1. As far as finances, Is Marriott firm acting in a socially responsible manner? Is the firm being environmentally responsible?

The most recent financial statements for GPS, Inc., are shown here:

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,649 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to be $26,534.

What is the external financing needed?

What does IRR mean? How it is estimated? Be specific. Are there problems with IRR? Explain.

A) Bank A offers a 2-year certificate of deposit (CD) that pays 10 percent compounded annually. Bank B offers a 2-year CD that is compounded semi-annually. The CDs have identical risk. What is the APR that Bank B would have to offer to make its EAR equivalent to the CD at Bank A?

Consider the following simplified financial statements for the Fire Corporation (assuming no income taxes):

The company has predicted a sales increase of 15 percent. It has predicted that every item on the balance sheet will increase by 15 percent as well.

How much dividends should be paid to reconcile the pro forma balance sheet?

Suppose that Xtel currently is selling at $35 per share. You buy 800 shares using $15,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 8%. If the maintenance margin is 30%, how low can Xtels price be before you get a margin call?

A bond has a coupon rate of 10 percent and 4 years until maturity. If the yield to maturity is 10.3 percent, what is the price of the bond?

Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $40,000 or $120,000, with equal probabilities of 0.5. The alternative riskless investment in T-bills pays 4%.

a. If you require a risk premium of 7%, how much will you be willing to pay for the portfolio? (Round your answer to the nearest dollar amount.)

b. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be? (Do not round intermediate calculations. Round your answer to the nearest whole percent.)

c. Now suppose you require a risk premium of 12%. What is the price you will be willing to pay now? (Round your answer to the nearest dollar amount.)

Assume that the DJIA closed at 10,875 one day recently, and the divisor was .12493117.
a. What is the sum of the prices of the 30 stocks in the index, given this information?
b. Assume that one stock in the index, Pfizer, moved $4.40 that day, while the index itself
moved about 105 points (to close at 10,875). What percentage of the total movement in
the DJIA that day was accounted for by the movement in Pfizer?
c. Now assume that one of the 30 stocks had a 2-for-1 stock split that day, declining from
$47.50 to $23.75. What would the new divisor have to be to keep the index unchanged at
10,875?

Challenge question I.  Michael is shopping for a special automobile. He finds the exact car he​ wants, a 1966 dark blue Pontiac GTO. This car is currently the property of a​ neighbor, so to buy it for the​ agreed-upon price of ​$45,000​, Michael must secure his own financing. He visits four different financial institutions and gets the following available​ loans

Bank​ 1:  36 monthly payments of ​$1, 399.78

Bank​ 2:  60 monthly payments of ​$891.05

Bank​ 3:  312 weekly payments of ​$177.97​(Assume a​ 52-week year.)

Bank​ 4:  16 quarterly payments of ​$3,297.87

Which loan should Michael​ take?  ​Hint:  Which loan has the lowest​ EAR? If Michael selects Bank 1 for the​ loan, what is the periodic interest rate on the​ loan?

1.

United Snack Company sells 50-pound bags of peanuts to university dormitories for $38 a bag. The fixed costs of this operation are $390,000, while the variable costs of peanuts are $0.24 per pound.

a. What is the break-even point in bags?
  

b. Calculate the profit or loss (EBIT) on 6,000 bags and on 19,000 bags.
  

c. What is the degree of operating leverage at 18,000 bags and at 23,000 bags? (Round your answers to 2 decimal places.)
  

d. If United Snack Company has an annual interest expense of $24,000, calculate the degree of financial leverage at both 18,000 and 23,000 bags. (Round your answers to 2 decimal places.)

e. What is the degree of combined leverage at both a sales level of 18,000 bags and 23,000 bags? (Round your answers to 2 decimal places.)
  

) Suppose you work for Meijer, a large grocer headquartered in Michigan. 20 years ago, Meijer bought a parcel of land on the outskirts of Lafayette, Indiana. It is currently being rented to a farmer. They intended to build a new store on the lot after a proposed new highway was complete. However, when the new highway was built it went in a different direction and now they must decide whether to build the new store. You ask around and find the following information from the following departments (all numbers are in thousands of dollars):
The sales department tells you: Annual Revenue: $2400
The operations department tells you: Inventory Required on Shelves: $140 Annual Cost of Goods Sold: $1500 Annual Cost of Running Store: $500 Annual Allocated Overhead from HQ: $80
The forecasting department tells you: Loan to fund construction: $300 Interest Rate: 4%, loan is interest only (no principle payments) Weighted Average Cost of Capital: 13% Depreciation Schedule: Straight-line depreciation over 40 years Tax Rate: 30%
The construction department tells you: Cost of environmental review (already completed): $65 Purchase Price of Land 20 years ago: $1000 (hint: land is not depreciated) Current Market Value of Land: $1100 (hint: land is not depreciated) Current Pre-Tax Income from renting land out: $75/year Cost of Construction (Labor & Materials): $1800

1a) Your boss tells you to find the unleveraged incremental cash flow of the project for the next four years. Write your answer in the form of a pro forma statement on the next page.
1b) Should you approve this project? Why or why not?

1. Find the present values of the following cash flow streams at a 10% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent.

   0

   1

   2

   3

   4

   5

   Stream A	$0	$100	$350	$350	$350	$300
   Stream B	$0	$300	$350	$350	$350	$100

   Stream A: $  

   Stream B: $  

2. What are the PVs of the streams at a 0% discount rate? Round your answers to the nearest dollar.

   Stream A: $  

   Stream B: $  

Your client is 23 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $12,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 7% in the future.

1. If she follows your advice, how much money will she have at 65? Do not round intermediate calculations. Round your answer to the nearest cent.

   $  

2. How much will she have at 70? Do not round intermediate calculations. Round your answer to the nearest cent.

   $  

3. She expects to live for 20 years if she retires at 65 and for 15 years if she retires at 70. If her investments continue to earn the same rate, how much will she be able to withdraw at the end of each year after retirement at each retirement age? Do not round intermediate calculations. Round your answers to the nearest cent.

   Annual withdrawals if she retires at 65: $

   Annual withdrawals if she retires at 70: $