Currently, your firm plans on depreciating an upcoming project’s PPE from an initial value of $800k to a final book value of $100k over a 10 year period. You’ve been asked to value a possible change in the depreciation scheme which will accelerate this process by depreciating the machine over a 6 year period (let’s assume this is legal to do). If you accelerate depreciation, you will still be depreciating to a final book value of $100k. If the project’s discount rate is 12% and the firm’s tax rate is 35%, by how much will the project’s NPV change if you switch to the accelerated depreciation schedule?

You would like to purchase a vacation home in 15 years.
The current price of such a home is $275,000 but the price of these types of homes is rising at a rate of 3% per year.
How much would you have to invest in years 1 to 5, (the same amount in each year) in nominal terms to exactly pay for the vacation home if your investments earn 4% APR (compounded annually) in nominal terms?

Comprehensive Ratio Analysis

Data for Lozano Chip Company and its industry averages follow.

Lozano Chip Company: Balance Sheet as of December 31, 2016 (Thousands of Dollars)

Lozano Chip Company: Income Statement for Year Ended December 31, 2016 (Thousands of Dollars)

1. Calculate the indicated ratios for Lozano. Round your answers to two decimal places.

   Ratio	Lozano	Industry Average
   Current assets/Current liabilities		2.0
   Days sales outstanding*	days	35.0 days
   COGS/Inventory		6.7
   Sales/Fixed assets		12.1
   Sales/Total assets		3.0
   Net income/Sales	%	1.2%
   Net income/Total assets	%	3.6%
   Net income/Common equity	%	9.0%
   Total debt/Total assets	%	30.0%
   Total liabilities/Total assets	%	60.0%
   *Calculation is based on a 365-day year.

2. Construct the extended Du Pont equation for both Lozano and the industry. Round your answers to two decimal places.

   For the firm, ROE is	%
   For the industry, ROE is	%

3. Outline Lozano's strengths and weaknesses as revealed by your analysis
   

Analyze why, despite employing various investment appraisal techniques, large investment projects in big corporations may fail to deliver their estimated cash flows. Critically assess how a failed capital project may affect key stakeholders and shareholder value, and also shape the future strategy of investment capital.

(within 2000 words)

Do you agree that the selection of a top-quality candidate is a critical process in organizations, or do you think intensive training after the person is selected is more valuable? Explain your answer.

12. Assume the BonBon Candy Company is a constant growth company whose last dividend was $3,00 and whose dividend is expected to grow indefinitely at 6% rate. It normally discounts all cash flow at 10% .

a. what is the firm’s expected dividend stream over the next three years ?

b. what is the firm’s current stock price ?

c. what is the stoch’s expected value one year from now ?

d. what are the following :

      i. the expected dividend yield during first year ?

      ii. the capital gain yield during the first year ?

      iii. the total return during the first year ?

e. now assume that the stock is currently selling at $79.50 . what is the expected rate of return on the stock?

f. what would the stock price be if its dividends were expected to have zero growth?

How much debt is too much for an organization, and should more users of organizational data use the combined degree of operating leverage versus operational and/or financial? min 200 words

DFB, Inc. expects earnings next year of $5.53 per share, and it plans to pay a $3.05 dividend to shareholders (assume that is 1-year from now). DFB will retain $2.48 per share of its earnings to reinvest in new projects that have an expected return of 15.1% per year.

Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year.

a. What growth rate of earnings would you forecast for DFB?

1. 2.3%

2. 3.4%

3. 4.5%

4. 5.6%

5. None of the above

b. If DFB's equity cost of capital is 11.1% and growth rate is 6.8%, what price would you estimate for DFB stock?

1. $47.60

2. $58.71

3. $69.82

4. $70.93

5. None of the above

c. Suppose instead that DFB paid a dividend of $4.05 per share at the end of this year and retained only $1.48 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesting in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its dividend?

1. $57.04, DFB should raise dividends because it will result in a higher stock price.

2. $57.04, DFB should not raise dividends because it will result in a lower stock price.

3. $60.25, DFB should not raise dividends because it will not result in a higher stock price.

4. $68.15, DFB should raise dividends because it will result in a higher stock price.

5. $68.15, DFB should not raise dividends because it will not result in a higher stock price.

Assume a corporation has earnings before depreciation and taxes of $104,000, depreciation of $42,000, and that it has a 30 percent tax bracket.

a. Compute its cash flow using the following format. (Input all answers as positive values.)
  

b. How much would cash flow be if there were only $16,000 in depreciation? All other factors are the same.
  

c. How much cash flow is lost due to the reduced depreciation from $42,000 to $16,000?
  

PLEASE HELP!!!

Two years ago you took out a mortgage at 4.5%. The initial balance of the loan was $200,000 and it was for 25 years (300 months.) Today, you observe that you could take out a new loan at 4.25% (with a 300 month term), but you would have to pay $5,000 in closing and other fees.

What is the current value of the loan (liability from your perspective)?

*Note: The answer is $195,579.52. I want to know how to get the answer with a financial calculator.

You have just sold your house for $1,000,000 in cash. Your mortgage was originally a 30-year mortgage with monthly payments and an initial balance of $800,000. The mortgage is currently exactly 18½ years old, and you have just made a payment. If the interest rate on the mortgage is 5.25% (APR), how much cash will you have from the sale once you pay off the mortgage?

Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section.

Heavy Metal Corporation is expected to generate the following free cash flows over the next five​ years:
(in millions)

Year 1 : 54.4

Year 2: 66.2

Year 3: 79.5

Year 4: 73.6

Year 5: 80.2

Thereafter, the free cash flows are expected to grow at the industry average of 4.5% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.6%​:

a.  Estimate the enterprise value of Heavy Metal.

b.  If Heavy Metal has no excess​ cash, debt of $304 ​million, and 41 million shares​ outstanding, estimate its share price.

7. One of your neighbors, Mr. and Mrs. Schekel, ( an elderly couple that always bring cookies when they visit ) has been very interested in hearing about your experiences at university. They would like to send their granddaughter to your university in 8 years’ time. You estimate that tuition will be $45,000 the first year , and the tuition will grow at 1.26% annually. They estimate it will take her 5 years to complete her undergraduate and MBA degrees, provided she attends summer school . they would also like to bestow a gift of $15,000 to her upon her graduation from the MBA program. How much must your clients deposit today, assuming an intrest rate of 6% in order to send their granddaughter to your university and provide her with the graduation present ?

Show time line . use uneven cash flow method

8. The schkels also have another granddaughter of whom they are very proud. They are considering offering her the following :

a. $40,000 today or

b. $45,000 towards a house down payment when she marries 2 years from now when her fiance finishes medical school. Assuming an intrest rate of 5% , which offer should the granddaughter accept ?

9. Another neighbor, Mr Ruble, is considering depositing $1,500 at the end of each year for five years in a saving account that pays 3.5% per year . you recommend that he deposit the funds at the beginning of each year. Calculate and demonstrate the change in value that will accrue to Mr.Ruble. Explain why there is a change in value .

Question 4

HMK Enterprises would like to raise $10 million to invest in capital expenditures. The company plans to issue 5-year bonds with a face value of $1,000 and a coupon rate of 6.52% (annual payments). The following table summarizes the yield to maturity for 5-year (annual-payment) coupon corporate bonds of various ratings:

a. Assuming the bonds will be rated AA, what will be the price of the bonds?

a. $856.32

b. $987.45

c. $999.66

d. $1,008.77

e. $1,019.88

b. How much of the total principal amount of these bonds must HMK issue to raise $10.0million today, assuming the bonds are AA rated? (Because HMK cannot issue a fraction of a bond, assume that all fractions are rounded to the nearest whole number.)

a. $5,605,000

b. $6,322,000

c. $7,243,000

d. $8,803,000

e. $9,914,000

c. What must be the rating of the bonds for them to sell at par?

1. AAA grade

2. AA grade

3. A grade

4. BBB grade

5. BB grade

d. Suppose that when the bonds are issued, the price of each bond is $958.38. What is the likely rating of the bonds? Are they junk bonds?

1. AAA grade, they are not junk bonds

2. AA grade, they are not junk bonds

3. A grade, they are not junk bonds

4. BBB grade, they are junk bonds

5. BB grade, they are junk bonds

Do you agree with the statement below? Why or why not?

“Given the inflation in Venezuela was well above 10,000% in 2017, Venezuela should adopt a cryptocurrency such as Bitcoin as a national currency?”