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We are evaluating a project that costs $768,000, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 57,000 units per year. Price per unit is $60, variable cost per unit is $35, and fixed costs are $770,000 per year. The tax rate is 35 percent, and we require a return of 15 percent on this project. |
| a. |
Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) |
| Break-even point | units |
| b-1 |
Calculate the base-case cash flow and NPV. (Do not round intermediate calculations and round your NPV answer to 2 decimal places, e.g., 32.16.) |
| Cash flow | $ | |
| NPV | $ | |
| b-2 |
What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) |
| ΔNPV/ΔQ | $ |
| c. |
What is the sensitivity of OCF to changes in the variable cost figure? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) |
| ΔOCF/ΔVC | $ |
In: Finance
Simple Simon's Bakery purchases supplies on terms of 1.3 divided by 10 comma net 271.3/10, net 27. If Simple Simon's chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon's owner an interest rate of 10.1% on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Use 365 days for a year.)
In: Finance
In: Finance
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The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 34 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. |
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | ||||||
| Investment | $ | 28,000 | ||||||||
| Sales revenue | $ | 14,500 | $ | 15,000 | $ | 15,500 | $ | 12,500 | ||
| Operating costs | 3,100 | 3,200 | 3,300 | 2,500 | ||||||
| Depreciation | 7,000 | 7,000 | 7,000 | 7,000 | ||||||
| Net working capital spending | 340 | 390 | 440 | 340 | ? | |||||
| a. |
Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) |
| Year 1 | Year 2 | Year 3 | Year 4 | ||
| Net income | $ | $ | $ | $ | |
| b. |
Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) |
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | |
| Cash flow | $ | $ | $ | $ | $ |
| c. |
Suppose the appropriate discount rate is 12 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| NPV | $ |
In: Finance
The December 31, 2018, balance sheet of Trelan, Inc., showed long-term debt of $1,405,000, $141,000 in the common stock account, and $2,660,000 in the additional paid-in surplus account. The December 31, 2019, balance sheet showed long-term debt of $1,590,000, $151,000 in the common stock account and $2,960,000 in the additional paid-in surplus account. The 2019 income statement showed an interest expense of $94,500 and the company paid out $146,000 in cash dividends during 2019. The firm’s net capital spending for 2019 was $970,000, and the firm reduced its net working capital investment by $126,000. What was the firm's 2019 operating cash flow, or OCF?
In: Finance
Describe some examples of checking and savings account transactions
that result in assessments of fees or penalties. Which are the
least and most avoidable?
2. Analyze your personal budget as a financial planning tool for making decisions in the following situations. In each case, how will they affect your budget (consider each individually)?
a. A neighbor and coworker suggest that he and you commute to work
together.
b.
The roofers inform you that your chimney needs be to repointed and
relined as well as your new roof, and the cost will be an
additional $4,000 - billed monthly.
c.
You have a part-time job where you make a consistent $700 a month
and are considering giving that up and putting more time into your
hobby which has an upfront cost of $5,000 to get off the ground as
a business, but, assuming it goes well, could earn you $1,000
month.
d.
Your car is just about on its "last wheels", you can buy a used car
for $250 a month for 3 years, but it is not that great on gas
mileage (18 mpg) and you drive 20,000 miles a
year. Or
you can buy a new car that
has payments of $375 a month for 5 years, but it gets great gas
mileage (34 mpg). Decide what you would do and explain the impact
to your budget.
3. Review your list of personal financial goals. For each goal, how does the U.S. Tax Code help or hinder you in achieving it?
In: Finance
In: Finance
Use the following table that shows the options available on DEF stock (which currently trades at $112) to answer the next seven questions.
|
Call Premiums |
Put Premiums |
|||||||||||||||||||||||||||||||||
|
Strike |
Jan. |
Feb. |
Jan. |
Feb. |
||||||||||||||||||||||||||||||
|
105 |
7.50 |
7.75 |
.50 |
.60 |
||||||||||||||||||||||||||||||
|
110 |
6.25 |
6.50 |
.65 |
.75 |
||||||||||||||||||||||||||||||
|
115 |
1.15 |
1.20 |
3.25 |
3.62 |
||||||||||||||||||||||||||||||
|
120 |
.75 |
.95 |
8.10 |
8.85 Question 15
5 points Question 16
5 points Question 17
5 points Question 18
5 points Question 19
5 points Question 20
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In: Finance
In: Finance
Why is working capital a particularly important area of concern for financial managers?
At least 200 words.
In: Finance
Financial risk is an important concept for any healthcare manager. The manager must understand how the various aspects of risk impact the organization’s potential access to capital for much needed investments. For this discussion, explain what financial risk is. Also, discuss how businesses and investors view risk. Provide an example that an organization might face. Lastly, discuss the terms stand alone and portfolio risk. In your opinion, is one more impactful to the organization than another?
In: Finance
Pick a federal agency of your choice. Find that agency’s appropriation for a recent fiscal year. That may be located in an annual appropriation act or in a consolidated appropriation bill that lumps a number of normal appropriation acts together. Are there provisions of a somewhat substantive nature that are included in the appropriation act?
In: Finance
1. Name and explain three tricks that management can play to manage earnings. Explain how using financial ratios can help spot these tricks.
2. Why is it important to analyze profitability, specifically focusing on return on investment? Invoke the breakdown of ROI in thinking about your response.
In: Finance
The value of HILEV firm at the end of one year can be $50 m or $100 m with equal probability of 0.5. The firm has debt with a face value of $50 m that matures in one year. Assume that investors are risk-neutral and the risk free rate is zero. The CEO of the firm decides to substitute assets of the firm with more risky assets immediately, so that the value of the firm at the end of one year is either $30 m or $120 m with equal probability of 0.5. This asset substitution will lead to
A gain of $10 million for stockholders and a loss of $10 million for bondholders
b. A loss of $10 million for stockholders and a gain of $10 million for bondholders
c. No gain or loss to debtholders or equity holders
d. Both debtholders and equity holders will lose $10 million from the increased risk of the business
* I answered C and it was incorrect
In: Finance
In: Finance