8. Determining the optimal capital structure Understanding the optimal capital structure Review this situation: Universal Exports Inc. is trying to identify its optimal capital structure. Universal Exports Inc. has gathered the following financial information to help with the analysis. Debt Ratio Equity Ratio EPS DPS Stock Price 30% 70% 1.55 0.34 22.35 40% 60% 1.67 0.45 24.56 50% 50% 1.72 0.51 25.78 60% 40% 1.78 0.57 27.75 70% 30% 1.84 0.62 26.42 Which capital structure shown in the preceding table is Universal Exports Inc.’s optimal capital structure? Debt ratio = 50%; equity ratio = 50% Debt ratio = 30%; equity ratio = 70% Debt ratio = 70%; equity ratio = 30% Debt ratio = 60%; equity ratio = 40% Debt ratio = 40%; equity ratio = 60% Consider this case: Globex Corp. currently has a capital structure consisting of 40% debt and 60% equity. However, Globex Corp.’s CFO has suggested that the firm increase its debt ratio to 50%. The current risk-free rate is 3%, the market risk premium is 7.5%, and Globex Corp.’s beta is 1.15. If the firm’s tax rate is 35%, what will be the beta of an all-equity firm if its operations were exactly the same? Now consider the case of another company: U.S. Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before-tax cost of debt is 10%, and its tax rate is 35%. It currently has a levered beta of 1.15. The risk-free rate is 3%, and the risk premium on the market is 7.5%. U.S. Robotics Inc. is considering changing its capital structure to 60% debt and 40% equity. Increasing the firm’s level of debt will cause its before-tax cost of debt to increase to 12%. Use the Hamada equation to unlever and relever the beta for the new level of debt. What will the firm’s weighted average cost of capital (WACC) be if it makes this change in its capital structure? (Hint: Do not round intermediate calculations.) The optimal capital structure is the one that the WACC and the firm’s stock price. Higher debt levels the firm’s risk. Consequently, higher levels of debt cause the firm’s cost of equity to .

You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 12 percent, which is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 10 years to maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.  

You must evaluate a proposal to buy a new milling machine. The base price is $112,000, and shipping and installation costs would add another $15,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $72,800. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $8,500 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 $50,000 per year. The marginal tax rate is 35%, and the WACC is 11%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine. How should the $5,000 spent last year be handled? 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. The cost of research is an incremental cash flow and should be included in the analysis. Only the tax effect of the research expenses should be included in the analysis. 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. 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. 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. $ 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 $ Should the machine be purchased?

You manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 36%. The T-bill rate is 5%. Your client’s degree of risk aversion is A = 1.6, assuming a utility function U = E(r) - ½Aσ².

a. What proportion, y, of the total investment should be invested in your fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. What is the expected value and standard deviation of the rate of return on your client’s optimized portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

A small business owner visits his bank to ask for a loan. The owner states that he can repay a loan at $1,800 per month for the next three years and then $800 per month for two years after that. If the bank is charging customers 9.25 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.)

Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 24% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 3%.

Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is U = E(r) − 0.5 × Aσ². (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Consider the following.

a. What is the duration of a four-year Treasury bond with a 10.5 percent semiannual coupon selling at par?
b. What is the duration of a three-year Treasury bond with a 10.5 percent semiannual coupon selling at par?
c. What is the duration of a two-year Treasury bond with a 10.5 percent semiannual coupon selling at par?
  
(For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

a. Duration of the bond _______ years
b. Duration of the bond _______ years
c. Duration of the bond _______ years

Discussion 2.1: Employment Laws

Discussion Topic

Post a summary of a total of five laws that you read on the U.S. Department of Labor website during this learning plan. Following your summaries, post three facts that you learned from your research of employment laws that will help you in your current position as an employee and/or as a supervisor. Be sure to explain how the facts you learned will help you.

ood day , this is the whole question.

1. Calculate the net profit on turnover for 2017.

2. calculate the earnings yield and dived yield for 2017 and explain their significance to shareholders.

3. calculate the accounts payable period(in days) noting that newton ltd has after tough negotiations secured a 90 day account will all its creditors.

Calculate the return on equity , would the shareholders be happy with the current return ?

Calculate the inventory turnover ratio and explain the significance of this ration?

statement of financial position : 2017

Non current/fixed R4 200 000

Inventory R 400 000

Receivables R 1 550 000

Cash R 600 000

Total = 6 750 000

EQUITY/LIABILITIES

Share Capital (R2 shres)   R4 200 000 R

Retained Income R 600 000

Long term debt R 250 000

Payables R 1 700 000

total= 6 750 000

Income statement for 2017.

Sales (10% on credit) R10 200 000.

Cost of sales (80% on credit) R4 080 000

Expenses R3 200 000

net income after tax R 2,000,000

Dividends R1 700 000

Retained income R3 000 000

NB: Shares arecurrently trading at R2,80 per share.

Please note there is no number of share, i am assuming that we divide the dividens by R2.80 to get the number of shares.

Red Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided below to prepare the financial plans.

Red Queen Restaurants Income Statement for the Year Ended December 31, 2019  
Sales revenue    $799,000
Less: Cost of goods sold   599,000
Gross profits    $200,000
Less: Operating expenses   101,000
Net profits before taxes    $99,000
Less: Taxes (21%)   20,790
Net profits after taxes    $78,210
Less: Cash dividends   20,500
To retained earnings    $57,710

      Red Queen Restaurants Balance Sheet December​ 31, 2019        
Assets Liabilities and Stockholders' Equity  
Cash    $32,700 Accounts payable    $99,900
Marketable securities    17,800       Taxes payable    20,600
Accounts receivable    149,800       Other current liabilities   4,500
Inventories   100,400 Total current liabilities   $125,000
Total current assets    $300,700       Long-term debt    $199,700
Net fixed assets   349,500 Common stock   $150,500
Retained earnings   $175,000
Total assets   $650,200 Total liabilities and equity    $650,200

The following financial data are also​ available:

(1) The firm has estimated that its sales for 2020 will be $899,700.

​(2) The firm expects to pay $34,400 in cash dividends in 2020.

​(3) The firm wishes to maintain a minimum cash balance of $31,500.

​(4) Accounts receivable represent approximately 21% of annual sales.

​(5) The​ firm's ending inventory will change directly with changes in sales 2020.

​(6) A new machine costing $43,100will be purchased in 2020.Total depreciation for 2020 will be $15,800.

​(7) Accounts payable will change directly in response to changes in sales in 2020.

​(8) Taxes payable will equal​ one-fourth of the tax liability on the pro forma income statement.

​(9) Marketable​ securities, other current​ liabilities, long-term​ debt, and common stock will remain unchanged.

Questions:

a. Prepare a pro forma income statement for the year ended December​ 31, 2020​, using the ​percent-of-sales method.

b. Prepare a pro forma balance sheet dated December​ 31, 2020​, using the judgmental approach.

c. Analyze these​ statements, and discuss the resulting external financing required.

RETURN ON EQUITY AND QUICK RATIO

Lloyd Inc. has sales of $350,000, a net income of $35,000, and the following balance sheet:

The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5x, without affecting sales or net income.

1. If inventories are sold and not replaced (thus reducing the current ratio to 2.5x); if the funds generated are used to reduce common equity (stock can be repurchased at book value); and if no other changes occur, by how much will the ROE change? Do not round intermediate calculations. Round your answer to two decimal places.
   
   
   
2. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places.

Write an essay about trends and key global factors that affect real estate market in India

Please Write 700 worlds no less than that

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of the risky funds is as follows:

The correlation between the fund returns is 0.09.

a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

a-2. What is the expected value and standard deviation of its rate of return? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 6%. The probability distribution of the risky funds is as follows:

The correlation between the fund returns is 0.13.

What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)