In: Finance
In: Finance
A7X Corp. just paid a dividend of $1.45 per share. The dividends are expected to grow at 25 percent for the next 6 years and then level off to a growth rate of 8 percent indefinitely.
If the required return is 15 percent, what is the price of the stock today?
In: Finance
13. Project Analysis You are considering a new product launch. The project will cost $760,000, have a four-year life, and have no salvage value; depreciation is straightline to zero. Sales are projected at 420 units per year; price per unit will be $17,200; variable cost per unit will be $14,300; and fixed costs will be $640,000 per year. The required return on the project is 15 percent, and the relevant tax rate is 35 percent. a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best case and worst-case scenarios? b. Evaluate the sensitivity of your base-case NPV to changes in fixed costs. c. What is the accounting break-even level of output for this project?
In: Finance
| Category | Prior Year | Current Year |
| Accounts payable | ??? | ??? |
| Accounts receivable | 320,715 | 397,400 |
| Accruals | 40,500 | 33,750 |
| Additional paid in capital | 500,000 | 541,650 |
| Cash | 17,500 | 47,500 |
| Common Stock | 94,000 | 105,000 |
| COGS | 328,500 | 430,836.00 |
| Current portion long-term debt | 33,750 | 35,000 |
| Depreciation expense | 54,000 | 55,125.00 |
| Interest expense | 40,500 | 42,404.00 |
| Inventories | 279,000 | 288,000 |
| Long-term debt | 339,829.00 | 400,384.00 |
| Net fixed assets | 946,535 | 999,000 |
| Notes payable | 148,500 | 162,000 |
| Operating expenses (excl. depr.) | 126,000 | 162,228.00 |
| Retained earnings | 306,000 | 342,000 |
| Sales | 639,000 | 847,534.00 |
| Taxes | 24,750 | 47,130.00 |
what is the current year's account payable balance?
what is the current year's return on assets (ROA)?
what is the current year's return on equity (ROE)?
what is the current year's entry for long-term debt on a common-sized balance sheet?
In: Finance
Choose two companies in the same industry whose financial statements are available online. Complete several financial ratios for each company and compare them. What did your analysis tell you about these companies? What sorts of decisions would this analysis help you make; such as buying stocks, considering accepting an employment offer, etc.?
In: Finance
A company currently pays a dividend of $2.75 per share (D0 = $2.75). It is estimated that the company's dividend will grow at a rate of 21% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 2, the risk-free rate is 7.5%, and the market risk premium is 6%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.
In: Finance
Explain in a paragraph, If a country experiences an increase in inflation relative to other countries, then their current account will increase.
In: Finance
Outline the main contents of the International Accounting standard 33 (IAS33) EPS
In: Finance
FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $200,000 per year. Once in production, the bike is expected to make $300,000 (after expenses) per year for 10 years. The cash inflows begin at the end of year 7.
At FastTrack, there is a difference of opinion as to the "best" decision rule to use. The four rules under consideration are NPV, IRR, Payback Period and Profitability Index (PI).
Additional Info: The firm's president has set a maximum acceptable payback period of 8 years for projects and the cost of capital appropriate for this project is 10%.
Using the end of year cash flows as shown in the table (see below), answer each of the following:
|
Year |
Cash Flows |
|
0 |
$0 |
|
1 |
-$200,000 |
|
2 |
-$200,000 |
|
3 |
-$200,000 |
|
4 |
-$200,000 |
|
5 |
-$200,000 |
|
6 |
-$200,000 |
|
7 |
$300,000 |
|
8 |
$300,000 |
|
9 |
$300,000 |
|
10 |
$300,000 |
|
11 |
$300,000 |
|
12 |
$300,000 |
|
13 |
$300,000 |
|
14 |
$300,000 |
|
15 |
$300,000 |
|
16 |
$300,000 |
1a What is the NPV of the project if the firm's cost of capital is 10%?
1b Should the project be accepted or rejected based on NPV and why?
Note that while at first you may think that IRR isn't appropriate, note that there is only one sign change, when the cash flows go from negative 200,000 to positive 300,000. This means there is only 1 sign change and 1 IRR.
2a What is the IRR of the project?
2b Should the project be accepted or rejected based on IRR and why?
3a What is the Payback period of the project?
3b Should the project be accepted or rejected based on Payback and why?
4a What is the profitability index or PI of the project?
4b Should the project be accepted or rejected based on PI and why?
5 If the firm's required rate of return increased, what would be the impact on each of the values?
5a Effect on NPV and why:
5b Effect on IRR and why:
5c Effect on Payback period and why:
5d Effect on PI and why:
In: Finance
Nast Stores has derived the following consumer credit-scoring model after years of data collecting and model testing:Accounts Receivable Management | 153 Y = (0.20 × EMPLOYMT) + (0.4 × HOMEOWNER) + (0.3 × CARDS) EMPLOYMT = 1 if employed full-time, 0.5 if employed part-time, and 0 if unemployed HOMEOWNER = 1 if homeowner, 0 otherwise CARDS = 1 if presently has 1–5 credit cards, 0 otherwise Nast determines that a score of at least 0.70 indicates a very good credit risk, and it extends credit to these individuals.
a. I f Janice is employed part-time, is a homeowner, and has six credit cards at present, does the model indicate she should receive credit?
b. J anice just got a full-time job and closed two of her credit card accounts. Should she receive credit? Has her creditworthiness increased or decreased, according to the model?
c. Y our boss mentions that he just returned from a trade-association conference, at which one of the speakers recommended that length of time at present residence (regardless of homeownership status) be included in credit-scoring models. If the weight turns out to be 0.25, how do you think the variable would be coded (i.e., 0 stands for what, 1 stands for what, etc.)?
d. S uggest other variables that Associated might have left out of the model, and tell how you would code them (i.e., 0, 1, 2 are assigned to what conditions or variables?).
In: Finance
|
We are examining a new project. We expect to sell 5,200 units per year at $66 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $66 × 5,200 = $343,200. The relevant discount rate is 17 percent, and the initial investment required is $1,510,000. After the first year, the project can be dismantled and sold for $1,230,000. Suppose you think it is likely that expected sales will be revised upward to 8,200 units if the first year is a success and revised downward to 3,800 units if the first year is not a success. |
| a. |
If success and failure are equally likely, what is the NPV of the project? Consider the possibility of abandonment in answering. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| b. |
What is the value of the option to abandon? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
In: Finance
|
McGilla Golf is evaluating a new line of golf clubs. The clubs will sell for $1,000 per set and have a variable cost of $450 per set. The company has spent $157,500 for a marketing study that determined the company will sell 50,500 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,500 sets of its high-priced clubs. The high-priced clubs sell at $1,500 and have variable costs of $630. The company also will increase sales of its cheap clubs by 12,100 sets. The cheap clubs sell for $450 and have variable costs of $180 per set. The fixed costs each year will be $9,650,000. The company has also spent $1,175,000 on research and development for the new clubs. The plant and equipment required will cost $31,150,000 and will be depreciated on a straight-line basis to a zero salvage value. The new clubs also will require an increase in net working capital of $2,530,000 that will be returned at the end of the project. The tax rate is 22 percent and the cost of capital is 15 percent. |
|
Suppose you feel that the values are accurate to within only ±10 percent. What are the best-case and worst-case NPVs? (Hint: The price and variable costs for the two existing sets of clubs are known with certainty; only the sales gained or lost are uncertain.) (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
In: Finance
Examine yield curve shapes using daily yield curve rates provided by U.S. department of treasury .
a) Report treasure yield rates (1 month, 3 month, 6 month, 1 year, 2 year, 3 year, 5 year, 7 year, 10 year, 20 year, 30 year) on Jan. 02, 2014, Jan. 02, 2015, Jan. 04, 2016, Jan. 03, 2017, Jan. 02, 2018, Jan. 02, 2019, and Sep. 02, 2019.
b) Compute each term spreads for seven term structures.
c) Plot seven yield curves that show the relation between yields and maturities.
d) Provide your findings thoroughly from b) and c).
In: Finance
In: Finance