expects these expenses to grow by 2% a year to keep up with inflation. Bodie wishes to provide for 30 years of retirement. Assume that all cash flows arise at year end (not year beginning) and that the rate of return (interest rate or discount rate) is 6%.
Question |
Answer |
What is the amount required in the retirement fund on the day Bodie retires? [Hint: calculate PV of expenses, the form of this stream of expenses is that of a growing annuity] |
|
What is the amount of savings required each year during Bodie’s working life (assume that each year’s savings is the same)? |
[Please show your work on this page.]
In: Finance
How much would you have to invest today to receive a. $15,000 in 8 years at 6 percent? b. $20,000 in 12 years at 8 percent? c. $6,000 each year for 5 years at 10 percent? d. $50,000 each year for 20 years at 12 percent?
In: Finance