Horizontal and Vertical Analysis

Selected data from the financial statements of Jones Hardware Company follows.

Required:

1. Calculate by how much accounts receivable, merchandise inventory, total assets, net sales, and cost of goods sold increased or decreased in dollar terms from 2018 to 2019.

2. Indicate what happened from 2018 to 2019 to accounts receivable and merchandise inventory as a percentage of total assets. Round to the nearest whole percent.

Indicate what happened from 2018 to 2019 to cost of goods sold as a percentage of net sales (rounded to the nearest whole percent).

Cost of goods sold   from % in 2018 to % in 2019.

You work for Apple. After toiling away on $ 10.5 million worth of​ prototypes, you have finally produced your answer to Google​ Glasses: iGlasses​ (the name alone is​ genius). iGlasses will instantly transport the wearer into the world as Apple wants him to experience​ it: iTunes with the wink of an eye and apps that can be activated just by looking at them. You think that these will sell for five years until the next big thing comes along​ (or until users are unable to interact with actual human​ beings). Revenues are projected to be $ 457.2 million per year along with expenses of $ 344.2 million. You will need to spend $ 56.9 million immediately on additional equipment that will be depreciated using the​ 5-year MACRS schedule.​ Additionally, you will use some fully depreciated existing equipment that has a market value of $ 9.2 million. As the iGlasses are an outcome of the​ R&D center, Apple plans to charge $ 5.3 million of the annual costs of the center to the iGlasses product for four years.​ Finally, Apple's working capital levels will increase from their current level of $ 119.7 million to $ 142 million immediately. They will remain at the elevated level until year​ 4, when they will return to $ 119.7 million.​ Apple's discount rate for this project is 15.7 % and its tax rate is 35 %. Calculate the free cash flows and determine the NPV of this project.​ (*) The opportunity cost must be​ after-tax. Note​: Assume that the equipment is put into use in year 1.

List and discuss four examples of unethical conduct that are not violations of civil and/or criminal law.

•South Park Energy is considering replacing the company's Methane Plant with a Nuclear Plant.

•The Methane Plant was built two years ago at a cost of $120M with an expected useful life of 5 years. This plant is being depreciated to zero using 5-year straight-line depreciation. The Methane Plant can be sold today for $70M. If this plant had been kept, it would have had no salvage value at the end of its expected useful life three years from today.

•The Nuclear Plant would cost $500M to build today. Since the Nuclear plant will just be a working prototype, its expected useful life is only 3 years and it falls in the 3-year MACRS depreciation class (yr 1: 33%, yr 2: 45%, yr 3: 15%, yr 4: 7%). The Nuclear Plant is expected to have a salvage value of $40M at the end of the plant's 3-year life. The Nuclear Plant is expected to reduce operating expenses by $150M each year during the plant's 3-year expected life and increase revenues by $40 million each year. The company's marginal tax rate is 40%, and this project has a weighted average cost of capital of 13%.

(Q1) What is the total cash flows during year 3 for this replacement analysis?

(Q2) What is the initial cash flow for this replacement analysis?

Corporation Finance question

Discuss the similarities in dividends, share repurchases, and stock splits/stock dividends.

Corporation Finance question

Discuss the difference between angel investing, venture capital, LBOs, private equity. Include 2 companies in each category and list some of their investments.

1. Describe the main results of Modigliani and Miller Propositions (I and II) for:
   1. 1958 model – no taxes, no bankruptcy costs
   2. 1963 model – with taxes, no bankruptcy costs
   3. Tradeoff model – with taxes and bankruptcy costs

In total there are 6 results

Corporation Finance Question

How is the quality of corporate governance measured?

Tannen Industries is considering an expansion. The necessary equipment would be purchased for $19 million, and the expansion would require an additional $4 million investment in net operating working capital. The tax rate is 40%.

a. What is the initial investment outlay? Write out your answer completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest dollar. Enter your answer as a positive value.

b. The company spent and expensed $25,000 on research related to the project last year. Would this change your answer? Explain.

i. No, last year's expenditure is considered a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.

ii. Yes, the cost of research is an incremental cash flow and should be included in the analysis.

iii. Yes, but only the tax effect of the research expenses should be included in the analysis.

iv. No, last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initial investment outlay.

v. No, last year's expenditure is considered an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.

c. The company plans to use a building it owns to house the project. The building could be sold for $5 million after taxes and real estate commissions. How would that fact affect your answer?

i. The potential sale of the building represents an opportunity cost of conducting the project in that building. Therefore, the possible after-tax sale price must be charged against the project as a cost.

ii. The potential sale of the building represents an opportunity cost of conducting the project in that building. Therefore, the possible before-tax sale price must be charged against the project as a cost.

iii. The potential sale of the building represents an externality and therefore should not be charged against the project.

iv. The potential sale of the building represents a real option and therefore should be charged against the project.

v. The potential sale of the building represents a real option and therefore should not be charged against the project.

Company ABC would like to sell an additional 1000 shares using the Dutch Auction method. Using the table below, Bidder D will receive how many shares? Bidder Quantity Price A 500 $30 B 300 $28 C 100 $25 D 400 $20 E 300 $19 Select one: a. 520 shares b. 400 shares c. 378 shares d. 308 shares e. 290 shares

“My husband is 53, and I am 13 years younger. During our 20-year marriage, I have been in and out of the workforce, raising children, and getting my education. Now, I plan to return to full-time employment. I am essentially just getting my career under way as my husband approaches the completion of his. None of the retirement seminars address the issue that not all husbands and wives are the same age, nor do they retire at the same time.” What unique problems do couples with a wide age gap face as they plan for retirement? What are some solutions to the situation? What should be the investment strategy?

Maple, Inc. would like to sell an additional 6,500 shares of stock using the Dutch auction method. The bids received are as follows: Bidder Quantity Price A 1000 $15 B 1500 $25 C 2500 $20 D 1500 $12 E 2000 $18 Bidder B will receive ____________ shares at a price of _____________. Select one: a. 1000; $15 b. 1000; $12 c. 929; $15 d. 1393; $15 e. 1857; $12

Suppose you purchase one share of the stock of Red Devil Corporation at the beginning of year 1 for $44.75. At the end of year 1, you receive a dividend of $2 and buy one more share for $48.75. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share), and sell the shares for $56.75 each. What is the time-weighted return on your investment? (Round your answer to 2 decimal places. Do not round intermediate calculations.)

A drill press is purchased for $12,000. It is anticipated that its market value at the end of any year will be 18% less than its market value at the end of that year. In other words, its market value is reduced by 18% each year. The repair costs are covered by the warranty in Year 1. However, the repair cost in Year 2 is $500 and increases by $500 each year. This machining company has an MARR of 15%. State here on Blackboard the minimum EUAC (to the closest penny) of this drill press and its economic life (in years).

New-Project Analysis

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,060,000, and it would cost another $18,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $535,000. The machine would require an increase in net working capital (inventory) of $13,500. The sprayer would not change revenues, but it is expected to save the firm $491,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%.

1. What is the Year 0 net cash flow?

b.What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.

c.What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? Do not round intermediate calculations. Round your answer to the nearest dollar.

d.the project's cost of capital is 15 %, what is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.

Should the machine be purchased? YES/NO