The most recent financial statements for Crosby, Inc., follow. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. Assume the firm is operating at full capacity and the debt-equity ratio is held constant.

Complete the pro forma income statements below. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Refer to the following financial statements of Bongo Comics Group.

Bongo Comic Group Income Statements (In 000’s, except EPS)

Bongo Comics Group Balance Sheets (In 000’s) as of Dec. 31, Years Ended

a. How long, on average, was Bongo Comics Group taking to collect on its receivable accounts in 2018? (Assume all of the company’s sales were on credit.)

b. Was Bongo Comics Group more or less profitable in 2018 than in 2016? Justify your answer by examining the net profit margin and return on assets ratios.

c. Was Bongo Comics Group more or less liquid at the end of 2018 than it was at the end of 2016? Justify your answer using the curre

Explain the net present value formula and also explain what the net present value represents.

Dickinson Company has $11,800,000 million in assets. Currently half of these assets are financed with long-term debt at 9.0 percent and half with common stock having a par value of $8. Ms. Smith, Vice President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns a return on assets before interest and taxes of 9.0 percent. The tax rate is 35 percent. Tax loss carryover provisions apply, so negative tax amounts are permissible.

Under Plan D, a $2,950,000 million long-term bond would be sold at an interest rate of 11.0 percent and 368,750 shares of stock would be purchased in the market at $8 per share and retired.

Under Plan E, 368,750 shares of stock would be sold at $8 per share and the $2,950,000 in proceeds would be used to reduce long-term debt.

a. How would each of these plans affect earnings per share? Consider the current plan and the two new plans. (Round your answers to 2 decimal places.)

b-1. Compute the earnings per share if return on assets fell to 4.50 percent. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

b-2. Which plan would be most favorable if return on assets fell to 4.50 percent? Consider the current plan and the two new plans.
  

• Plan E

• Current Plan

• Plan D

b-3. Compute the earnings per share if return on assets increased to 14.0 percent. (Round your answers to 2 decimal places.)

b-4. Which plan would be most favorable if return on assets increased to 14.0 percent? Consider the current plan and the two new plans. Current Plan Plan D Plan

E c-1. If the market price for common stock rose to $10 before the restructuring, compute the earnings per share. Continue to assume that $2,950,000 million in debt will be used to retire stock in Plan D and $2,950,000 million of new equity will be sold to retire debt in Plan E. Also assume that return on assets is 9.0 percent. (Round your answers to 2 decimal places.)

c-2. If the market price for common stock rose to $10 before the restructuring, which plan would then be most attractive? Plan D Current Plan Plan E

A 25-year, $1,000 par value bond has an 8.5% annual coupon. The bond currently sells for $1,175. If the yield to maturity remains at its current rate, what will the price be 5 years from now? Select the correct answer. a. $1,159.09 b. $1,165.29 c. $1,168.39 d. $1,162.19 e. $1,155.99

1. The Gulf Power Company currently is an all-equity firm. The value of Gulf Power's equity is $12,000,000 and there are 600,000 shares outstanding. The expected annual EBIT of Gulf Power is $2,400,000. Those earnings are also expected to remain constant into the foreseeable future. Gulf Power is in the 40-percent tax bracket. The Gulf Power Company plans to announce that it will issue $3,000,000 of perpetual bonds and uses the proceeds to repurchase common stock. The bonds will have a 5-percent coupon rate. After the sale of the bonds, Gulf Power will maintain the new capital structure indefinitely. The MM theory applies.   What is the firm's cost of capital before the capital restructuring?

   		8%
   		13%
   		12%
   		20%

You are considering making a movie. The movie is expected to cost $10.9 million up front and take a year to produce. After​ that, it is expected to make $4.9 million in the year it is released and $1.8 million for the following four years. What is the payback period of this​ investment? If you require a payback period of two​ years, will you make the​ movie? Does the movie have positive NPV if the cost of capital is 10.6%​?

What is the payback period of this​ investment?  

The payback period is years.  ​(Round to one decimal​ place.)

If you require a payback period of two​ years, will you make the​ movie?

▼

No

Yes

. ​(Select from the​ drop-down menu.)

Does the movie have positive NPV if the cost of capital is 10.6%​?

If the cost of capital is 10.6%​, the NPV is ​$   million. (round to 2 decimal places) ​

Suppose that the Index Model for the excess returns of stocks A and B is estimated with the following results: RA = 0.01 + 0.80 * Rm + eA RB = -0.02 + 1.5 * Rm + eB Stdev(Rm)=0.25 Stdev(eA)=0.40 Stdev(eB)=0.20 What is the Standard Deviation of each Stock. What is the Covariance between Stock A and Stock B. What is the Correlation between Stock A and Stock B

You are choosing between two projects. The cash flows for the projects are given in the following table​ ($ million):

a. What are the IRRs of the two​ projects?

b. If your discount rate is 4.9%​, what are the NPVs of the two​ projects?

c. Why do IRR and NPV rank the two projects​ differently?

c. Why do IRR and NPV rank the two projects​ differently? ​ (Select from the​ drop-down menus.)

NPV and IRR rank the two projects differently because they are measuring different things.

▼

NPVNPV

IRRIRR

is measuring value​ creation, while

▼

NPVNPV

IRRIRR

is measuring return on investment. Because returns do not scale with different levels of​ investment, the two meas

Karim deposits $100 every two years for 40 years into an account that earns an effective annual interest rate i. The accumulated value after 20 years is X. The accumulated value after 40 years is Y.

a) i = 2%. Find X. Find Y.

b) i is unknown, but Y = 4X. Find i. Find X.

One bond has a coupon rate of 5.4%, another a coupon rate of 8.2%. Both bonds pay interest annually, have 13-year maturities, and sell at a yield to maturity of 7.5%.

a. If their yields to maturity next year are still 7.5%, what is the rate of return on each bond?

You have been offered a unique investment opportunity. If you invest $11,700

​today, you will receive $585 one year from​ now, $1,755 two years from​ now, and $11,700 ten years from now

.a. What is the NPV of the opportunity if the cost of capital is 6.5% per​ year? Should you take the​ opportunity?b. What is the NPV of the opportunity if the cost of capital is 2.5% per​ year? Should you take it​ now?

a. What is the NPV of the opportunity if the cost of capital is 6.5% per​ year?

If the cost of capital is 6.5% per​ year, the NPV is: $ (Round to the nearest​ cent.)

Should you take the​ opportunity?  ​(Select from the​ drop-down menu.)

You

▼

should not

should

take this opportunity.  

b. What is the NPV of the opportunity if the cost of capital is 2.5% per​ year? If the cost of capital is 2.5% per​ year, the NPV is: $ ​(Round to the nearest​ cent.)

Should you take it​ now?  ​(Select from the​ drop-down menu.)

You

▼

should not

should

take this opportunity at the new cost of capital.

Your factory has been offered a contract to produce a part for a new printer. The contract would last for 33 years and your cash flows from the contract would be $5.00

million per year. Your upfront setup costs to be ready to produce the part would be $8.00 million. Your discount rate for this contract is 8.0%.

a. What does the NPV rule say you should​ do?

b. If you take the​ contract, what will be the change in the value of your​ firm?

a. What does the NPV rule say you should​ do?

The NPV of the project is: million.  ​(Round to two decimal​ places.)

What should you​ do?  ​(Select the best choice​ below.)

A.The NPV rule says that you should accept the contract because the

NPV less than 0NPV<0.

B.The NPV rule says that you should accept the contract because the

NPV greater than 0NPV>0.

C.The NPV rule says that you should not accept the contract because the

NPV greater than 0NPV>0.

D.The NPV rule says that you should not accept the contract because the

NPV less than 0NPV<0.

b. If you take the​ contract, what will be the change in the value of your​ firm?

If you take the​ contract, the value added to the firm will be: $ million. 

Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

1. $700 per year for 16 years at 8%.

   $  

2. $350 per year for 8 years at 4%.

   $  

3. $200 per year for 8 years at 0%.

   $  

4. Rework previous parts assuming they are annuities due.

   Present value of $700 per year for 16 years at 8%: $  

   Present value of $350 per year for 8 years at 4%: $  

   Present value of $200 per year for 8 years at 0%: $  

1. NuDayWear Inc. is a nationwide retail chain specializing in women's apparel. The company's most popular lines are West and SeaWear. West offers executive wear for women in the middle to high-end markets, and SeaWear features sportswear and stylish clothes, also targeted at women in the middle to high-end markets. The company has 95 million shares outstanding with a current market price of $10.55 per share. The company is expected to show net income of $41 million in the next 12 months. Forecast sales and EBITDA are $635 million and $63 million, respectively. Debt outstanding is $120 million. (Show all your work for credit).

a. Do you think that the list below represents valid comparable companies? If not, which are comparable and why?

b. What is the current total equity value of NuDayWear? Total enterprise market value of NuDayWear?

c. Suppose you are asked to value NuSoftWear Inc. given the following information. Using your comparable companies from a. above what is your estimate of equity? Of enterprise value?

N.B.: This is all available information on the problem. The list of companies mentioned in a is the list below with given data.