Your firm is considering investing $7,500,000 in a factory to build home ethanol systems that will allow individuals to create ethanol from grass clippings. There is an 80% chance that the technology will work as planned and expected net cash flows will be $1,240,000 per year and a 20% chance of technical problems that will reduce expected net cash flows to $40,000 per year. Either way, net cash flows would begin a year from today and continue for 20 years (when your patents will expire and new technology will allow personal solar power systems to become viable). Alternatively, in two years, your firm will know whether the technology will work and thus whether net cash flows will be $1,240,000 or $40,000 per year. Should your firm build now or wait two years if the required return on the project is 10% per year?

Management of Sunland Home Furnishings is considering acquiring a new machine that can create customized window treatments. The equipment will cost $213,550 and will generate cash flows of $76,750 over each of the next six years. If the cost of capital is 14 percent, what is the MIRR on this project? (Round intermediate calculations to 3 decimals and final answers to 1 decimal places, e.g. 15.5%. Do not round factor values.)

A 25-year, $1,000 par value bond has an 8.5% annual coupon. The bond currently sells for $875. If the yield to maturity remains at its current rate, what will the price be 10 years from now?

Adamson Corporation is considering four average-risk projects with the following costs and rates of return:

The company estimates that it can issue debt at a rate of r_d = 10%, and its tax rate is 40%. It can issue preferred stock that pays a constant dividend of $6 per year at $42 per share. Also, its common stock currently sells for $38 per share; the next expected dividend, D₁, is $4.50; and the dividend is expected to grow at a constant rate of 4% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock.

1. What is the cost of each of the capital components? Do not round intermediate calculations. Round your answers to two decimal places.
   Cost of debt:   %
   Cost of preferred stock:   %
   Cost of retained earnings:   %

1. What is Adamson's WACC? Do not round intermediate calculations. Round your answer to two decimal places.
     %
   
2. Only projects with expected returns that exceed WACC will be accepted. Which projects should Adamson accept?

   Project 1	accept/reject
   Project 2	accept/reject
   Project 3	accept/reject
   Project 4	accept/reject

A financial derivative is guaranteed to be worth $110.00 in 20 months. Assume the risk-free rate is 5.9%.

(a) What is the derivative worth today?

(b) Describe an arbitrage opportunity if the derivative is trading at $70.00 today. This should only involve one of the derivatives. What is your guaranteed profit in 20 months from the arbitrage?

you manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 36%. The T- Bill rate is 6%

your risky portfolio includes the following investments in the given proportions:

stock a 27%

stock b 35%

stock c 38%

suppose that your client decided to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 15%

A. what is the proportion of y?

B. What are your client's investment proportions in your three stocks and T- bill fund?

C. What is the standard deviation of the rate of return on your client's portfolio?

Quisco Systems has 6.66.6 billion shares outstanding and a share price of $ 17.41 Quisco is considering developing a new networking product in house at a cost of $ 467

million.​ Alternatively, Quisco can acquire a firm that already has the technology for $ 939

million worth​ (at the current​ price) of Quisco stock. Suppose that absent the expense of the new​ technology, Quisco will have EPS of $ 0.82

a. Suppose Quisco develops the product in house. What impact would the development cost have on​ Quisco's EPS? Assume all costs are incurred this year and are treated as an​ R&D expense,​ Quisco's tax rate is 35% and the number of shares outstanding is unchanged.

b. Suppose Quisco does not develop the product in house but instead acquires the technology. What effect would the acquisition have on​ Quisco's EPS this​ year? (Note that acquisition expenses do not appear directly on the income statement.

Assume the firm was acquired at the start of the year and has no revenues or expenses of its​ own, so that the only effect on EPS is due to the change in the number of shares​ outstanding.)

c. Which method of acquiring the technology has a smaller impact on​ earnings? Is this method​ cheaper? Explain.

Allen wants to open a savings account. He will transfer $40,000 from another account to the savings account today. After that, he will deposit $1,000 every month to the savings account. If the annual interest rate is 3.2%, what will be the account balance in his savings account after 5 years?

how would this be solved using finance functions in excel?

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $3.6 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $4.1 million. The company wants to build its new manufacturing plant on this land; the plant will cost $18.1 million to build, and the site requires $950,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?

Explain what the indirect method of reporting cash flow is. Provide an example.

The following spreadsheet contains monthly returns for Cola Co. and Gas Co. for 2013. Using these​ data, estimate the average monthly return and the volatility for each stock. Month Cola Co. Gas Co.

January negative 1.80​% 8.20​%

February negative 3.70​% negative 4.60​%

March negative 0.05​% 5.50​%

April negative 1.20​% 1.90​%

May 1.90​% negative 1.00​%

June 1.90​% 4.90​%

July 0.60​% negative 2.70​%

August negative 2.10​% negative 6.00​%

September 4.10​% 4.50​%

October negative 2.40​% 1.70​%

November negative 8.60​% negative 3.70​%

December negative 2.50​% 4.80​%

The average monthly return for Cola Co. is negative 1.15​%. ​(Round to two decimal​ places.)

The average monthly return for Gas Co. is 1.13​%. ​(Round to two decimal​ places.)

The volatility for Cola Co. is __​%. ​(Round to two decimal​ places.)

The volatility for Gas Co. is __​%. ​(Round to two decimal​ places.)

You are interested in buying a house and renting it out. You expect to receive a monthly net income of $1000 from rent. You then expect to sell the house for $390,000 at the end of 42 months. If your discount rate on this investment is 1.1% per month, what is this property worth to you today? Assume that you receive rent at the beginning of each month and you receive the first rent the same day you purchase the property. Round to the nearest cent

Shimmer Inc. is a calendar-year-end, accrual-method corporation. This year, it sells the following long-term assets: Asset Sales Price Cost Accumulated Depreciation Building $703,000 $657,000 $54,000 Sparkle Corporation stock 138,000 246,000 n/a Shimmer does not sell any other assets during the year, and its taxable income before these transactions is $820,000. What are Shimmer's taxable income and tax liability for the year? (New Corporate income tax rate has been mentioned as "21% on all taxable income" as per the recent change.)

Your company is considering a capital investment of ​$212.469 million. The project will generate equal annual​ after-tax operating cash flows of ​$36.79 million for 7 years. At the end of its​ life, the project will be sold for ​$37 ​million, but the​ project's adjusted tax basis at termination will be ​$31 million. The project will require ​$16 million in additonal net working capital. With a 27​% marginal tax​ rate, what is the​ project's IRR? ​ (Percent with​ 1decimal)