Waste Industries is evaluating a $56,900 project with the following cash flows.

The coefficient of variation for the project is 0.443.

Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. Select the appropriate discount rate.

• 7%

• 19%

• 13%

• 9%

• 16%

b. Compute the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value: ________

c. Based on the net present value should the project be undertaken?

• No

• Yes

a firm must choose between two investment alternatives, each costing $95,000. the first alternative generates $35,000 a year for 4 years. the second pays one large lump sum of $160,800 at the end of the fourth year. if the firm can raise the required funds to make the investment at an annual cost of 9% what are the present values of two investment alternatives use appendix b and appendix d to answer the question round your answers to the nearest dollar.
PV(first alternative)=
pv(second alternative)=

which alternative should be preferred?

Can someone explain me how to calculate this on a TI-83 PLUS financial calculator...

What is the duration of a five-year, $1,000 Treasury bond with a 10 percent semiannual coupon selling at par? Selling with a yield to maturity of 12 percent? 14 percent? What can you conclude about the relationship between duration and yield to maturity? Plot the relationship. Why does this relationship exist?

Consider a company that issues a dual-currency bond with a face value of €45 million, which pays an interest rate of 3.5 percent a year in dollars. Indicate how the company can manage the risk on this bond issue and calculate the net cash flows associated with the transactions. A bond with a face value of €45 million that pays 5 percent annual interest in euros is available for purchase. The fixed rates on a currency swap are 4 percent in dollars and 4.75 percent in euros, and the exchange rate is €1.15/$.

In our class example, I simplified the “annuity” prize option by assuming level, equal annual payments. Actually, this annuity prize option is now on an annuitized prize payment schedule with 30 beginning of year payments that start at a lower amount with each successive payment being 5% higher than the previous annual payment. The sum of these 30 annuitized payments equal the announced estimated jackpot amount with a lower one-time lump-sum payment also being available as the Cash Option.

A recent Mega Millions estimated jackpot amount is $200 million which is the undiscounted sum of the 30 annuity option payments with a Cash Option of $138 million. The first payment under the Annuity Option which would occur immediately is $3,010,300 with 29 additional annual payments with each payment being 5% larger than the previous one. Using this information and assuming you demand a 3.5% annual return, would you prefer the Annuity Option or the Cash Option if you have the winning ticket? Please include the following to support your decision: 1. A complete schedule of all 30 annual payments under the Annuity Option. 2. A comparison of the present value of all the payments under the Annuity Option and the present value of the Cash Option. 3. Your decision.

Research the financial press (online media) to find two companies that merged within the last 5 years. Determine or estimate the following:

(maybe the companies, Saudi Aramco and SABIC)

1. Summarize the chronology of events from the first offer that was made by the acquiring firm until the final acquisition was agreed. Include information about other firms that were involved, even in an indirect manner (for example, where there any “white knights” out there?) and the potential synergies that drove the merger, if any.
2. Was the deal 1) all equity, 2) all cash, or 3) a combination thereof?
3. Consider your answer to part (c). Is this a taxable event to 1) the target firm’s existing shareholders, and 2) the acquiring firm’s existing shareholders?
4. Was there a premium offered for the shares of the target firm? If so, try to approximate it
   .

You are considering investing in a real estate project which has an asking price of $30,000. The project is expected to generate annual cash flows to you of: $4,500 in year 1, $5,000 in years 2-5, $8,000 in year 6 and $19,000 in year 7. Your required rate of return for projects with similar risk is 12% annually.

1.          What is the investment value of this property?

2.          What is the NPV of this investment opportunity?

3.          What is the IRR of this investment opportunity?

Compute ROE and RNOA with Disaggregation
Selected balance sheet and income statement information for Home Depot follows.

Round all answers to two decimal places (ex: 0.12345 = 12.35%)

a. Compute return on equity.
Answer%

b. Compute return on net operating assets (RNOA).
Answer%

c. Use ROE and RNOA to determine the nonoperating return for the year.
Answer%

d. Disaggregate RNOA into components of profitability and productivity and show that the product of the two components equals RNOA. Assume a statutory tax rate of 37%.
NOPM Answer%
NOAT Answer
RNOA Answer%

Most important, I can not figure out D

Chapter 11 Mini Case, Capital Budgeting, Capital Rationing, and Cash Flow It’s been 2 months since you took a position as an assistant financial analyst at Caledonia Products. Although your boss has been pleased with your work, he is still a bit hesitant about unleashing you without supervision. Your next assignment involves both the calculation of the cash flows associated with a new investment under consideration and the evaluation of several mutually exclusive projects. Given your lack of tenure at Caledonia, you have been asked not only to provide a recommendation but also to respond to a number of questions aimed at judging your understanding of the capital-budgeting process. The memorandum you received outlining your assignment follows: To: The Assistant Financial Analyst From: Mr. V. Morrison, CEO, Caledonia Products Re: Cash Flow Analysis and Capital Rationing We are considering the introduction of a new product. Currently we are in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital. This project is expected to last 5 years and then, because this is somewhat of a fad product, be terminated. The following information describes the new project: Cost of new plant and equipment: $7,900,000 Shipping and installation costs: $100,000 Sales price per unit: $300/unit in years 1 through 4, $260/unit in year 5 Variable cost per unit: $180/unit Annual fixed costs: $200,000 per year in years 1–5 Working-capital requirements: There will be an initial working-capital requirement of $100,000 just to get production started. For each year, the total investment in net working capital will be equal to 10 percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 through 3, then decrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5. Use the simplified straight-line method over 5 years. Assume that the plant and equipment will have no salvage value after 5 years. Year Units Sold 1 70,000 2 120,000 3 140,000 4 80,000 5 60,000 The purpose/risk classes and preassigned required rates of return are as follows: • Replacement decision 12% • Modification or expansion of existing product line 15% • Project unrelated to current operations 18% • Research and development operations 20% a. Should Caledonia focus on cash flows or accounting profits in making its capital-budgeting decisions? Should the company be interested in incremental cash flows, incremental profits, total free cash flows, or total profits? b. How does depreciation affect free cash flows? c. How do sunk costs affect the determination of cash flows? d. What is the project’s initial outlay? e. What are the differential cash flows over the project’s life? f. What is the terminal cash flow? g. Draw a cash-flow diagram for this project. h. What is its net present value? i. What is its internal rate of return? j. What is its modified internal rate of return? NEW QUESTION k. Should the project be accepted? Why or why not? l. In capital budgeting, risk can be measured from three perspectives. What are those three measures of a project’s risk? m. According to the CAPM, which measurement of a project’s risk is relevant? What complications does reality introduce into the CAPM view of risk, and what does that mean for our view of the relevant measure of a project’s risk? Please delete this question. m. Explain how simulation works. What is the value in using a simulation approach? n. What is sensitivity analysis and what is its purpose?

1. Should companies impose their corporate values on employees?

2. Should a company be held responsible for the actions of its investors or does a duty to shareholders trump such ethical questions?

3. Should companies reject investors that they perceive as misaligned with their values?

4. Is it a corporation’s role to take a public stance on a political situation?

(Estimated time allowance: 4 minutes) Pera Inc. is planning to buy a piece of equipment that can be used in a 9-year project. The equipment costs $2,000,000; has a tax life of 10 years, and is depreciated using the straight-line method. The equipment can be sold at the end of 9 years for $200,000. If the marginal tax rate is 20 percent, what is termination value of the equipment (the after-tax cash flow from the sale of this asset)? PLEASE SHOW ALL STEPS!!

Manzana Inc. is buying a piece of equipment. The equipment costs $1,000,000. The equipment is considered for tax purposes as a 5-year MACRS class. If the equipment is sold at the end of 4 years for $200,000, what is termination value of the equipment (the after-tax cash flow from the sale of this asset)? The marginal tax rate is 20 percent. The Annual expense percentage for a 5-year MACRS property from year 1 to 6 respectively are: 20.00%; 32.00%; 19.20%; 11.52%; 11.52: and 5.76%. PLEASE SHOW ALL STEPS!!

8.You save $2000 a year into a 401(k) account that you invest in a mutual fund earning 9% per year. You plan to retire in 35 years. How much money will you have in your account at retirement?

Ivanka maintains an aggressive investment posture including margin trading. She currently holds a $100,000 diversified stock portfolio in her margin account. The account has a debit balance of $40,000. She believes T. Enterprises, which is selling at $20 per share, is about to soar to at least $50 per share in the next year. The company pays no dividends. The initial margin requirement is 50% and margin loans charge 10%.

1. Suppose Ivanka decides to buy 1000 shares of T. Enterprises. Bear in mind this is a $20,000 transaction.
   1. What is her current (before the purchase or T. Enterprises) margin?
2. 2. Suppose she pays cash, what is the new margin in her account?
3. 3. What is her new margin position after the transaction if she uses $5,000 of her own money and obtains a $15,000 margin loan for the balance?
4. 4. Explain why in part c Ivanka can purchase the stock while putting up only 25% of the transaction ($5,000/20,000) and borrows the rest when the initial requirement is 50%
5. 5. Suppose she finances the new stock completely on the margin that is, she puts up no money and borrows the full purchase price. What is her account’s new margin?
6. 6. Explain why both d and e involve pyramiding.