Assume that sales will grow at 5.00%. The following accounts (cash, accounts receivable, inventory, net fixed assets, accounts payable and accruals, as well as operating costs) are assumed to change with sales and will maintain their current percentage of sales rates into 2016. The dividend payout ratio will remain the same. Long-term debt and notes payable will remain constant into 2016 as will interest expense, as a result. The firm also does not plan to issue any additional common stock or conduct any share repurchases. The firm’s tax rate is 40%. Any additional funds needed will be sourced through a line-of-credit (LOC) and surpluses will be paid out through a special dividend.

BALANCE SHEET AS OF 12/31/2015:

Using the percent-of-sales forecast approach, forecast the 2016 income statement and balance sheet. Be sure the balance sheet balances.

What are the Projected Regular Dividends for 2016?

What is the Projected Special Dividend (if any)?

What is the Projected LOC (if any)?

Post Card Depot, an large retailer of post cards, orders 7,955,726 post cards per year from its manufacturer. Post Card Depot plans on ordering post card 24 times over the next year. Post Card Depot receives the same number of post cards each time it orders. The carrying cost is $0.26 per post card per year. The ordering cost is $396 per order. What is the annual total inventory management costs of post card inventory?

Consider a European call option and a put option on a stock each with a strike price of K = $22 and each expires in six months. The price of call is C = $3 and the price of put is P = $4. The risk free interest rate is 10% per annum and current stock price is S0 = $20. Show how to create an arbitrage strategy and calculate the arbitrage traders profit.

BETHESDA MINING COMPANY
Bethesda Mining is a midsized coal mining company with 20 mines located in Ohio, Pennsylvania, West Virginia,
and Kentucky. The company operates deep mines as well as strip mines. Most of the coal mined is sold under
contract, with excess production sold on the spot market.
The coal mining industry, especially high-sulfur coal operations such as Bethesda, has been hard-hit by
environmental regulations. Recently, however, a combination of increased demand for coal and new pollution
reduction technologies has led to an improved market demand for high-sulfur coal. Bethesda has just been approached by Mid-Ohio Electric Company with a request to supply coal for its electric generators for the next
four years. Bethesda Mining does not have enough excess capacity at its existing mines to guarantee the
contract. The company is considering opening a strip mine in Ohio on 5,000 acres of land purchased 10 years
ago for $5.4 million. Based on a recent appraisal, the company feels it could receive $7.3 million on an aftertax
basis if it sold the land today.
Strip mining is a process where the layers of topsoil above a coal vein are removed and the exposed coal
is removed. Some time ago, the company would simply remove the coal and leave the land in an unusable
condition. Changes in mining regulations now force a company to reclaim the land; that is, when the mining
is completed, the land must be restored to near its original condition. The land can then be used for other
purposes. As they are currently operating at full capacity, Bethesda will need to purchase additional equipment,
which will cost $49 million. The equipment will be depreciated on a seven-year MACRS schedule. The contract
only runs for four years. At that time the coal from the site will be entirely mined. The company feels that the
equipment can be sold for 60 percent of its initial purchase price. However, Bethesda plans to open another
strip mine at that time and will use the equipment at the new mine.
The contract calls for the delivery of 500,000 tons of coal per year at a price of $70 per ton. Bethesda Mining
feels that coal production will be 750,000 tons, 810,000 tons, 830,000 tons, and 720,000 tons, respectively,
over the next four years. The excess production will be sold in the spot market at an average of $64 per ton,
Variable costs amount to $29 per ton and fi xed costs are $4.2 million per year. The mine will require a net working
capital investment of 5 percent of sales. The NWC will be built up in the year prior to the sales.
Bethesda will be responsible for reclaiming the land at termination of the mining. This will occur in Year 5.
The company uses an outside company for reclamation of all the company’s strip mines. It is estimated the
cost of reclamation will be $3.9 million. After the land is reclaimed, the company plans to donate the land to the
state for use as a public park and recreation area as a condition to receive the necessary mining permits. This
will occur in Year 5 and result in a charitable expense deduction of $7.3 million. Bethesda faces a 38 percent
tax rate and has a 12 percent required return on new strip mine projects. Assume a loss in any year will result
in a tax credit.
You have been approached by the president of the company with a request to analyze the project. Calculate
the payback period, profi tablitity index, net present value, and internal rate of return for the new strip mine.
Should Bethesda Mining take the contract and open the mine?

Please show work and explain. Also, can I use TVM in the TI-83+ to solve?

5-8: Thatcher Corporation’s bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8% coupon rate, paid semiannually. The price of the bonds is $1,100. The bonds are callable in 5 years at a call price of $1,050.

What is their yield to maturity?

What is their yield to call?

Briefly explain the Balance of Payments national accounts system. What are the Capital and Current accounts? Why is this important information for countries to track?

1) How many people were present for the signing of the Declaration of Independence?

9. Tom got a 30 year fully amortizing FRM for $500,000 at 8%, with constant monthly payments. After 3 years of payments rates fall and he can get a 27 year FRM at 5%, but he must pay 7 points and $20000 in closing costs to get the new loan. Think of the refinancing decision as an investment for Tom, he pays a fee now but saves money in the future in the form of lower payments. what is the IRR of refinancing for Tom assuming he prepays the new loan 5 years after refinancing? (Clarification: Tom will prepay the new loan 3+5=8 years after the house is purchased)

Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.38 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which it will be worthless. The project is estimated to generate $1,760,000 in annual sales, with costs of $670,000. The tax rate is 25 percent and the required return is 11 percent. What is the project’s NPV? (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.)

The machines shown below are under consideration for an improvement to an automated candy bar wrapping process.

(Source: Blank and Tarquin)

Question 1 (10 points)

Based on the data provided and using an interest rate of 5% per year, the correct equation to calculate the Capital Recovery “CR” of Machine C is:

1. CR_C = –40,000(P/A, 5%, 3) + 12,000(F/A, 5%, 3)
2. CR_C = –40,000(A/P, 5%, 3) + 12,000(A/F, 5%, 3) –15,000(A/P, 5%,3)
3. CR_C = –40,000(A/P, 5%, 3) + 12,000(A/F, 5%, 3) –15,000
4. CR_C = –40,000(A/P, 5%, 3) + 12,000(A/F, 5%, 3)

Question 2 (10 points)

Based on the data provided and using an interest rate of 5% per year, the Capital Recovery “CR” of Machine C is closest to:

(All the alternatives presented below were calculated using compound interest factor tables including all decimal places)

1. CR_C = –$14,688
2. CR_C = –$18,494
3. CR_C = –$6,117
4. CR_C = –$10,882

Question 3 (10 points)

Based on the data provided and using an interest rate of 5% per year, the correct equation to calculate the Annual Worth “AW” of Machine C is:

1. AW_C= –40,000(P/A, 5%, 3) + 12,000(F/A, 5%, 3) –15,000
2. AW_C = –40,000(A/P, 5%, 3) + 12,000(A/F, 5%, 3) –15,000(A/P, 5%, 3)
3. AW_C = –40,000(A/P, 5%, 3) + 12,000(A/F, 5%, 3) –15,000
4. AW_C = –40,000(A/P, 5%, 3) + 25,000(A/F, 5%, 3) –10,000

Question 4 (10 points)

Based on the data provided and using an interest rate of 5% per year, the Annual Worth “AW” of Machine C is closest to:

(All the alternatives presented below were calculated using compound interest factor tables including all decimal places)

1. AW_C = –$25,882
2. AW_C = –$86,098
3. AW_C = –$21,117
4. AW_C = –$16,390

Forward versus Money Market Hedge on Receivables. Assume the following information:

180‑day U.S. interest rate = 0.08

180‑day British interest rate = 0.10

180‑day forward rate of British pound = $1.42

Spot rate of British pound = $1.48

Assume that Banc Corp. from the United States will receive 421,000 pounds in 180 days. How much more (or less) would the firm receive in 180 days if it uses a forward hedge instead of a money market hedge?