Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $440,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $54,000 at the end of the project in 5 years. Sales would be $287,000 per year, with annual fixed costs of $50,000 and variable costs equal to 37 percent of sales. The project would require an investment of $31,000 in NWC that would be returned at the end of the project. The tax rate is 23 percent and the required return is 10 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
In: Finance
In: Finance
Western Tech is considering a new project that will require $118,000 of fixed assets and net working capital of $16,000. The fixed assets will be depreciated on a straight-line basis to a zero salvage value over three years. Ignore bonus depreciation. This project is expected to produce an operating cash flow of $45,000 the first year with that amount decreasing by 5 percent annually for two years before the project is shut down. The fixed assets can be sold for $55,000 at the end of the project and all net working capital will be recovered. What is the net present value of this project at a discount rate of 11.5 percent and a tax rate of 23 percent? Multiple Choice −$3,770.30 −$5,456.32 $3,209.17 $12,136.54 $15,311.09
In: Finance
Determine whether the following statement is true for
false:
Given two bonds with the same price, face value, expiration date
and yield, their coupons
payments must be identical.
Justify your answer by providing either a proof if true, or a
counterexample if false
In: Finance
|
Bluegrass Mint Company has a debt-equity ratio of .30. The required return on the company’s unlevered equity is 13.2 percent and the pretax cost of the firm’s debt is 7 percent. Sales revenue for the company is expected to remain stable indefinitely at last year’s level of $20,100,000. Variable costs amount to 70 percent of sales. The tax rate is 25 percent and the company distributes all its earnings as dividends at the end of each year. |
| a. |
If the company were financed entirely by equity, how much would it be worth? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
| b. | What is the required return on the firm’s levered equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| c-1. | Use the weighted average cost of capital method to calculate the value of the company. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
| c-2. | What is the value of the company’s equity? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
| c-3. | What is the value of the company’s debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
| d. | Use the flow to equity method to calculate the value of the company’s equity. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
Note: the answer for part a is $34,261,363.64----- the rest are wrong, please get them right as I am reposting this question again and this is my LAST question I can post this billing period. Please please please don't submit unless 100% sure
Thank you and have a blessed day :)
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In: Finance
You are considering a stock investment in one of two firms (NoEquity, Inc. and NoDebt, Inc.), both of which operate in the same industry and have identical operating income of $9.5 million. NoEquity, Inc. finances its $20 million in assets with $19 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc. finances its $20 million in assets with no debt and $20 million in equity. Both firms pay a tax rate of 30 percent on their taxable income.
Calculate the net income and return on assets for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 2 decimal places.)
In: Finance
In 2018, Usher Sports Shop had cash flows from investing activities of $420,000 and cash flows from financing activities of −$464,000. The balance in the firm’s cash account was $627,000 at the beginning of 2018 and $604,000 at the end of the year.
Calculate Usher Sports Shop’s cash flow from operations for 2018. (Amounts to be deducted should be indicated by a minus sign.)
In: Finance
Williamson Industries has $5 billion in sales and $1.004 billion in fixed assets. Currently, the company's fixed assets are operating at 95% of capacity.
In: Finance
The Jimenez Corporation's forecasted 2020 financial statements follow, along with some industry average ratios.
Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2020
| Assets | |
| Cash | $ 73,000 |
| Accounts receivable | 439,000 |
| Inventories | 893,000 |
| Total current assets | $1,405,000 |
| Fixed assets | 431,000 |
| Total assets | $1,836,000 |
| Liabilities and Equity | |
| Accounts payable | $ 332,000 |
| Notes payable | 120,000 |
| Accruals | 150,000 |
| Total current liabilities | $ 602,000 |
| Long-term debt | 403,700 |
| Common stock | 575,590 |
| Retained earnings | 254,710 |
| Total liabilities and equity | $1,836,000 |
| Jimenez Corporation: Forecasted Income Statement for 2020 | ||
| Sales | $4,290,000 | |
| Cost of goods sold | 3,701,000 | |
| Selling, general, and administrative expenses | 397,456 | |
| Earnings before interest and taxes (EBIT) | $ 191,544 | |
| Interest expense | 50,000 | |
| Earnings before taxes (EBT) | $ 141,544 | |
| Taxes (25%) | 35,386 | |
| Net income | $ 106,158 | |
| Jimenez Corporation: Per Share Data for 2020 | ||
| EPS | $ 4.62 | |
| Cash dividends per share | $ 0.95 | |
| P/E ratio | 5.0 | |
| Market price (average) | $23.08 | |
| Number of shares outstanding | 23,000 | |
Industry Ratiosa |
||
| Quick ratio | 1.0 | |
| Current ratio | 2.7 | |
| Inventory turnoverb | 7.0 | |
| Days sales outstandingc | 32.0 | days |
| Fixed assets turnoverb | 13.0 | |
| Total assets turnoverb | 2.6 | |
| Return on assets | 9.1 | % |
| Return on equity | 18.2 | % |
| Profit margin on sales | 3.5 | % |
| Debt-to-assets ratio | 21.0 | % |
| Liabilities-to-assets ratio | 50.0 | % |
| P/E ratio | 6.0 | |
| Market/Book ratio | 3.5 | |
| Notes: | ||
| aIndustry average ratios have been stable for the past 4 years. | ||
| bBased on year-end balance sheet figures. | ||
| cCalculation is based on a 365-day year. | ||
Calculate Jimenez's 2020 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Assume that there are no changes from the prior period to any of the operating balance sheet accounts. Do not round intermediate calculation. Round your answers to two decimal places.
| Ratios | Firm | Industry | Comment |
| Quick ratio | 1.0 | -Select-StrongWeakItem 2 | |
| Current ratio | 2.7 | -Select-StrongWeakItem 4 | |
| Inventory turnover | 7.0 | -Select-PoorHighItem 6 | |
| Days sales outstanding | days | 32 days | -Select-PoorHighItem 8 |
| Fixed assets turnover | 13.0 | -Select-PoorHighItem 10 | |
| Total assets turnover | 2.6 | -Select-PoorHighItem 12 | |
| Return on assets | % | 9.1% | -Select-BadGoodItem 14 |
| Return on equity | % | 18.2% | -Select-BadGoodItem 16 |
| Profit margin on sales | % | 3.5% | -Select-BadGoodItem 18 |
| Debt-to-assets ratio | % | 21.0% | -Select-LowHighItem 20 |
| Liabilities-to-assets ratio | % | 50.0% | -Select-LowHighItem 22 |
| P/E ratio | 6.0 | -Select-PoorHighItem 24 | |
| Market/Book ratio | 3.5 | -Select-PoorHighItem 26 |
So, the firm appears to be -Select-badlywellItem 27 managed.
In: Finance
2) You win the lottery! Your choices are
a) If the interest rate is 0.1% compounded annually, which would you prefer?
b) If the interest rate is 4% compounded annually, which would you prefer?
c) At what annual interest rate would you be indifferent between the two?
(Hint: build a spreadsheet to compute the present value of each of the $1 million payments.)
In: Finance
Commonwealth Construction (CC) needs $2 million of assets to get started, and it expects to have a basic earning power ratio of 35%. CC will own no securities, so all of its income will be operating income. If it so chooses, CC can finance up to 45% of its assets with debt, which will have an 10% interest rate. If it chooses to use debt, the firm will finance using only debt and common equity, so no preferred stock will be used. Assuming a 35% tax rate on all taxable income, what is the difference between CC's expected ROE if it finances these assets with 45% debt versus its expected ROE if it finances these assets entirely with common stock? Round your answer to two decimal places.
In: Finance
The following are the cash flows of two projects:
Year Project A Project B
0 -250 -250
1 130 150
2 130 150
3 130 150
4 130
If the opportunity cost is 10%, what is the profitability index for each project?
Project Profitability Index
A
B
In: Finance
Assume you have recently graduated with your business degree, and landed a new position at a company you had been researching during your senior year in college. You have been offered a lump-sum, sign-on bonus of $5,000. You also recently purchased a new condominium and vehicle. These items, in addition to your student loans, comprise your personal debt. Consider your debt reduction and investment earnings potential, as well as any applicable taxes. Assume that tax rates are stable over the next 10 years, and inflation is low (<1% per year) and does not change. Would you personally choose to invest the $5,000 sign-on bonus, or use it to pay down your debt? Regardless of your decision to either invest or pay down debt, be specific regarding the type of investment or debt payment you would make. Provide specific rationale for your decision. You may develop a quantitative example to support your rationale.
In: Finance
You shorted 1,000 shares of WDC at $55.6. Show your account equity position value. If the stock price fell to $40 in 6 months and the company paid $2.8 in dividends, what is your dollar gain and percentage gain? What if the price went up t $68 a share?(please show me how to do it in excel.)
In: Finance
| Just Dew It Corporation reports the following balance sheet information for 2014 and 2015. |
| JUST DEW IT CORPORATION 2014 and 2015 Balance Sheets |
||||||||||||||||
| Assets | Liabilities and Owners’ Equity | |||||||||||||||
| 2014 | 2015 | 2014 | 2015 | |||||||||||||
| Current assets | Current liabilities | |||||||||||||||
| Cash | $ | 10,620 | $ | 13,275 | Accounts payable | $ | 52,560 | $ | 60,750 | |||||||
| Accounts receivable | 21,420 | 29,925 | Notes payable | 19,260 | 24,075 | |||||||||||
| Inventory | 67,860 | 82,575 | ||||||||||||||
| Total | $ | 99,900 | $ | 125,775 | Total | $ | 71,820 | $ | 84,825 | |||||||
| Long-term debt | $ | 36,000 | $ | 27,000 | ||||||||||||
| Owners’ equity | ||||||||||||||||
| Common stock and paid-in surplus | $ | 45,000 | $ | 45,000 | ||||||||||||
| Retained earnings | 207,180 | 293,175 | ||||||||||||||
| Net plant and equipment | $ | 260,100 | $ | 324,225 | Total | $ | 252,180 | $ | 338,175 | |||||||
| Total assets | $ | 360,000 | $ | 450,000 | Total liabilities and owners’ equity | $ | 360,000 | $ | 450,000 | |||||||
|
Prepare the 2014 and 2015 common-size balance sheets for Just Dew It. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| 2014 | 2015 | ||||||||||||
| Assets | |||||||||||||
| Current assets | |||||||||||||
| Cash | $ | 10,620 | % | $ | 13,275 | % | |||||||
| Accounts receivable | 21,420 | % | 29,925 | % | |||||||||
| Inventory | 67,860 | % | 82,575 | % | |||||||||
| Total | $ | 99,900 | % | $ | 125,775 | % | |||||||
| Fixed assets | |||||||||||||
| Net plant and equipment | $ | 260,100 | % | $ | 324,225 | % | |||||||
| Total assets | $ | 360,000 | % | $ | 450,000 | % | |||||||
| Liabilities and Owners’ Equity | |||||||||||||
| Current liabilities | |||||||||||||
| Accounts payable | $ | 52,560 | % | $ | 60,750 | % | |||||||
| Notes payable | 19,260 | % | 24,075 | % | |||||||||
| Total | $ | 71,820 | % | $ | 84,825 | % | |||||||
| Long-term debt | $ | 36,000 | % | $ | 27,000 | % | |||||||
| Owners' equity | |||||||||||||
| Common stock and paid-in surplus | $ | 45,000 | % | $ | 45,000 | % | |||||||
| Accumulated retained earnings | 207,180 | % | 293,175 | % | |||||||||
| Total | $ | 252,180 | % | $ | 338,175 | % | |||||||
| Total liabilities and owners' equity | $ | 360,000 | % | $ | 450,000 | % | |||||||
In: Finance