Consider the following stock price and shares outstanding information.
| DECEMBER 31, Year 1 | DECEMBER 31, Year 2 | |||||||
Price |
Shares Outstanding |
Price |
Shares Outstanding |
|||||
| Stock K | $23 | 110,000,000 | $34 | 110,000,000 | ||||
| Stock M | 82 | 2,100,000 | 50 | 4,200,000a | ||||
| Stock R | 36 | 29,000,000 | 38 | 29,000,000 | ||||
| aStock split two-for-one during the year. | ||||||||
Compute the beginning and ending values for a price-weighted index and a market-value-weighted index. Assume a base value of 100 and Year 1 as the base period. Do not round intermediate calculations. Round your answers to two decimal places.
PWIYear 1:
PWIYear 2:
VWIYear 1:
VWIYear 2:
Compute the percentage change in the value of each index during the year. Do not round intermediate calculations. Round your answers to two decimal places.
Percentage change in PWI: %
Percentage change in VWI: %
Compute the percentage change for an unweighted index assuming $1,000 is invested in each stock. Do not round intermediate calculations. Round your answer to two decimal places.
%
In: Finance
In: Finance
1.
| PRICE | SHARES | |||||||||||
| Company | A | B | C | A | B | C | ||||||
| Day 1 | $14 | $21 | $55 | 500 | 390 | 270 | ||||||
| Day 2 | 11 | 22 | 60 | 500 | 390 | 270 | ||||||
| Day 3 | 15 | 42 | 58 | 500 | 195a | 270 | ||||||
| Day 4 | 10 | 44 | 27 | 500 | 195 | 540b | ||||||
| Day 5 | 12 | 43 | 29 | 500 | 195 | 540 | ||||||
| aSplit at close of day 2. bSplit at close of day 3. |
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Calculate a Standard& Poor's Index for days 1 through 5 using a beginning index value of 10. Do not round intermediate calculations. Round your answers to three decimal places.
Day 1:
Day 2:
Day 3:
Day 4:
Day 5:
2.
| PRICE | SHARES | |||||||||||
| Company | A | B | C | A | B | C | ||||||
| Day 1 | $13 | $25 | $53 | 450 | 400 | 210 | ||||||
| Day 2 | 11 | 20 | 58 | 450 | 400 | 210 | ||||||
| Day 3 | 14 | 50 | 60 | 450 | 200a | 210 | ||||||
| Day 4 | 15 | 52 | 28 | 450 | 200 | 420b | ||||||
| Day 5 | 11 | 50 | 30 | 450 | 200 | 420 | ||||||
| aSplit at close of day 2. bSplit at close of day 3. |
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Calculate a Dow Jones Industrial Average for days 1 through 5. Do not round intermediate calculations. Round your answers to three decimal places.
Day 1:
Day 2:
Day 3:
Day 4:
Day 5:
In: Finance
You need to accumulate $10,000. To do so, you plan to make deposits of $1,400 per year - with the first payment being made a year from today - into a bank account that pays 11% annual interest. Your last deposit will be less than $1,400 if less is needed to round out to $10,000. How many years will it take you to reach your $10,000 goal? Do not round intermediate calculations. Round your answer up to the nearest whole number.
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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. |
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Suppose you feel that the values are accurate to within only ±10 percent. What are the best-case and worst-case NPVs? |
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We are evaluating a project that costs $1,140,000, has a life of 10 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 36,000 units per year. Price per unit is $50, variable cost per unit is $20, and fixed costs are $720,000 per year. The tax rate is 23 percent and we require a return of 12 percent on this project.
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Bridgton Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $140,000, has a 5-year life, and costs $10,100 per year to operate. The relevant discount rate is 10 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $10,300 at the end of the project’s life. The relevant tax rate is 24 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment? |
In: Finance
Current Position Analysis
The following data were taken from the balance sheet of Nilo Company at the end of two recent fiscal years:
| Current Year | Previous Year | |||||||
| Current assets: | ||||||||
| Cash | $334,400 | $249,600 | ||||||
| Marketable securities | 387,200 | 280,800 | ||||||
| Accounts and notes receivable (net) | 158,400 | 93,600 | ||||||
| Inventories | 798,600 | 585,600 | ||||||
| Prepaid expenses | 411,400 | 374,400 | ||||||
| Total current assets | $2,090,000 | $1,584,000 | ||||||
| Current liabilities: | ||||||||
| Accounts and notes payable | ||||||||
| (short-term) | $319,000 | $336,000 | ||||||
| Accrued liabilities | 231,000 | 144,000 | ||||||
| Total current liabilities | $550,000 | $480,000 | ||||||
a. Determine for each year (1) the working capital, (2) the current ratio, and (3) the quick ratio. Round ratios to one decimal place.
| Current Year | Previous Year | |||||
| 1. Working capital | $ | $ | ||||
| 2. Current ratio | ||||||
| 3. Quick ratio | ||||||
b. The liquidity of Nilo has from the preceding year to the current year. The working capital, current ratio, and quick ratio have all . Most of these changes are the result of an in current assets relative to current liabilities.
In: Finance
Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.37 million. The fixed asset falls into the 3-year MACRS class (MACRS schedule). The project is estimated to generate $1,765,000 in annual sales, with costs of $664,000. The project requires an initial investment in net working capital of $360,000, and the fixed asset will have a market value of $345,000 at the end of the project.
| a. |
If the tax rate is 21 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? |
| b. | If the required return is 11 percent, what is the project's NPV? |
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Calligraphy Pens is deciding when to replace its old machine. The machine's current salvage value is $3,050,000. Its current book value is $1,800,000. If not sold, the old machine will require maintenance costs of $710,000 at the end of the year for the next five years. Depreciation on the old machine is $360,000 per year. At the end of five years, it will have a salvage value of $155,000 and a book value of $0. A replacement machine costs $4,650,000 now and requires maintenance costs of $380,000 at the end of each year during its economic life of five years. At the end of the five years, the new machine will have a salvage value of $745,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $3,650,000. The company will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 25 percent and the appropriate discount rate is 7 percent. The company is assumed to earn sufficient revenues to generate tax shields from depreciation. |
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Calculate the NPV for the new and old machines. |
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Explain your understanding of how business goals are influenced by the form of organization and ownership.
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What additional strategies might a firm employ to send money to another part of the company if the firm is operating in a country that blocks funds? In otherwords, Subsidiary A wants to send money to its parent and Subsidiary A is located in a country that regularly blocks funds? In addition, what techniques might the parent use to send money to the subsidiary if its subsidiary is located in a country that blocks funds?
Please help me answer this international financial management question.
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Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.18 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life. The project is estimated to generate $1,730,000 in annual sales, with costs of $640,000. The project requires an initial investment in net working capital of $290,000, and the fixed asset will have a market value of $240,000 at the end of the project.
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In: Finance
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 15% 35% Bond fund (B) 6% 29% The correlation between the fund returns is 0.0517. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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LO, Inc., is considering an investment of $454,000 in an asset with an economic life of five years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $292,100 and $90,800, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 4 percent. The company will use the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is estimated to be $74,000 in nominal terms at that time. The one-time net working capital investment of $24,500 is required immediately and will be recovered at the end of the project. The corporate tax rate is 24 percent. |
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What is the project’s total nominal cash flow from assets for each year? Year 0? Year 1? Year 2? Year 3? Year 4? Year 5? |
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