In Section 19.7 of Chapter 19, there is a discussion of the security analysis techniques used by the investment guru Benjamin Graham. Discuss the technique that Graham suggests and provide the Internet link to your favorite source on value investing.

DUK stock has a Beta coefficient of 1.0. This means that if the Indianapolis-based market (index) LOSES 2.0% today (Monday, April 6, at 9:00 EDT), what will happen to DUK stock?

it will go down 1.0%

it will go down 2.0%

it will go down 100%

it will go down 200%

Question 361 pts

WISC stock has an Alpha of 1.5. If the index goes up, which of the following statements is most accurate?

WISC will go up 1.5%

WISC will go up 1.5 times more than the index

WISC will outperform the index by 1.5%

WISC will go down 1.5 times more than the index

McGilla Golf has decided to sell a new line of golf clubs. The length of this project is seven years. The company has spent $138237 on research and development for the new clubs. The plant and equipment required will cost $2829364 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $127415 that will be returned at the end of the project. The OCF of the project will be $811598. The tax rate is 32 percent, and the cost of capital is 7 percent. What is the NPV for this project?

Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would really appreciate your effort. Thanks.

1). Sandhill Communication Corp. is investing $8,373,700 in new technologies. The company’s management expects significant benefits in the first three years after installation (as can be seen by the following cash flows), and smaller constant benefits in each of the next four years.

Excel Template
(Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you’ve been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.)

What is the discounted payback period for the project assuming a discount rate of 10 percent? (Round answer to 2 decimal places, e.g. 15.25. If discounted payback period exceeds life of the project, enter 0 for the answer.)

2). Management of Cullumber, Inc., an aviation firm, is considering purchasing three aircraft for a total cost of $166,023,819. The company would lease the aircraft to an airline. Cash flows from the proposed leases are shown in the following table.

What is the IRR of this project? (Round answer to 2 decimal places, e.g. 15.25%.)

3). Ivanhoe Specialties just purchased inventory-management computer software at a cost of $1,449,950. Cost savings from the investment over the next six years will produce the following cash flow stream: $199,340, $304,240, $348,600, $524,250, $734,320, and $484,740. What is the payback period on this investment? (Round answer to 2 decimal places,e.g. 15.25.)

Payback Period is _______?

“BLACKFRIDAY” company is planning an expansion of its existing production capacity. The firm hired you as a consultant for the expansion project. Since you are a savvy project manager, you first decided to estimate the firm’s cost of capital based on the available data.

Data:

• Tax Rate: 40%
• Bond: Coupon rate 12%, Maturity Years 15, Present value $1150
• Preferred Stock: Dividend rate 10%, Par Value $100, Present Value $111 Common Stock: Market price $50, D₀=$4.20, Dividend growth 5%, Beta 1.2, Treasury Bond yield 7%, Market risk premium 6%. When the firm uses Bond-yield+Premium method, the risk premium is 4%.
• Capital structure of ABC is as follows;
  • Debt 30%, Common Equity 60%, Preferred Stock 10%

Next, you asked your assistant “Mr.COUPON” to give his opinion on the following burning questions;

1. What is your final Cost of Equity?
2. Do you agree that the cost of new equity is cheaper than the cost of retained earnings? Why?
3. What is flotation cost and how do you adjust it?
4. If the flotation cost of new stock issue is 10%, what is the estimated cost of equity considering the 10% flotation cost under DCF method you calculated in question iv above? (cost of equity using discounted cashflow technique is 15.50%)

Interest rates play a prominent role in calculation, and determination of bond prices, and yields. Let's discuss why, and what factors need to be addressed with this. Use examples.

In addition, let's not forget what factors affect the valuation of common stock. Use examples.

Ken T. Ucky buys a municipal bond yielding 5.95%. Ken's marginal federal income tax rate is 18.88%. If Ken receives $7,892.00 in interest payments in 2014, how much (dollar amount) does Ken owe in federal income taxes for 2014 (related to the interest payment)?

$0.00

$1,490.00

$469.57

$377.78

Question 261 pts

Wesley Consin owns 100 shares if WIN stock. Wes purchased the stock a year ago for $1 per share. The stock is currently selling for $4 per share. Wes decides to sell a call on WIN with a strike price of $4.00. The premium is $0.50. A month later, WIN stock is still at $4 per share. The option expires without being exercised. How much (total) did Wes earn on this transaction (not counting fees / commissons)?

$0.00

$50.00

$300.00

$400.00

Question 271 pts

Duke B. Deville sees that WIN stock is trading at $90 per share. Duke writes (sells) a naked call on WIN with a strike price of $92.00. Duke collects a premium of $0.85 on the transaction. WIN's stock price goes up to $110 per share by the expiration date of the option. Calculate Duke's total gains/losses from this transaction:

Duke gains $2,000.00 on the transaction

Duke gains $2,085.00 on the transaction

Duke loses $2,000.00 on the transaction

Duke loses $2,085.00 on the transaction

Duke loses $1,715.00 on the transaction

Question 281 pts

Ken T. Ucky believes that WIN will see a dramatic increase in stock price in the near term. WIN is currently trading at $38 per share. Ken believes that WIN will go as high as $40 per share. Ken buys a call option on WIN with a strike price of $38.00. The premium Ken pays is $1.00. At expiration, WIN has not increased it's share price (it turns out, WIN's stock was fundamentally flawed, relying too much on the company's interior strength combined with a little flash and sizzle...their competitors, meanwhile, gained ground by being good overall companies and by focusing on both external and internal things that really mattered). WIN is still sitting at a price of $38.00. The option expires worthless. Instead of making a lot of money and enjoying his 'one shining moment,' how much money does Ken lose on this bitter, bitter, unforeseeable, painful, and totally unforgettable transaction?

$1.00

$100.00

$200.00

$3,800 and a place in history

$4,000 and immortalization in the 'hall of fame'

a. Do you think it is important to save for retirement, and why?

b. What is your strategy of achieving your goal to save for retirement?

9. Stocks that don't pay dividends yet

Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. She expects Goodwin to pay a $4.25000 dividend at that time (D₃ = $4.25000) and believes that the dividend will grow by 22.10000% for the following two years (D₄ and D₅). However, after the fifth year, she expects Goodwin’s dividend to grow at a constant rate of 4.08000% per year.

Goodwin’s required return is 13.60000%. Fill in the following chart to determine Goodwin’s horizon value at the horizon date (when constant growth begins) and the current intrinsic value. To increase the accuracy of your calculations, do not round your intermediate calculations, but round all final answers to two decimal places.

If investors expect a total return of 14.60%, what will be Goodwin’s expected dividend and capital gains yield in two years—that is, the year before the firm begins paying dividends? Again, remember to carry out the dividend values to four decimal places. (Hint: You are at year 2, and the first dividend is expected to be paid at the end of the year. Find DY₃ and CGY₃.)

Goodwin has been very successful, but it hasn’t paid a dividend yet. It circulates a report to its key investors containing the following statement:

Goodwin has yet to record a profit (positive net income).

Is this statement a possible explanation for why the firm hasn’t paid a dividend yet?

a.Yes

b.No

Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would really appreciate your effort. Thanks.

1). Crane, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.56 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 18 percent, what is the current value of the stock? (Round all intermediate calculations and final answer to 2 decimal places, e.g. 15.20.)

Current Value ______?

2). Sandhill Corp. will pay dividends of $5.00, $6.25, $4.75, and $3.00 in the next four years. Thereafter, management expects the dividend growth rate to be constant at 5 percent. If the required rate of return is 14.00 percent, what is the current value of the stock? (Round all intermediate calculations and final answer to 2 decimal places, e.g. 15.20.)

Current Value ______?

3). Cullumber Corp. management is planning to spend $650,000 on a new marketing campaign. They believe that this action will result in additional cash flows of $304,000 each year for three years. If the discount rate is 17.5 percent, what is the NPV on this project? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.)

The NPV is ______?

Light emitting diodes (LED) light bulbs have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $.39 and lasts 1,000 hours. A 15-watt LED, which provides the same light, costs $3.10 and lasts for 12,000 hours. A kilowatt-hour of electricity costs $.115. A kilowatt-hour is 1,000 watts for 1 hour. If you require a return of 11 percent and use a light fixture 500 hours per year, what is the equivalent annual cost of each light bulb? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Eddie & Company: Exceeding the
Relevant Range
Eddie & Company is a small manufacturer located in the North Central part of the United
States. The company manufactures auto and truck axles for automobile producers. Most
of its output is sold to one of the larger auto companies. Because its sales have recently
increased beyond all expectation, that company now wants Eddie & Company to increase
its production level to satisfy the increased demand.
This request poses a serious dilemma for the owners of Eddie & Company. It would
have to considerably increase production in order to ship more axles to the automaker.
However, it has already been operating at full capacity just to meet the demands of its
customers, including the automaker, when sales were low. The only ways to satisfy the
increased demand would be (1) to buy the needed new products from its competitors
and resell them to the automaker—at no profit—or (2) to increase its own production
capacity in order to satisfy the demand.
The first alternative would satisfy the short-run increase in demand, but not the
long-range one. But the second alternative of increasing production capacity would pose

different problems. First, there is no assurance that the increased demand from the auto-
maker will be permanent, and Eddie & Company could find itself with unused capacity.

Second, this alternative would mean increased fixed expenses, which would raise the
company’s break-even point. And this increase would continue even if the automaker cut
back its orders to the original level.

1.What options are available to the company?
2. What would you do if you faced the same situation?
3. Would you buy the product from your competitor to meet the contract? Explain.
4. Would you add the additional capacity? Explain.

Item11 Item 11 Item 11 An investment project costs $10,000 and has annual cash flows of $2,820 for six years. a. What is the discounted payback period if the discount rate is zero percent? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the discounted payback period if the discount rate is 4 percent? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the discounted payback period if the discount rate is 19 percent? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Analyze S&J Plumbing, Inc.'s balance sheet below:

Calculate the following:

• Current ratio
• Quick ratio
• Net working capital

Write a report of 2-3 pages that discusses the liquidity of S & J Plumbing Incorporated.

Assume a bond matures for $1000 ten years and two months from today. It also pays semiannual coupons with an annual coupon rate of 8%. Calculate the dirty (cash) and clean prices of the bond if the bond’s yield to maturity equals 9%. (Show Work)