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Amazing Manufacturing, Inc., has been considering the purchase of a new manufacturing facility for $490,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value at that time. Operating revenues from the facility are expected to be $385,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 5 percent. Production costs at the end of the first year will be $230,000, in nominal terms, and they are expected to increase at 6 percent per year. The real discount rate is 8 percent. The corporate tax rate is 25 percent. |
| Calculate the NPV of the project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
In: Finance
I need an to check my answer with 4 decimal places:
Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $5.4 million. The equipment will be depreciated straight line over 6 years to a value of zero, but in fact it can be sold after 6 years for $682,000. The firm believes that working capital at each date must be maintained at a level of 10% of next year’s forecast sales. The firm estimates production costs equal to $1.30 per trap and believes that the traps can be sold for $5 each. Sales forecasts are given in the following table. The project will come to an end in 6 years, when the trap becomes technologically obsolete. The firm’s tax bracket is 35%, and the required rate of return on the project is 8%.
a. What is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places.)
b. By how much would NPV increase if the firm
depreciated its investment using the 5-year MACRS schedule?
(Do not round intermediate calculations. Enter your answer
in whole dollars not in millions.)
Use the MACRS depreciation schedule.
| Year: | 0 | 1 | 2 | 3 | 4 | 5 | 6 | Thereafter |
| Sales (millions of traps) | 0 | 0.5 | 0.7 | 0.8 | 0.8 | 0.7 | 0.5 |
0 |
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a) Calculate the monthly installments
b) Build an amortization table for the life of loan. For each payment, show the beginning loan balance, interest payment, principal payment, and ending balance.
In: Finance
After years of playing the lottery, you just won $10,000,000.
Now, you have to figure out how you want it paid to you. You can
take a lump sum now before tax, (yes, Uncle Sam will eventually get
his part), or you can take annual payments at the end of each year
(also before tax). The interest rate is 4% and if you do take the
payments, they will be paid over 20 years.
1) What is the lump sum payment that you would receive today?
2) How much would you have received in total at the end of the 20
years if you took the payments?
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Calculating Rates of Return [LO3]
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A coin sold at auction in 2017 for $2,897,000. The coin had a face value of $10 when it was issued in 1795 and had previously been sold for $310,000 in 1970. |
| a. |
At what annual rate did the coin appreciate from its first minting to the 1970 sale? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | What annual rate did the 1970 buyer earn on his purchase? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| c. | At what annual rate did the coin appreciate from its first minting to the 2017 sale? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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(Calculating corporate income tax) Last year the commercial real estate firm Kelly and Co., Inc., earned taxable income of $19 million. Calculate Kelly’s federal income taxes. Now calculate Kelly’s average and marginal tax rates.
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A 7.10 percent coupon bond with 21 years left to maturity is priced to offer a 5.2 percent yield to maturity. You believe that in one year, the yield to maturity will be 5.7 percent. |
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What would be the total return of the bond in dollars? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) |
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What would be the total return of the bond in percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) |
In: Finance
Identify and describe two incremental cash flows for project such as expanding a product line or launching a new product or service.
Need 300b words discussion
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You discover that the client's previous tax returns from last year, which someone else prepared, listed a deduction of $3,000 in excess of the actual expenditure. This mistake was not intention and the IRS will probably not detect the error. You can change the error, which might cost the client additional liability. Another option would be to prepare the return from the previous year so that the mistake was yours. Create a price structure for each option. Indicate to the client that you want to meet to discuss these options.
For this assignment, feel free to add any additional information that you feel the client would want to know about each option (this can come from your own experiences, knowledge from other courses, etc). You can be creative with some of the information in the memo, such as name, date, etc.
In: Finance
(CO B) Ms. Towne is buying a home for $250,000 and is putting down 20% cash on the purchase. She is financing the rest with a 30-year, fixed rate mortgage with a rate of 4.625% but is considering an option that would allow her to make biweekly payments. How much interest would the biweekly payment option allow her to save over the life of the loan and how long would it take to pay off the loan?
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A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 80% loan for 25 years at 8% interest and 1 point and the second is a 95% loan for 25 years at 9.25% interest and 2 points. Assuming the loan will be held to maturity, what is the incremental cost of borrowing the extra money?
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10-year corporate bond has a coupon rate of 6% with semi-annual payments. If interest rates rise to 7% on similar bonds then what is the value of the bond in the marketplace?
A 10-year corporate bond has a coupon rate of 6% with semi-annual payments. If interest rates rise to 5% on similar bonds then what is the value of the bond in the marketplace?
A 10-year corporate bond has a coupon rate of 6% with annual payments. If the current value of the bond in the marketplace is $900, then what is the Yield-to-Maturity (YTM)?
A 10-year corporate bond has a coupon rate of 6% with annual payments. If the current value of the bond in the marketplace is $1100, then what is the Yield-to-Maturity (YTM)?
In: Finance
Balance Sheet Analysis
Complete the balance sheet and sales information in the table that follows for J. White Industries using the following financial data:
Total assets turnover: 1.3
Gross profit margin on sales: (Sales - Cost of goods sold)/Sales =
23%
Total liabilities-to-assets ratio: 55%
Quick ratio: 1.25
Days sales outstanding (based on 365-day year): 33 days
Inventory turnover ratio: 6.0
Round your answers to the nearest whole dollar.
| Partial Income | Statement Information |
| Sales | $ |
| Cost of goods sold | $ |
Balance Sheet
| Cash | $ | Accounts payable | $ |
| Accounts receivable | $ | Long-term debt | $ 50,000 |
| Inventories | $ | Common stock | $ |
| Fixed assets | $ | Retained earnings | $ 100,000 |
| Total assets | $ 400,000 | Total liabilities and equity | $ |
In: Finance
In: Finance
(1) You wish to retire in 10 years, at which time you want to
have accumulated enough money to receive an annual annuity of
$13,000 for 15 years after retirement. During the period before
retirement you can earn 9 percent annually, while after retirement
you can earn 11 percent on your money.
What annual contributions to the retirement fund will allow you to
receive the $13,000 annuity? Use Appendix C and Appendix D for an
approximate answer, but calculate your final answer using the
formula and financial calculator methods. (Do not round
intermediate calculations. Round your final answer to 2 decimal
places.)
Annual contribution=
(2) Mr. Dow bought 100 shares of stock at $17 per share. Three
years later, he sold the stock for $23 per share. What is his
annual rate of return? Use Appendix B for an approximate answer,
but calculate your final answer using the financial calculator
method. (Do not round intermediate calculations. Round your
final answer to 2 decimal places.)
Annual rate of return % =
(3) Franklin Templeton has just invested $9,760
for his son (age one). This money will be used for his son’s
education 19 years from now. He calculates that he will need
$35,235 by the time the boy goes to school.
What rate of return will Mr. Templeton need in order to achieve
this goal? Use Appendix B for an approximate answer, but calculate
your final answer using the formula and financial calculator
methods. (Do not round intermediate calculations. Round
your final answer to 2 decimal places.)
Rate of Return% =
(4) Juan Garza invested $103,000 5 years ago at
8 percent, compounded quarterly. How much has he accumulated? Use
Appendix A for an approximate answer but calculate your final
answer using the formula and financial calculator methods.
(Do not round intermediate calculations. Round your final
answer to 2 decimal places.)
Future Value =
(5) Jack Hammer invests in a stock that will pay dividends of $3.15 at the end of the first year; $3.60 at the end of the second year; and $4.05 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $65.What is the present value of all future benefits if a discount rate of 8 percent is applied? Use Appendix B for an approximate answer, but calculate your final answer using the formula and financial calculator methods.
Dividend Present Value
$3.15
3.60
4.05
65.00
Total
(6) Rita Gonzales won the $44 million lottery.
She is to receive $2 million a year for the next 17 years plus an
additional lump sum payment of $10 million after 17 years. The
discount rate is 9 percent.
What is the current value of her winnings? Use Appendix B and
Appendix D for an approximate answer, but calculate your final
answer using the formula and financial calculator
methods.(Do not round intermediate calculations. Round your
final answer to 2 decimal places.)
Present Value =
In: Finance