OPTION 1: The initial purchase price of the machine is $30,000. The salvage value at the end of the useful life will be $4,000. Maintenance costs are $2,000 for the first year and are estimated to increase by $200 per year. OPTION 2: The machine is leased for an initial payment of $2,000 plus annual payments of $3,500. There is no salvage value. Annual maintenance cost is $10,000. Put down the present value of each of the items specified for each machinery option in the table below. Assume an interest rate of 6% and a useful lifetime of 8 years. Show your calculations in the spaces below the table.

a.) Please show the steps.

b.) What is the annual equivalent cost of capital (capital recovery), over the 8-year lifetime, for the machine with the lowest present value calculated in the above table?

c.) What is the amount of money that you should invest now if you want to receive payments of $1,000 at the end of each year for ten years with the receipt of the first payment starting three years from now? Assume interest rate is 5% compounded annually.

d.) Provide explanation on your calculation in part c(i). Include in your explanation the specific type of cash flow given and the reason of why you have to derive the present or future equivalent value at various time points.

The return on the Rush Corporation in the state of recession is estimated to be -25% and the return on Rush in the state of boom is estimated to be 35%. The return on the Oberman Corporation in the state of recession is estimated to be 45% and the return on Oberman in the state of boom is estimated to be -18%. Given this information, what is the covariance between Rush and Oberman if there is a 0.50 probability that the economy will be in the state of boom and a 0.50 probability that the economy will be in the state of recession.

Please give specific calculations, thanks!!!

A project has the following cash flows : Year Cash Flows 0 −$11,700 1 5,110 2 7,360 3 4,800 4 −1,640 Assuming the appropriate interest rate is 7 percent, what is the MIRR for this project using the discounting approach?

Your firm has an ROE of 11.8 % a payout ratio of 29 % $ 559,600 of​ stockholders' equity, and $ 415,000 of debt. If you grow at your sustainable growth rate this​ year, how much additional debt will you need to​ issue?

Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $5.4 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. The land was appraised last week for $6.2 million. In five years, the aftertax value of the land will be $6.6 million, but the company expects to keep the land for a future project. The company wants to build its new manufacturing plant on this land; the plant and equipment will cost $32.72 million to build. The following market data on DEI’s securities is current:

DEI uses G.M. Wharton as its lead underwriter. Wharton charges DEI spreads of 8 percent on new common stock issues, 6 percent on new preferred stock issues, and 4 percent on new debt issues. Wharton has included all direct and indirect issuance costs (along with its profit) in setting these spreads. Wharton has recommended to DEI that it raise the funds needed to build the plant by issuing new shares of common stock. DEI’s tax rate is 35 percent. The project requires $1,525,000 in initial net working capital investment to get operational. Assume Wharton raises all equity for new projects externally.

a. Calculate the project’s initial Time 0 cash flow, taking into account all side effects. Assume that the net working capital will not require flotation costs. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)

b. The new RDS project is somewhat riskier than a typical project for DEI, primarily because the plant is being located overseas. Management has told you to use an adjustment factor of +2 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEI’s project. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Kilgore Natural Gas has a $1,000 par value bond outstanding that pays 13 percent annual interest. The current yield to maturity on such bonds in the market is 14 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Compute the price of the bonds for these maturity dates: (Do not round intermediate calculations. Round your final answers to 2 decimal places. Assume interest payments are annual.)

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Question: Kenny Electric Company's noncallable bonds were issued several years ago and now have 20 years to...

Kenny Electric Company's noncallable bonds were issued several years ago and now have 20 years to maturity. These bonds have a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. If the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation?

Perpetual preferred stock from Franklin Inc. sells for $97.50 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC?

When working with the CAPM, which of the following factors can be determined with the most precision?

Bartlett Company's target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of common using reinvested earnings is 12.75%. The firm will not be issuing any new stock. You were hired as a consultant to help determine their cost of capital. What is its WACC?

Avery Corporation's target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from reinvested earnings is 11.25%, and the tax rate is 40%. The firm will not be issuing any new common stock. What is Avery's WACC?

Company A is considering going public and is trying to determine its value based on its future dividend payments. Their current EPS is $5.00, and over the next 5 years they anticipate a payout ratio of 20% and ROE of 15%. During this high-growth period, their beta is estimated at 1.20, with a risk-free rate of 1.0% and a market risk premium of 5%. At the end of the 5-year high growth period, they estimate their stable beta will be 1.05, with ROE of 12% and growth of 2.0%. (Risk-free rate and market risk premium will remain the same.) Using this information, determine the per-share value for the company and show the calculation in details.

The following is a four- year forecasted estimate for ABC limited.

Required

1. Estimate the fair market value of ABC limited at the end of 2018. Assume that after 2022 earnings before interest and tax will remain constant at Sh. 200 million, depreciation will equal capital expenditure in each year and working capital will not change. The weighted average cost of capital for the company is 11% and its tax rate is 30%.

2. Estimate the fair market value per share of the company’s equity at the end of 2018 if the company has 40 million shares outstanding and the market value of interest-bearing liabilities on the valuation date equals Sh. 300 million. (10 Marks)

The Euro has been an important addition to the foreign currency markets. Using the internet and any other sources you can for information, please discuss in your own opinion what the most important current issues associated with the Euro are. Also, discuss from a US perspective your perception of the pros and cons associated with this currency

You are considering the purchase of a small retail shopping complex that will generate net cash flows each of the next 15 years, starting at $500,000 in Year 1. You normally demand a 12% rate of return on such investments. Future cash flows after year 1 are expected to grow with inflation at 5% per year. How much would you be willing to pay for the complex today if it will have to be torn down in 15 years, and the land could be sold for a net amount of $4 million in year 15?

Consider a bond portfolio, which consists of 1,000 units each of three bonds:

• Bond A with annual coupons, a coupon rate of 7%, maturity of 6 years, and YTM of 6.5%.
• Bond B, a perpetuity with coupon rate of 7.5%, and YTM of 6.0%.
• Bond C, a zero-coupon bond with YTM of 6.9% and maturity of 5 year.

1. Calculate the total current market value of the portfolio.
2. Calculate the modified duration of the portfolio
3. What would be the new market value of the portfolio if interest rates were to increase by 60 basis points across board? (use modified duration approach)
4. Suggest a portfolio adjustment the manager can use to mitigate the portfolio’s exposure to the yield increase.

Your job as an analyst is to produce valuation report for your investment firm. Your current focus is on Consun Energy Inc., a company which operates in the renewable energy industry. Last year, the company earned $30 million before interest and taxes on revenues of $80 million. Capital expenditure were $20 million, and depreciation was $15 million. The addition to work capital were $6 million. The firm’s weighted average cost of capital is 12.45%, the marginal tax rate is 40% and the expected growth rate of cash flow is 5%. The market value of the debt is $25 million.

(In no more than a paragraph)

1. Conduct a brief Porter’s five competitive forces analysis on this industry and summarize the implication of your analysis in terms the ease of profitability.
2. What stage in the industry life cycle do you think the renewable energy industry is? Corroborate your choice with a brief discussion of industry evidence.
3. Present in a brief discussion, the important macroeconomic variables to consider when analyzing the renewable energy industry and why you think those variables are important to your analysis.
4. What is your estimate of the intrinsic value of the Consun's equity using the financial information provided above?

You are given the following information: State of Economy Return on Stock A Return on Stock B Bear 0.103 -0.046 Normal 0.114 0.149 Bull 0.074 0.234 Assume each state of the economy is equally likely to happen. a. Calculate the expected return of each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation of each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the covariance between the returns of the two stocks? (A negative answer should be indicated by a minus sign, Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) d. What is the correlation between the returns of the two stocks? (A negative answer should be indicated by a minus sign, Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.)

Brooke Army Medical Center dispenses 250,000 bottles of brand name pharmaceutical annually. The optimal safety stock (which is on hand initially) is 1,000 bottles. Each bottle costs the center $10, inventory carrying costs are 30 percent, and the cost of placing an order with its supplier is $175. Orders can be placed only in multiples of 100 units.

a. What is the economic order quantity?

b. How many orders will be placed annually?

Please show work in Excel!