how does the afi framework relate in the real business world??   

Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs:

This project will require an investment of $15,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Yeatman pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project’s net present value (NPV) would be under the new tax law.

1) Determine what the project’s net present value (NPV) would be under the new tax law.

A. $44,036

B. $55,045

C. $63,302

D. $66,054

2) Now determine what the project’s NPV would be when using straight-line depreciation.

A. $51,493

B. $70,464

C. $67,754

D. $54,203

3) Using the BONUS/STRAIGHT-LINE depreciation method will result in the highest NPV for the project.

4) No other firm would take on this project if Yeatman turns it down. How much should Yeatman reduce the NPV of this project if it discovered that this project would reduce one of its division’s net after-tax cash flows by $600 for each year of the four-year project?

A. $2,047

B. $1,117

C. $1,861

D. $1,582

5) The project will require an initial investment of $15,000, but the project will also be using a company-owned truck that is not currently being used. This truck could be sold for $4,000, after taxes, if the project is rejected. What should Yeatman do to take this information into account?

A. Increase the amount of the initial investment by $4,000.

B. The company does not need to do anything with the value of the truck because the truck is a sunk cost.

C. Increase the NPV of the project by $4,000.

For the mixed stream of cash flows shown in the following​ table. determine the future value at the end of the final year if deposits are made into an account paying annual interest of 15​%, assuming that no withdrawals are made during the period and that the deposits are​ made:

a. At the end of each year.

b. At the beginning of each year

A.

An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 17% and a standard deviation of return of 18.0%. Stock B has an expected return of 13% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is 0.50. The risk-free rate of return is 8%. The proportion of the optimal risky portfolio that should be invested in stock A is _________.

B.

1- Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.49 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,010,000 in annual sales, with costs of $705,000. The project requires an initial investment in net working capital of $230,000, and the fixed asset will have a market value of $295,000 at the end of the project. If the tax rate is 34 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, e.g. 1,234,567. Negative amounts should be indicated by a minus sign.)

1. Coconut, Inc. has sales of $610,400, total equity of $170,000, a profit margin of 10 percent and a debt-equity ratio of 0.8. What is the return on assets?

   		23.70 percent
   		21.34 percent
   		19.95 percent
   		25.50 percent

4 points   

QUESTION 22

1. Blueberry, Inc. has total assets of $642,000. There are 60,000 shares of stock outstanding with a market value of $42 a share. The firm has a profit margin of 7 percent and a total asset turnover of 1.36. What is the price-earnings ratio?

   		26.50
   		41.18
   		18.20
   		33.06

This topic comes from both Chapter 13 and 15. It is an investment topic, but you will need to refer to Chapter 13 to understand stock splits. You are a financial consultant. Your client owns 200 shares of Chipotle Mexican Grill. This corporation has never had a stock split. Write a message to your client discussing the possibility of a stock split. Explain to your client how a 2:1 split might affect their portfolio of stocks. You will need to do some research on stock splits and study the section on stock-splits from the book in Chapter 13. The Chapter 13 PowerPoint slides are a good resource. Your message must be professionally written, using the proper voice for your audience. It must be completely free of spelling and grammatical errors. Remember to be thorough, but concise, so a maximum of two paragraphs. Use actual Chipotle stock prices in your explanation and focus on what the client needs.

You have $1,000 to invest over an investment horizon of three years. The bond market offers various options. You can buy (i) a sequence of three one-year bonds; (ii) a three-year bond; or (iii) a two-year bond followed by a one-year bond. The current yield curve tells you that the one-year, two-year, and three-year yields to maturity are 3.5 percent, 4 percent, and 4.5 percent respectively. You expect that one-year interest rates will be 4 percent next year and 5 percent the year after that. Assuming annual compounding, compute the return on each of the three investments. Instructions: Enter your responses rounded to the nearest two decimal places. Expected return for (i) = ___% Expected return for (ii) =____ % Expected return for (iii) =____ %

Five years ago, Brian had invested $16,850 in a growth fund. The investment is worth $24,000 today. If the interest was compounded annually, what is the annual rate of return earned on the investment?

Greenpoint Corporation is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 25 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Suppose the appropriate discount rate is 12 percent. Determine the net working capital spending for Year 4 then calculate the NPV of the project. What is the project NPV? Year 0 Year 1 Year 2 Year 3 Year 4 Investment $118,000 Sales revenue $75,000 $75,800 $77,000 $78,500 Operating cost 18,000 18,600 19,600 21,000 Depreciation 29,500 29,500 29,500 29,500 Net working capital spending 10,000 4,000 2,000 1,000 ? $30,532.66 $29,744.78 $28,568.41 $27,520.33 $26,244.80

Franklin Company is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its useful life. The company requires a 12 percent rate of return and uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of $372,000, annual operating costs of $31,600, and a 4-year life. Machine B costs $268,000, has annual operating costs of $39,200, and a 3-year life. The firm currently pays no taxes. Which machine should be purchased and why? Machine A; because it will save the company about $2,875 a year Machine A; because it will save the company about $4,130 a year Machine B; because it will save the company about $3,294 a year Machine B; because it will save the company about $2,795 a year Machine B; because it will save the company about $2,358 a year

Fluor Enterprise is considering a 3-year project with an initial cost of $336,000. The project will not directly produce any sales but will reduce operating costs by $150,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $151,000. The tax rate is 25 percent and the required return is 12 percent. An extra $22,000 of inventory will be required for the life of the project. What is the total cash flow for Year 3? $307,512.63 $299,174.80 $290,413.64 $313,416.76 $382,266.33

A project will produce an operating cash flow of $445,000 a year for four years. The initial cash outlay for equipment will be $1,195,000. The net aftertax salvage value of $61,000 will be received at the end of the project. The project requires 87,000 of net working capital up front that will be fully recovered. What is the net present value of the project if the required rate of return is 12 percent? $146,800.23 $181,219.28 $154,036.37 $172,811.69 $163,677.13

In 2018, CJH Excavating reported the following information. What is the firm's free cash flow? Dividends are paid out at 31% of earnings for the year. The firm has 50,000 common shares outstanding. The firm's tax rate is 32%.

Treasury Securities.

Consider a 4-year semiannual TIPS with a coupon rate of 6%. Suppose that an investor purchases $1,000,000 of par value (initial principal) of this issue today, and that the annual inflation rate is 2.8% for the 1st six-month period and 3.2% for the 2nd six month period. What is the dollar coupon interest that will be paid in cash at the end of the 2nd six-month period?

Suppose the quote on a bank discount for a treasury bill with 90 days to maturity and a face value of $1,000 is 5% what is the price?