Trident is a US company that sells goods to crown, a British firm in March for Sterling pounds 1,000,000. Payments are due in three months that is June. Trident cost of capital is 12%. The following quotes are available:
a. spot exchange rate: $1.7640/pound
b. Three month forward rate: $1.7540/pound
c. UK 3 month borrowing interest rate is 8% p.a (or 2% per quarter)
d. US 3 month rate is 8% p.a (or 2% per quarter)
e. US 3 month investment rate is 6% p.a (1.5 per quarter)
June put options on the stock exchange of 12,500 pounds, strike price is $1.75; 1.5% per pound premium, and brokerage cost $25 per contract.

June put option in the OTC market 1,000,000 pounds; strike price is $1.75; 1.5% premium. Trident foreign exchange adviser forecasts that the spot rate in 3 months will be $1.76/pound.

REQUIRED
i. Remain unhedged position
ii. Hedge in the forward market
iii. Hedge in the money market
iv. Hedge in the capital market

You have been assigned the task of putting together a statement for the ACME Com- pany that shows its expected inflows and outflows of cash over the months of July 2016 through December 2016.

You have been given the following data for ACME Company:

(1)Expected gross sales for May through December, respectively, are $300,000, $290,000, $425,000, $500,000, $600,000, $625,000, $650,000, and $700,000.

(2) 12% of the sales in any given month are collected during that month. However, the firm has a credit policy of 3/10 net 30, so factor a 3% discount into the current month’s sales collection.

(3) 75% of the sales in any given month are collected during the following month after the sale.

(4)13% of the sales in any given month are collected during the second month following the sale.

(5)The expected purchases of raw materials in any given month are based on 60% of the expected sales during the following month.

(6)The firm pays 100% of its current month’s raw materials purchases in the following month.

(7)Wages and salaries are paid on a monthly basis and are based on 6% of the current month’s expected sales.

(8)Monthly lease payments are 2% of the current month’s expected sales.

(9)The monthly advertising expense amounts to 3% of sales.

(10) R&D expenditures are expected to be allocated to August, September, and October at the rate of 12% of sales in those months.

(11) During December a prepayment of insurance for the following year will be made in the amount of $24,000.

(12) During the months of July through December, the firm expects to have miscella- neous expenditures of $15,000, $20,000, $25,000, $30,000, $35,000, and $40,000, respectively.

(13) Taxes will be paid in September in the amount of $40,000 and in December in the amount of $45,000.

(14) The beginning cash balance in July is $15,000. (15)The target cash balance is $15,000.

TO DO

a. Prepare a cash budget for July 2016 through December 2016 by creating a com- bined spreadsheet that incorporates spreadsheets similar to those in Tables 4.8, 4.9, and 4.10. Divide your spreadsheet into three sections:

(1) Total cash receipts (2) Total cash disbursements (3) Cash budget covering the period of July through December

The cash budget should reflect the following: (1) Beginning and ending monthly cash balances (2) The required total financing in each month required (3) The excess cash balance in each month with excess

b. Based on your analysis, briefly describe the outlook for this company over the next 6 months. Discuss its specific obligations and the funds available to meet them. What could the firm do in the case of a cash deficit? (Where could it get the money?) What should the firm do if it has a cash surplus?

What are the variety of capital budgeting tools including net present value (NPV), internal rate of return (IRR), payback period, and profitability index (PI). Only evaluate the incremental changes to cash flows and use applicable metrics that align with the values below.

Use an Excel spreadsheet showing the required cash flow forecasts and capital budgeting tool calculations.

Marketing/Advertising Campaign

• A major new marketing/advertising campaign, which will cost $2 million per year and last 6 years.
• It is forecast that the campaign will increase sales/revenues and costs of sales by 15% per year.
• Annual sales for the previous year were $20 million.
• The marginal corporate tax rate is presumed to be 25%.
• Being a moderate risk investment, the required rate of return of the project is 10%.
• Cost of sales costs of sales by 15% per year.

Watson consulting, llc is a consultancy to consultants. They have bonds which have a face value of $1,000. The bonds carry a 3.5 percent semi-annual coupon, and mature in 10 years. What is the current price of these bonds if the yield to maturity (the going market rate, rd) is 5 percent? $883.08 $813.06 $884.17 $749.04 $594.98

On average, how would you think the typical person in the following socio-economic groups would view an income redistribution scheme, and WHY?

A single mother-of-color with two teenage children
An unmarried computer engineer in San Francisco earning $100,000 per year
An immigrant from abroad who has worked himself up form nothing to riches by starting a successful real estate company
A democratic congresswoman from the inner city
A republican senator from a rural state
A 31-year-old foreign exchange trader in an international bank earning $7,000,000 in commissions annually. (This actually occurs!)***
A homeless person in San Francisco
Yourself

Describe the problems with using the IRR statistic to evaluate capital budgeting projects. What is the solution to these problems?

Gold Diggers, Inc. has 350,000 shares of common stock, currently trading at $26/share. The common stock of Gold Diggers, Inc. is expected to generate a dividend of $2.00/share next year, and it has a Beta calculated at 1.2. It also has 100,000 shares of preferred stock, trading at $50/share. The preferred stock pays dividends of 7%. Finally, Gold Diggers, Inc. has 30,000 bonds currently trading at $960/bond. The coupon rate is 5%, and the bonds will mature in 8 years.

Gold Diggers, Inc. expects its dividends to grow at a rate of 6%/year, and it is in a 34% tax bracket. It estimates that the risk-free rate of return is 3% and the market rate of return is 7%.

Calculate the WACC for Gold Diggers, Inc. Be sure to show all your work. NOTE: When calculating the cost of equity, compute the cost using the CAPM method and the DCF (Dividend Constant Growth Method) and average the two.

You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $440 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $245 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $177,000 in assets, which will be depreciated on a straight-line basis with a life of 3 years. The actual market value of these assets at the end of year 3 is expected to be $39,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 35 percent and the required return on the project is 11 percent. (Use SL depreciation table) What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

What is meant by the terms capital structure? What are the elements of an organization’s capital structure? Briefly describe each of the elements. How do each affect the capital structure of the organization and value of the organization through the capital structure?

find an example of a company that failed to innovate, that failed (or is currently failing) to keep up with a changing market (like Blockbuster Video, Sears/Kmart, Yahoo, MySpace, RadioShack, etc.). What did they do wrong? Does the fault like with the vision of the CEO and other executives? Or did the management structure operate poorly and was unable to execute the vision of the executives?

Why do Investors and Companies Care about Intrinsic Value?

Discuss how economic conditions, chosen investment vehicles (FDIC insured investments, mutual funds, stock markets, etc.), diversification (e.g., invest all in Tesla or go with index funds), rates of return, and inflation will affect retirement planning. What are some ways that those saving for retirement can help address the key issues you have discussed?

You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $128,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $62,000. The machine would require a $10,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $38,000 per year. The marginal tax rate is 25%, and the WACC is 9%. Also, the firm spent $4,500 last year investigating the feasibility of using the machine.

1. How should the $4,500 spent last year be handled?
   1. Last year's expenditure is considered a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.
   2. The cost of research is an incremental cash flow and should be included in the analysis.
   3. Only the tax effect of the research expenses should be included in the analysis.
   4. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initial investment outlay.
   5. Last year's expenditure is considered an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.
   
   -Select-IIIIIIIVVItem 1
   
2. What is the initial investment outlay for the machine for capital budgeting purposes after the 100% bonus depreciation is considered, that is, what is the Year 0 project cash flow? Enter your answer as a positive value. Round your answer to the nearest dollar.
   $  
   
3. What are the project's annual cash flows during Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.
   Year 1: $  
   Year 2: $  
   Year 3: $  
   
4. Should the machine be purchased?

Please show full work if possible, would like to be able to understand the problem and solution.

1. Lion Inc. recently hire you as a consultant to estimate the company’s WACC. You have

obtained the following information.

(1) The firm’s noncallable bonds mature in 20 years, have an 8% annual coupon, a par

value of $1,000, and a market price of $1,050.

(2) The company’s tax rate is 40%.

(3) The risk-free rate is 4.50% and the market risk premium is 5.50%. The stock has a

beta of 1.20.

(4) The target capital structure consists of 35% debt and the remainder is common

stock.

(5) The firm uses the CAPM to estimate the cost of equity, and it does not expect to

issue any new common stock.

Please identify the company’s WACC

A. 7.16%

B. 7.54%

C. 7.93%

D. 8.35%

E. 8.79%