You plan to retire after 30 years. After that, you need $200,000 per year for 10 years (first withdrawal at t=31). At the end of these 10 years, you will enter a reitrement home where you will stay for the rest of your life. As soon as you enter the retirement home, you will need to make a single payment of $1,000,000. You want to start saving for your retirement in an account that pays you 9% p.a. Therefore, beginning from the end of the first year (t=1), you will make equal yearly deposits into this account for 30 years. You expect to receive $500,000 at t=30 from a cash value insurance policy that you own. This money will be deposited in your retirement account. What should your yearly deposits into the account be?

Han Products manufactures 40,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is:

An outside supplier has offered to sell 40,000 units of part S-6 each year to Han Products for $22 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $90,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.

Required:

What is the financial advantage (disadvantage) of accepting the outside supplier’s offer?

Bed & Bath, a retailing company, has two departments—Hardware and Linens. The company’s most recent monthly contribution format income statement follows:

A study indicates that $374,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 15% decrease in the sales of the Hardware Department.

Required:

What is the financial advantage (disadvantage) of discontinuing the Linens Department?

mperial Jewelers manufactures and sells a gold bracelet for $408.00. The company’s accounting system says that the unit product cost for this bracelet is $267.00 as shown below:

The members of a wedding party have approached Imperial Jewelers about buying 27 of these gold bracelets for the discounted price of $368.00 each. The members of the wedding party would like special filigree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $467 and that would increase the direct materials cost per bracelet by $13. The special tool would have no other use once the special order is completed.

To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $14.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party’s order using its existing manufacturing capacity.

Required:

1. What is the financial advantage (disadvantage) of accepting the special order from the wedding party?

2. Should the company accept the special order?

elaborate on the concept of compounding. Discuss how to calculate the net present value and the significance of this indicator for decision.

How can I compare the weekly performance of 2 stocks online?
I am looking for CNI ( canadian national rail) vs CP ( Canadian pacific)

A firm has purchased for $14,000 a machine with a five year useful life. The machine will be
depreciated using ADS on a three-year depreciation schedule. The uniform annual benefits are
$3600. The firm’s effective tax rate is 47% and the MARR before tax is 10%. The firm estimates
that there is a 40% likelihood that the machine will have a salvage value of $5,000 and
due to the probability of obsolescence, a 60% likelihood that the machine will have no salvage
value. Determine if this is a satisfactory investment.

An Initial Public Offering (IPO) is a major milestone for a company. This is a very expensive and time-consuming process. It does not come without a lot of forethought and judicial weighing of the pros and cons. We will start this conversation by looking at some of the reasons why a company would decide to take the steps to become a publicly traded corporation. What pros and cons have to be weighed?

Instructions - Use the numbers in the instructions to organize your post and ensure that you meet all requirements.

1. The #1 benefit of an IPO is the capital that is raised. List one additional way a company would benefit from an IPO. Explain in one paragraph.

2. List one use of additional capital. Explain the benefit in one paragraph.

3. Many changes in reporting standards have been enacted as a result of financial scandals. Identify one specific change in reporting standards or requirements for publicly traded companies and explain why this is important. Identify the change by the title of the act or section number.

NOTE: The Sarbanes-Oxley Act is the most frequently mentioned changed. It contains many individual provisions. Break it down to one provision that has not been mentioned by a classmate. There are a number of more recent changes to select from as well.

Explain how tax credits differ substantially from tax deduction. Explain which one provides the most tax benefit to taxpayers and why.

Debt: 4,000, 7% semiannual coupon bonds outstanding, $1,000 par value, 18 years to maturity, selling for 102 percent of par; the bonds make semiannual payments.

Preferred Stock:  10,000 outstanding with par value of $100 and a market value of 105 and $10 annual dividend.

Common Stock: 84,000 shares outstanding, selling for $56 per share, the beta is 2.08

The market risk premium is 5.5%, the risk free rate is 3.5% and Huntington’s tax rate is 32%.

Huntington Power Co. is evaluating two mutually exclusive project that is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and decided to apply an adjustment factor of +2.1% to the cost of capital for both projects.

Project A is a five-year project that requires an initial fixed asset investment of $2.4 million. The fixed asset falls into the five-year MACRS class. The project is estimated to generate $2,050,000 in annual sales, with costs of $950,000. The project requires an initial investment in net working capital of $285,000 and the fixed asset will have a market value of $225,000 at the end of five years when the project is terminated.

Project B requires an initial fixed asset investment of $1.0 million. The marketing department predicts that sales related to the project will be $920,000 per year for the next five years, after which the market will cease to exist. The machine will be depreciateddown to zero over four-year using the straight-line method (depreciable life 4 years while economic life 5 years). Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales.  The project will also require an addition to net working capital of $150,000 immediately. The asset is expected to have a market value of $120,000 at the end of five years when the project is terminated.

Use the following rates for 5-year MACRS: 20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76%

1. Calculate WACC for the firm.
2. What is the appropriate discount rate for project A and project B (Risk adjusted rate)?
3. Calculate project A’s cash flows for years 0-5
4. Calculate NPV, IRR and PI for project A
5. Calculate project B’s cash flows for year 0-5
6. Calculate NPV, IRR and PI for project B
7. Which project should be accepted if any and why?
8. What is the exact NPV profile’s crossover rate (incremental IRR)?

A call option with a current value of $6.20. A put option with a current value of $7.90. Both options written on the same stock, with 1 year until expiration, and a strike price of $60.00. The prevailing risk-free rate is 8.00%. What must be the current price of the stock on which these two options are written?

Bulldog Memorabilia, a small screen printing firm, is considering investing in new technology that allows customers to design their own products online, then they are automatically printed and shipped with only minimal labor costs. The firm has projected the following cash flows:

Time 0                   Time 1             Time 2             Time 3             Time 4             Time 5

-2,000,000             450,000            550,000            625,000            600,000            400,000

The firm anticipates selling the equipment for 300,000 (its salvage value) at time 5 and estimates the project cost of capital to be 10%. The firm estimates the IRR on the project to be 13.19%

The CFO of Bulldog is not sure that she is accurate in her estimates of the future cash flows and decides to conduct a scenario analysis. She has asked you to recalculate the NPV assuming that each cash flow and the salvage value are 10% higher than her initial estimate or 10 % lower. How is the estimate of NPV changed in each case (case1—all cash flows and the salvage value increase by 10%, case 2 all cash flows and the salvage value decrease by 10%)? Does the range of outcomes change how you would view the project? (10 points)

Table 1 provides projected financial statement values for Firm X (a firm that you work for as a treasury analyst). Calculate the change in operating cash flow that would result if management implemented the strategic and operational tactics needed to achieve the best in industry target values for the given operating working capital accounts. Discuss why operating cash flow would increase.

Table 1

CORPORATE VALUATION

Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 5% rate. Dantzler's WACC is 10%.

1. What is Dantzler's horizon, or continuing, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.) Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55.
   $  million
   
2. What is the firm's value today? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round your intermediate calculations.
   $  million
   
3. Suppose Dantzler has $94 million of debt and 23 million shares of stock outstanding. What is your estimate of the current price per share? Round your answer to two decimal places. Write out your answer completely. For example, 0.00025 million should be entered as 250.

In the Dave Ramsey: Wealth Building and Compound Interest video, approximately how much less did Arthur have at age 65 by beginning investing just 8 years later than his brother Ben?

1. Suppose that you are just about to retire, and you just turned 65. Your personal and family health history is such that you forecast that you will live to age 88.

In retirement, you would like to have purchasing power of $60,000 (i.e., real dollars) before taxes. Suppose, for our example, that you anticipate receiving $20,000 in inflation-adjusted Social Security payments each year. Hence, your portfolio will need to provide $40,000 in real dollars each year. Assume that each payment is at the start of each year in retirement, where the first payment is immediately. How much do you need to have in your retirement account at retirement (in real dollars)? Assume that your portfolio earns a real annual rate of return of 5.06%, compounded annually during retirement.

Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. Do not type the $ symbol.

2. Suppose that you are considering a conventional, fixed-rate 30-year mortgage loan for $100,000. The lender quotes an APR of 5.56%, compounded monthly; mortgage payments would be monthly, beginning one month after the closing on your home purchase.

After 10 years of payments, what is the balance outstanding on your loan?

Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do not type the $ symbol.

A store has 5 years remaining on its lease in a mall. Rent is $2,000 per month, 60 payments remain, and the next payment is due in 1 month. The mall's owner plans to sell the property in a year and wants rent at that time to be high so that the property will appear more valuable. Therefore, the store has been offered a "great deal" (owner's words) on a new 5-year lease. The new lease calls for no rent for 9 months, then payments of $2,700 per month for the next 51 months. The lease cannot be broken, and the store's WACC is 12% (or 1% per month).

1. Should the new lease be accepted? (Hint: Be sure to use 1% per month.)

   Yes or No?

2. If the store owner decided to bargain with the mall's owner over the new lease payment, what new lease payment would make the store owner indifferent between the new and old leases? (Hint: Find FV of the old lease's original cost at t = 9; then treat this as the PV of a 51-period annuity whose payments represent the rent during months 10 to 60.) Do not round intermediate calculations. Round your answer to the nearest cent.

   $_____   

3. The store owner is not sure of the 12% WACC—it could be higher or lower. At what nominal WACC would the store owner be indifferent between the two leases? (Hint: Calculate the differences between the two payment streams; then find its IRR.) Do not round intermediate calculations. Round your answer to two decimal places.

   _____%