Problem 4-14
Uneven Cash Flow Stream

1. Find the present values of the following cash flow streams. The appropriate interest rate is 6%. Round your answers to the nearest cent. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF₀ = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Chapter 4 Tool Kit.)

   Year	Cash Stream A	Cash Stream B
   1	$100	$300
   2	400	400
   3	400	400
   4	400	400
   5	300	100

   
   Stream A $   
   Stream B $   
   
2. What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest cent.
   Stream A $   
   Stream B $  

Problem 4-10
Present and Future Values of Single Cash Flows for Different Interest Rates

Use both the TVM equations and a financial calculator to find the following values. Round your answers to the nearest cent. (Hint: Using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in parts b and d, and in many other situations, to see how changes in input variables affect the output variable.)

1. An initial $200 compounded for 10 years at 6.7 percent.
   $   
   
2. An initial $200 compounded for 10 years at 13.4 percent.
   $   
   
3. The present value of $200 due in 10 years at a 6.7 percent discount rate.
   $   
   
4. The present value of $200 due in 10 years at a 13.4 percent discount rate.
   $  

Your firm is interested in selling a new type of headphone. The machinery to build these headphones costs $300,000 (at year 0) and will be used for 10 years. At the end of these 10 years, the machine is worth nothing. The price of these headphones is $175 and the cost to produce each pair is $45. There are annual (years 1 through 10) fixed costs of $320,000 to produce the headphones. You will depreciate the machine using straightline depreciation. The appropriate discount rate is 13% and your firm's marginal tax rate is 35%. Use GOALSEEK to find the minimum number of headphones you need to sell each year in order to breakeven (i.e. have an NPV of zero).

Hint: You are going to have to find the annual free cash flow (FCF) produced by this project each year.

Begin by plotting how the NPV of this project changes with different discount rates. Note that you'll have to find the NPV of the project first using a discount rate of your choosing. Use a data table to create this plot. Have your discount rates range from 0% to 60% in increments of 2%. Please label your x-axis "Discount Rate" and your y-axis "Net Present Value of Cash Flows". Title your graph "NPV Calculation". There should be no legend on the graph. How many IRRs does this project have? What are they? Perform your IRR calculations in the box on the left.

Problem 3-11
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: 2.8
Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 23%
Total liabilities-to-assets ratio: 60%
Quick ratio: 0.90
Days sales outstanding (based on 365-day year): 31.5 days
Inventory turnover ratio: 5.0

Do not round intermediate calculations. Round your answers to the nearest whole dollar.

Balance Sheet

Using the data in the following​ table, and the fact that the correlation of A and B is 0.39​, calculate the volatility​ (standard deviation) of a portfolio that is 70% invested in stock A and 30% invested in stock B.

The standard deviation of the portfolio is _%?

Using an article relating to Business Finance from any medium, briefly summarize the article, explain how you found the article particularly useful or timely, and give your personal reactions to the article. Be sure to provide the title of the article, the author(s), and the reference for the article. Your classmates will make comments and ask questions concerning your report.

Do the various regulatory uses of credit ratings make sense? Why or why not?

In what ways do users rely on credit ratings? Should their reliance be reduced? Why or why not?

after completing its capital spending for the year, carlson manufacturing has $1,800 extra cash. carlson's manager must choose between investing the cash in treasury bonds that yield 3 percent or paying the cash out to investors who would invest in the bonds themselves. a. if the corporate tax rate is 23 percent, what personal tax rate would make the investors equally to receive the dividend or to let carlson invest the money? b. id the answer to (a) reasonable? c. suppose the only investment choice is a preferred stock that yields 6 percent. the corporate dividend exclusion of 50 percent applies. what personal tax rate will make the stockholders indifferent to the outcome of carlson's dividend decision? d. is this a compelling argument for a low dividend-payout ratio?

Calculate the NPV for each project and determine which project should be accepted. Project A Project B Project C Project D Initial Outlay (105,000.00) (99,000.00) (110,000.00) (85,000.00) Inflow year 1 53,000.00 51,000.00 25,000.00 45,000.00 Inflow year 2 50,000.00 47,000.00 55,000.00 50,000.00 Inflow year 3 48,000.00 41,000.00 15,000.00 30,000.00 Inflow year 4 30,000.00 52,000.00 21,000.00 62,000.00 Inflow year 5 35,000.00 40,000.00 35,000.00 68,000.00 Rate 7% 10% 13% 18% NPV = $75,228.32 $77,364.07 -$2,531.00 $69,006.08 Answer: Project B How to show work in excell

Consider the following information for Watson Power Co.: Debt: 4,500 9 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 104 percent of par; the bonds make semiannual payments. Common stock: 103,500 shares outstanding, selling for $63 per share; the beta is 1.1. Preferred stock: 15,500 shares of 7.5 percent preferred stock outstanding, currently selling for $107 per share. Market: 10 percent market risk premium and 6.5 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the WACC. Multiple Choice 11.74% 12.24% 12.01% 11.84% 12.9%

You own a stock portfolio invested 25 percent in Stock Q, 15 percent in Stock R, 15 percent in Stock S, and 45 percent in Stock T. The betas for these four stocks are 1.36, 1.7, 1.3, and 0.48, respectively. What is the portfolio beta?

Capital Budgeting and Risk Analysis

• Define the most important capital budgeting techniques. name at least two (2) capital budgeting techniques (e.g., NPV, IRR, Payback Period, etc.) that you used to arrive investment decision.