There are six resources of cost advantage for firms. Identify three of these sources and provide examples for each

Is net present value (NPV) the best investment technique? Why? Do you agree with this assessment?  

Problem 1-3 Calculating Returns (LO1, CFA1)

Suppose you bought 600 shares of stock at an initial price of $38 per share. The stock paid a dividend of $0.30 per share during the following year, and the share price at the end of the year was $33.

a. Compute your total dollar return on this investment. (A negative value should be indicated by a minus sign.)

b. What is the capital gains yield? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is the dividend yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

d. What is the total rate of return on the investment? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

4. (Merger and acquisition): Energy-USA plans to acquire Energy-Brazil. It offers X million shares of Energy-USA for all of Energy-Brazil’s shares. The exchange rate is R$1.7200/$ around the acquisition. P/E ratio for energy brazil=20, for energy USA=30, # of Shares for energy Brazil=200million, for energy USA=250, (after-tax) Earnings Energy-Brazil R$172 million Energy-USA $200 million .

(a) Find the lower bound of X (4 decimal places) such that original Energy-Brazil shareholders would agree with the merger (assume the P/E ratio is 30 after the merger)? (b) Find the upper bound of X (4 decimal places) such that original Energy-USA shareholders would benefit from the merger (assume the P/E ratio is 30 after the merger)? (c) If the merger adds no extra value to both original firms, find P/E (after the merger), the value of X (4 decimal places), and the exchange ratio (4 decimal places) of the merger per Energy-Brazil share in this scenario. (d) If X=90, and P/E=30 after the merger, calculate the value ($million) of the synergies created by the merger and the stock return (%) of Energy-USA to the original Energy-USA shareholders.

Question: Based on the following transactions, complete this income statement:

Sales:

Operating Expense:

Depreciation Expense:

EBIT:

Intresrest Expense:

Pre-tax Income:

Taxes:

Net Income:

Dividened:

Paid to Retained Earning:

1. Earn $85,000 in sales revenue: $40,000 into Accounts Receivable and $45,000 in cash.

2. The sales require $50,000 worth of existing inventory. $20,000 of additional inventory is purchased on credit and applied to the Accounts Payable.

3. $30,000 is collected from Accounts Recievable.

4. $35,000 of the Accounts Payable is due this month and must be paid in cash.

5. The mortgage payment is $2,026.55 which includes the monthly interest of 12% APR

6. The plant is depreciated by $875 and the equipment is depreciated by $500

7. Salary, General, and Administrative expenses are $20,000 and are paid in cash.

8. The tax rate is 30% and is simply accumulated in the Taxes Payable Account and paid off at the end of the year, which is six months in advance.

Company Z-prime’s earnings and dividends per share are expected to grow by 4% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $9, the market capitalization rate is 9% and next year’s EPS is $14. What is Z-prime’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

My guess was: $153.42 and this WAS NOT CORRECT

A. Use a spreadsheet (or a calculator with a linear regression function) to determine Stock X's beta coefficient. Round your answer to two decimal places.

b. Determine the arithmetic average rates of return for Stock X and the NYSE over the period given. Calculate the standard deviations of returns for both Stock X and the NYSE. Round your answers to two decimal places.

c. ssume that the situation during Years 1 to 7 is expected to prevail in the future (i.e., , , and both σ_x and b_x in the future will equal their past values). Also assume that Stock X is in equilibrium - that is, it plots on the Security Market Line. What is the risk-free rate? Round your answer to two decimal places.

c. At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

1. Consider the following two projects both costing $5,000. Assume the prevailing interest rate is 4%.
         Project 1 pays $1,000 for 50 years.
         Project 2 pays $900 forever.
   1. Use Solver to find the interest rate at which an investor would be indifferent between the two projects. Please use an Excel spreadsheet and save the Solver solution. That way, the grader can open the Solver window and check the parameter values you entered into Solver.
      
      (Hint: One way to ensure that the value of the two projects is identical is to create a cell in Excel that is equal to the difference in values of the two projects. Then, choose the option in Solver to set that cell equal to zero. Equivalently, you can add a constraint to Solver that the values of the two projects are equal.)

You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street sweeper accident. In the trial, doctors testified that it will be five years before the plaintiff is able to return to work. The jury has already decided in favor of the plaintiff. You are the foreperson of the jury and propose that the jury give the plaintiff an award to cover the following: (a) The present value of two years’ back pay. The plaintiff’s annual salary for the last two years would have been $38,000 and $42,000, respectively. (b) The present value of five years’ future salary. You assume the salary will be $45,000 per year. (c) $150,000 for pain and suffering. (d) $20,000 for court costs. Assume the salary payments are equal amounts paid at the end of each month. Requirement 1: If the interest rate you choose is an EAR of 7 percent, what is the size of the settlement? (Enter your answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Award $ Requirement 2: If you were the plaintiff, would you like to see a higher or lower interest rate?

You are planning your retirement in 10 years. You currently have $120,000 in a bond account and $500,000 in a stock account. You plan to add $5,000 per year at the end of each of the next 10 years to your bond account. The stock account will earn a return of 10.5 percent and the bond account will earn a return of 7 percent. When you retire, you plan to withdraw an equal amount for each of the next 25 years at the end of each year and have nothing left. Additionally, when you retire you will transfer your money to an account that earns 6.25 percent. Required: How much can you withdraw each year in your retirement? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Annual withdrawal amount $