Problem 3-5

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 $1,036,000. Construct a statement of cash flows for Axtel for 20X1. (Hint: Retiring stock means buying it back from shareholders. Assume the purchase was made at book value, and treat it like a negative sale of stock.) Enter your answers in thousands. For example, an answer of $200 thousands should be entered as 200, not 200000. Use a minus sign, to indicate any decreases in cash or cash outflows.

Yasser Ben Rashid must earn a minimum rate of return of 12% to be adequately compensated for the risk of the following investment:

Initial Investment $16,000

End of Year Income   

   1 $7,000

   2 $4,000

   3 $6,000

   4 $3,000

   5    $3,100

a. Estimate the IRR on this investment.

b. On the basis of your finding in part a, should Yasser make the proposed investment? Explain.

true/false
1. Financial leverage index = return on equity/return on assets
2. Market to book ratio = stock price/earning per share
3. Total return to shareholders = stock price appreciation .
4. Working capital turnover measures inventory management.

1. What drives the value of a stock?

2. Is the current U.S. stock market over-valued or under-valued? Explain

Briefly detailed answers, 400 words for each answer at least, with references.

Thank you I really do appreciate you help

Give an example of why under purchasing power parity a change in nominal exchange rate does not affect a firm or country.

For the above stocks

1.

a. Calculate the price-weighted average of the four stocks.

b. What is the divisor to produce the base figure market value-weighted index?

2.

Suppose the price for LMN and ABC stay the same, XYZ’s price increases to $110, and PDQ’s

falls to $2

a. Calculate the price-weighted average of the four stocks.

b. Calculate the market value-weighted index of the four stocks.

c. Find the percentage change in the price-weighted average.

d. Find the percentage change in the market value-weighted index.

e.

After

the above change, suppose XYZ has a 4-for-1 stock split, calculate the new divisor

for the price-weighted average of the four stocks.

f. Does the market value-weighted index need to be adjusted for the stock split? Why or Why

not?

1. As the CFO, you decided to hedge using forward contracts. Assume that the expected final sales volume is 30,000. What are your total benefit/cost and the percentage benefit/cost from hedging (compared to no hedging)

a) if the exchange rate remains at $1.18/€?

b) if the exchange rate will be $1.3/€?

c) if the exchange rate will be $1.1/€?

d) As the CFO, you decided to hedge using option contracts. Assuming expected final sales volume is 30,000, what are your total benefit/cost and the percentage benefit/cost from hedging (compared to no hedging)

e) if the exchange rate remains at $1.18/€?

f) if the exchange rate will be $1.3/€?

g) if the exchange rate will be $1.1/€?

What is the most profitable strategy for the case in which the expected final sales volume is 30,000 (no hedge, forward contract, or option contract)

h) if the exchange rate remains at $1.18/€?

i) if the exchange rate will be $1.3/€?

j) if the exchange rate will be $1.1/€?

k) Is there a best strategy? Why? Note that you only need to provide a few sentences about which strategy to use from no hedge, forward contract, or option contract strategies.

What happens to ROA / ROE / ROIC if the company needs additional funding, which it raises through additional equity ?

1. Oaktree Company has a $1000 face value, 9% coupon bond making annual coupon payments with 10 years to maturity.  What is the dollar amount of the annual coupon payment?

1. You are considering investing in a $1000 face value 10% semi-annual coupon bond with 8 years left to maturity. Similar bonds are yielding 9.5% in the market, so the current price of this bond is _______, and if market interest rates increase to 11% the selling price of the bond would _____________?

   		$957.69; increase to $1,017.50
   		$957.69; decrease to $860.50
   		$1,027.59; decrease to $947.69
   		$1,027.59; increase to $1,107.69

1. You are considering investing in a $1000 face value 12% semi-annual coupon bond with 4 years left to maturity. Similar bonds are yielding 11% in the market, so the current price of this bond is _______, and if market interest rates drop to 10% the selling price of the bond would _____________?

   		$880.50; increase to $924.50
   		$936.67; decrease to $915.50
   		$1,031.67; decrease to $1,016.50
   		$1,031.67; increase to $1,064.63

You are considering investing in a $1000 face value 9% semi-annual coupon bond with 10 years left to maturity. Similar bonds are yielding 10% in the market, so the current price of this bond is _______, and if market interest rates increase to 11% the selling price of the bond would _____________?

1. 		$937.69; increase to $974.50
   		$937.69; decrease to $880.50
   		$1,062.50; increase to $1,087.69
   		$1,062.50; decrease to $1,023.50

1. You are considering investing in a $1000 face value 8% semi-annual coupon bond with 3 years left to maturity. Similar bonds are yielding 9.5% in the market, so the current price of this bond is _______, and if market interest rates drop to 8.25% the selling price of the bond would _____________?

   		$947.73; increase to $974.67
   		$947.73; decrease to $924.67
   		$961.63; increase to $993.47
   		$961.63; decrease to $933.47

1. JAM Co just paid a dividend of $5.00, and expects an annual dividend growth rate of 5% indefinitely.  What is the expected dividend a year from now?

1. XYZ Co just paid a dividend of $3.00, and expects an annual dividend growth rate of 5% indefinitely.  What is the expected dividend a year from now?

1. PDQ Co just paid a dividend of $2.00, and expects an annual dividend growth rate of 6% indefinitely.  What is the expected dividend a year from now?

1. RAM Co just paid a dividend of $3.00, and expects an annual dividend growth rate of 3% indefinitely.  What is the expected dividend a year from now?

1. PDQ Co has a dividend payout ratio of 30% (which means it has a retention ratio of 70%) If Return on Earnings is 5%, what is the expected growth rate for dividends?

The Cookie Shop's purchases are equal to 63 percent of the following month's sales. The accounts payable period for purchases is 30 days while all other expenditures are paid in the month they are incurred. Assume each month has 30 days. The company has compiled the following information. April May June Sales $ 7,100 $ 7,400 $ 7,800 Other expenses 1,625 1,675 1,925 Interest and taxes 380 390 410 What are the company's total cash disbursements for May?

If you buy a computer directly from the manufacturer for $ 3,310 and agree to repay it in 60 equal installments at 1.79%interest per month on the unpaid​ balance, how much are your monthly​ payments? How much total interest will be​ paid?