Compare and contrast the features of common stock. Describe the characteristics of long-term debt. Distinguish between floating rate & fixed rate corporate bonds.
In: Finance
In: Finance
Please give me the correct answer:
Lucy’s Music Emporium purchased $50 million in fixed assets in January and their accountant told them that they would have to depreciate the assets over 20 years (they use the same depreciation calculations for shareholder reporting and income tax purposes). In December they learned that their accountant did not have a college degree and fired him. They hired a new accountant with a college degree and she told them that they could depreciate the assets over 15 years. How would the new depreciation assumption affect the company's financial statements relative to the old assumption?
1. The firm's EBIT would increase.
2. The firm's cash position would increase, all else held equal.
3. The firm's reported earnings per share would increase.
4. The firm's reported net fixed assets would increase.
5. The firm's net liabilities would increase.
Which of the following statement is incorrect?
1. Most of the answers are correct.
2. Total net operating capital = NOWC + Operating long-term assets.
3. Cost of goods sold (COGS) are the revenues less any discounts or returns.
4. An S corporation is a small corporation which, under Subchapter S of the Internal Revenue Code, elects to be taxed as a proprietorship or a partnership yet retains limited liability and other benefits of the corporate form of organization.
5. Accounts receivable arises when a firm sells its products to customers but does not demand immediate payment, and the customers then have obligations to make the payment at a later time, usually less than a year.
Which of the following statement is incorrect?
1. Most of the answers are correct.
2. A firm’s balance sheet is a statement of the firm’s financial position at a specific point in time.
3. Retained earnings is the portion of the firm’s earnings that have been saved rather than paid out as dividends.
4. Operating long-term liabilities are the liabilities that are a natural consequence of the firm’s operations, such as accounts payable and accruals and include notes payable or any other short-term debt that charges interest.
5. S corporations are businesses that have the limited-liability benefits of the corporate form of organization yet are taxed as partnerships or proprietorships.
Which of the following statement is incorrect?
1. A capital gain occurs when an asset is sold for less than its book value.
2. The income statement reports the results of operations over a period of time, and it shows earnings per share as its “bottom line.”
3. The LIFO (last-in, first-out) method assumes that the items most recently placed in inventory are the first ones used in production.
4. Most of the answers are correct.
5. On a typical balance sheet, cash, short-term investments, accounts receivable, and inventories are listed as current assets because those items are expected to converted into cash within a year.
Jessie's Bobcat Rentals' operations provided a negative net cash flow last year, yet the cash shown on its balance sheet increased. Which of the following statements could explain the increase in cash, assuming the company's financial statements were prepared under generally accepted accounting principles?
1. The company sold some of its fixed assets.
2. The company retired a large amount of its long-term debt.
3. The company dramatically increased its capital expenditures.
4. The company repurchased some of its common stock.
5. The company had high depreciation expenses.
Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet?
1. The company pays a dividend.
2. The company repurchases common stock.
3. The company gives customers more time to pay their bills.
4. The company issues new common stock.
5. The company purchases a new piece of equipment.
Which of the following statement is correct?
1. All the answers are incorrect.
2. The income statement begins with assets, which are the “things” the company owns.
3. Cost of goods sold (COGS) reflects the estimated costs of the assets that wear out in producing goods and services.
4. Gross income is defined as taxable income less a set of exemptions and deductions which are spelled out in the instructions to the tax forms individuals must file.
5. The fundamental value of a company to its investors depends on the present value of its expected future FCFs which are discounted at the company’s weighted average cost of capital (WACC).
Olivia Hardison, CFO of Impact United Athletic Designs, plans to have the company issue $500 million of new common stock and use the proceeds to pay off some of its outstanding bonds. Assume that the company, which does not pay any dividends, takes this action, and that total assets, operating income (EBIT), and its tax rate all remain constant. Which of the following would occur?
1. The company would have to pay less taxes.
2. The company's net income would increase.
3. The company's taxable income would fall.
4. The company would have less common equity than before.
5. The company's interest expense would remain constant.
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2. Discuss the McKinsey's 7 S's and how each of these strategy concepts/dimensions plays into the formation and operation of a real estate brokerage. Provide detailed examples of how different brokerages may make different choices in each of these areas and how those choices may affect their company performance. Write a minimum of 500 words.
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NPV mathematically will give the correct accept-or-reject decision regardless of Whether the project experiences non-normal cash flows or if differences in project size or timing of cash flows exist in our case."
Would the IRR provides the correct accept -or-reject decision as the NPV ?
If you cannot eliminate the systematic risk, how can you reduce it if you hold a portfolio of several stocks?
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|
A firm is considering the purchase of a new machine at a price
of $150,000. The machine falls into the three-year MACRS
class. If the new machine is acquired, the firm's investment in net
working capital will immediately increase by $10,000 and then
remain at that level throughout the life of the project. At the end
of 3 years, the new machine can be sold for $16,000. Earnings
before depreciation, interest and taxes (EBDIT) are expected to be
as follows with respect to the new machine: Year 1: EBDIT = $58,000 The firm is subject to a 40 percent tax rate and the firm's discount rate is 9 percent. |
| Requirement 1: |
| Calculate the missing data in the table below for each year over the life of this project. (Do not round intermediate calculations. Round your answers to the nearest whole dollar (e.g., 32).) |
| Year | EBDIT | Depreciation | EBIT | Taxes |
| 1 | $58,000 | $ | $ | $ |
| 2 | $75,000 | $ | $ | $ |
| 3 | $85,000 | $ | $ | $ |
| Requirement 2: |
| What is the book value of the machine at the end of Year 3? (Do not round intermediate calculations. Round your answer to the nearest whole dollar (e.g., 32).) |
| Book Value (End of Year 3) | $ |
| Requirement 3: |
| Calculate the taxes related to the sale of the asset at the end of the project and the after-tax salvage value of the machine. (Do not round intermediate calculations. Net tax savings should be indicated by a minus sign. Round your answer to the nearest whole dollar (e.g., 32).) |
| Taxes | $ |
| After-Tax Salvage Value | $ |
| Requirement 4: |
|
What is the net cash flow of the project for each of the following years? (Do not round intermediate calculations. Net cash outflows should be indicated by a minus sign. Round your answers to the nearest whole dollar (e.g., 32).) |
| Year | Cash Flow |
| 0 | $ |
| 1 | |
| 2 | |
| 3 | |
| Requirement 5: |
|
What is the NPV of the project? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| NPV | $ |
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Use the formula for continuous compounding to compute the balance in the account after 1, 5, and 20 years. Also, find the APY for the account.
A $9,000 deposit in an account with an APR of 3.8%
1 year =
5 year =
20 year =
APY =
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Marginal Incorporated (MI) has determined that its after-tax cost of debt is 10.0%. Its cost of preferred stock is 14.0%. Its cost of internal equity is 16.0%, and its cost of external equity is 21.0%. Currently, the firm's capital structure has $372 million of debt, $30 million of preferred stock, and $198 million of common equity. The firm's marginal tax rate is 25%. The firm is currently making projections for the next period. Its managers have determined that the firm should have $70 million available from retained earnings for investment purposes next period. What is the firm's marginal cost of capital at a total investment level of $255 million?
In: Finance
The following are quotes for several U.S. currency dealers.
|
Dealer |
A |
B |
C |
D |
E |
|
Japanese yen |
108.98 - 109.00 |
109.02 - 109.06 |
108.99 - 109.02 |
109.01 - 109.05 |
108.97 - 109.01 |
|
British pounds |
1.2374 - 1.2376 |
1.2376 - 1.2378 |
1.2378 - 1.2381 |
1.2376 - 1.2378 |
1.2373 - 1.2375 |
Inter-dealer arbitrage
1a. Is there an arbitrage opportunity in Japanese yen? If so, what exchanges should you make to take advantage of it? (Be specific about which dealer you would select, what currency you would buy from or sell to that dealer, and how much of the other currency you would pay or receive.
b. How profitable is a round trip trade? (State the profitability either in percent or basis points.)
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Both Bond Sam and Bond Dave have 9 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 2 years to maturity, whereas Bond Dave has 12 years to maturity. (Do not round your intermediate calculations.)
Requirement 1: (a) If interest rates suddenly rise by 5 percent, what is the percentage change in the price of Bond Sam?
(b) If interest rates suddenly rise by 5 percent, what is the percentage change in the price of Bond Dave?
Requirement 2: (a) If rates were to suddenly fall by 5 percent instead, what would the percentage change in the price of Bond Sam be then?
(b) If rates were to suddenly fall by 5 percent instead, what would the percentage change in the price of Bond Dave be then?
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Growing, Inc. is a firm that is experiencing rapid growth. The firm yesterday paid a dividend of $7.10. You believe that dividends will grow at a rate of 16.0% per year for two years, and then at a rate of 10.0% per year thereafter. You expect the stock will sell for $40.42 in two years. You expect an annual rate of return of 23.0% on this investment. If you plan to hold the stock indefinitely, what is the most you would pay for the stock now?
In: Finance
|
A project under consideration costs $600,000, has a five-year
life and has no salvage value. Depreciation is straight-line to
zero. The firm has made the following projections related to this
project:
|
| Requirement 1: |
| What are the worst-case and best-case scenarios for this project? (Input unit sales as number of units. Round all other answers to the nearest whole dollar (e.g., 32).) |
| Worst Case | Best Case | |
| Unit Sales | ||
| Price Per Unit | $ | $ |
| Variable Cost Per Unit | $ | $ |
| Fixed Costs | $ | $ |
| Requirement 2: |
| Your analysis of the project's NPV in the "base case" shows a NPV of $28,664. However, your boss has asked you to determine the sensitivity of the project's NPV to potential changes in fixed costs. Using the firm's estimate of the highest possible level of fixed costs, complete the table below and use your results to assess the sensitivity of the project's NPV to changes in fixed costs. (Round all answers except your sensitivity estimate to the nearest whole dollar (e.g., 32). Round the sensitivity estimate to 2 decimal places (e.g., 32.16). Negative amounts should be indicated by a minus sign.) |
| Sales | $ |
| Variable Costs | $ |
| Fixed Costs | $ |
| Depreciation | $ |
| EBIT | $ |
| Taxes | $ |
| Net Income | $ |
| Operating Cash Flow | $ |
| Net Present Value (NPV) | $ |
| Sensitivity (ΔNPV/ΔFC) | $ |
In: Finance
| Consider the following two mutually exclusive projects: |
| Year | Cash Flow (A) | Cash Flow (B) |
| 0 | –$250,000 | –$35,000 |
| 1 | 15,000 | 17,000 |
| 2 | 40,000 | 11,000 |
| 3 | 55,000 | 20,000 |
| 4 | 340,000 | 15,000 |
|
The required return on these investments is 14 percent. |
| Required: | |
| (a) |
What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
| Payback period | |
| Project A | years |
| Project B | years |
| (b) |
What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g.,32.16).) |
| Net present value | |
| Project A | $ |
| Project B | $ |
| (c) |
What is the IRR for each project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Internal rate of return | |
| Project A | % |
| Project B | % |
| (d) |
What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).) |
| Profitability index | |
| Project A | |
| Project B | |
| (e) | Based only on the projects' NPV and IRR, which project should you finally choose? |
In: Finance
Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would really appreciate your effort. Thanks.
1. Cullumber Corp had sales of $336,000 in 2017. If management expects its sales to be $476,450 in 6 years, what is the rate at which the company’s sales are expected to grow? (If you solve this problem with algebra round intermediate calculations to 4 decimal places, in all cases round your final answer to 2 decimal places, e.g. 8.72%.)
Growth Rate _____?
2. Ivanhoe, Inc., management expects the company to earn cash flows of $12,700, $15,100, $18,200, and $19,500 over the next four years. If the company uses an 9 percent discount rate, what is the future value of these cash flows at the end of year 4? (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)
Future Value $_____?
3. Jason Allen borrowed some money from his friend and promised to repay him $1,230, $1,330, $1,550, $1,620, and $1,620 over the next five years. If the friend normally discounts investment cash flows at 7.5 percent annually, how much did Jason borrow? (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)
Present value $_____?
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Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would really appreciate your effort. Thanks.
1. You invest $260 in a mutual fund today that pays 6.30 percent interest annually. How long will it take to double your money? (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to 0 decimal place, e.g. 545)
Number of Years ______?
2. You decide to take advantage of the current online dating craze and start your own Web site. You know that you have 250 people who will sign up immediately and, through a careful marketing research and analysis, determine that membership can grow by 24 percent in the first two years, 19 percent in year 3, and 18 percent in Year 4. How many members do you expect to have at the end of four years? (Round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest whole number.)
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.)
Members at the end of four years ______?
3. You have just inherited $600,000. You plan to save this money and continue to live off the money that you are earning in your current job. If you can invest the money in a bond that pays 5.67 percent interest annually, how long will it be before your inheritance is worth $1 million? (If you solve this problem with algebra round intermediate calculations to 5 decimal places, in all cases round your final answer to 2 decimal places, e.g. 8.72.)
Inheritance will be worth $1 million in ____ years?
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