1)what financial innovations are best explained as attempts to avoid regulations? 2)what are the reasons for the decline of traditional banking?

2)what are the reasons for the decline of traditional banking?

Discuss the pros and cons of taking a company private. Is a private firm better positioned than a public company to make acquisitions?

Karuda Transportation Sdn Bhd provides bonded trucking services to its clients. The company is evaluating a potential lease arrangement on a truck that cost $250,000 and falls into the MACRS 5-year class. The applicable MACRS depreciation rates are 20%, 32%, 19%, 12%, 11% and 6%. Karuda has a ready credit line from their banker, a term loan financing with an attractive rate of 10% p.a. if they decided to borrow money and buy the asset rather than lease it. The 5-equal instalments are to be paid at the end of each year.

The truck is expected to have a 5-year economic life, and its estimated residual value is $25,000. If Karuda buys the truck, it would purchase a maintenance contract with the Vendor, Scandia Truck & Bus Sdn Bhd that costs $6,000 per year, payable at the end of each year. Karuda plans to keep the truck and use it beyond its recovery period.

Karuda is also required to insure the trucks and the annual insurance premium is calculated at a rate of 1.75% of the insured value. For the first year, the truck is insured for $250,000. For the subsequent years, the book value of the asset is taken as the yearly insured value. Annual insurance premium are being paid at the beginning of the year.

The lease option calls for $60,000 lease payment, payable in advance. All other costs will be borne by the lessor. The company intends to exercise its option to purchase the truck at the end of the lease period for $12,000. Karuda’s tax rate is 30 percent.

1. Calculate the after-tax cash flows associated with each of the alternative.
2. What is the Net Advantage to Leasing? Should the firm lease or buy?

A security exists that promises to pay $300 in one year’s time.  If the market rate of interest is 20% p.a. and the security is for sale for $200, what would you do and why? Ultimately, what would you expect to happen?

SHOW/ EXPLAIN THE WORK PLEASE

Complete problem: Balance Sheet Analysis

o Complete the balance sheet and sales information in the table that follows for XYZ, Inc., using the following financial data:

o Show your work.

Total assets turnover: 1.5 Gross profit margin on sales: (Sales – Cost of goods sold)/Sales = 25% Total liabilities-to-assets ratio: 40% Quick ratio: 0.80 Days sales outstanding (based on 365-day year): 36.5 days Inventory turnover ratio: 3.75 Partial Income Statement Information _______________________________________________________________________________________

Sales ____________

Cost of goods sold ____________

Balance Sheet Information

______________________________________________________________________________________

Cash ___________ Accounts payable ___________ Accounts receivable ___________ Long-term debt 50,000 Inventories ___________ Common stock ___________ Fixed assets ___________ Retained earnings 100,000 Total assets $400,000___ Total liabilities and equity __________

. In the provided scenario, you address the time value of money also known as discounted cash flow analysis. This type of analysis is crucial to being able to viably analyze financial statements.

The start-up firm you founded is trying to save $10,000 in order to buy a parcel of land for a proposed small warehouse expansion. In order to do so, your finance manager is authorized to make deposits of $1250 per year into the company account that is paying 12% annual interest. The last deposit will be less than $1250 if less is needed to reach $10,000.

o How many years will it take to reach the $10,000 goal and how large will the last deposit be? Show your work.

Bonus Versus Stock

A. The company has offered you a $5,000 bonus, which you may receive today, or 100 shares of the company’s stock, which has a current stock price of $50 per share. Mathematically, what is the best choice? Why?

B. What are the advantages and disadvantages of each option? Be sure to support your answers.

C. What would you ultimately choose to do? What is your financial reasoning behind this choice? Consider supporting your answer with quantitative data.

The Department of Corrections (DOC) needs to replace two of its prison transport buses. There are two companies that have a track record of making reliable vehicles, and both make a bus that meets the needs of the department. The DOC pays an 8% interest rate on money it borrows. The bus from Company A has a purchase price of $105,000 and a 10-year service life expectancy, and it averages $2,000 per year in maintenance costs. The bus from Company B has a purchase price of $110,000 and a 10-year service life expectancy, and it averages $1,500 per year in maintenance costs. Which bus should the Department of Corrections select?

The CFO of the supermarket chain Aldi is examining an investment in a new delivery service for internet orders. The initial investment of the project consists of a cash outflow of €700,000 for the following items: a) distribution fleet, b) computer servers, c) delivery packages, and d) other fixed assets. These assets will be fully depreciated for tax purposes over a 5-year period, which is the lifetime of the project, using the straight-line depreciation method. At the end of this project, the distribution fleet and computer servers can be sold for €60,000.

The revenue of the new service will be equal, for the first year, to 15% of the current total sales of the traditional service, which are €7.5 million. For the following years, the revenues of the new service will be 20%, 25%, 30%, and 35% respectively of the initial traditional sales. This new service for internet ordering is a premium service. Therefore, the prices of the home delivery goods will be 5% higher than the current supermarket prices.

It should be taken into account that the cost of goods sold represents 70% of the supermarket sales price. Aldi expects to spend each year 7% of the sales of the new service for advertising. The company already has the available warehouse capacity needed for this service. The service will occupy 10% of the warehouse. The warehouse is rented at an annual cost of €300,000. The wages for the project workers will be €150,000 per year, however, 20% of them are workers transferred from other Aldi businesses (the company has a lifetime job policy). The distribution costs (fuel, etc.) are 3% of sales of the new service.

The introduction of the new internet ordering service will have as a consequence the reduction of the traditional sales of the supermarket business. Sales in the traditional supermarket business are expected to decrease from €7.5 million a year to €7.4 million a year for the next five years.

Accounts payable are equal to 4% of cost of goods sold, inventory corresponds to 8% of cost of goods sold, and accounts receivables are 10% of sales. At the end of the internet sales project, all remaining net working capital would be liquidated, and the cash recovered. Aldi has profits from its current business, pays taxes of 25% and has a cost of capital equal to 10%

. You are required to:

a. Calculate the project’s profit after tax throughout its five-year cycle

b. What is the change in Net Working Capital for each year?

c. Calculate the project’s Net Cash Flows for each year

d. Evaluate the project according to its NPV, IRR, Profitability Index, and Payback Period

question/ A mutual fund manager expects her portfolio to earn a rate of return of 11% this year. The beta of her portfolio is 0.9.

If the rate of return available on risk-free assets is 4% and you expect the rate of return of the market portfolio to be 14%.

#1A- What expected rate of return would you demand before you would be willing to invest in this mutual fund?

#2A- Is this fund attractive? Why?

#3A- How could you mix mutual fund with a risk-free position in Treasury bills to create a portfolio with the same managers but with a higher expected rate of return? what is the rate of the return of the portfolio?

The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Current Ratio = 1.33

Quick Ratio = 0.61

Days sales outstanding (DSO) = 59.14 days

Asset Turnover - 1.40

Inventory Turnover Ratio = 4.09

Return on Asset(ROA)= 2.70%

Return on Equity(ROE)= 9%

Net Profit Margin= 1.93%

Question: A). Using the following data, analyse the company's performance based on the ratio, explain what each ratio figure means in terms of the performance. (50-100 word on each ratio)

B). analyze the company overall performance (summary of A)

Explain the difference between (a) public offerings and private placements, (b) primary markets and secondary markets, (c) the money market and the capital market, and (d) organized security exchanges and over-the-counter markets.

a) You are the owner of a firm that currently generates revenues of £1 million per year. Next year, revenues will either decrease by 8% with 60% probability or increase by 10% with 40% probability and then stay at that level for as long as you run the business. You own the firm outright. Also, you have annual costs of £700,000. If you decide to shut down the firm the cost is zero. In that case, you can always sell the firm for £600,000. What is the business worth today if the cost of capital is 12%? [15 marks]

b) Zweite Pharma is a fast-growing company. The company forecasts that in the next three years its growth rates will be 30%, 28% and 24% respectively. After three years, the company expects a more stable growth of 8% that will last forever. Last week it declared a dividend of £1.67. The required rate of return is 14%.

i) Compute the dividends for the next three years and find their present value.

ii) Calculate the price of the shares at the end of year 3 when the firm settles to a constant growth.

iii) What is the current price of the shares?

assume you sell short 100 shares of common stock at 50 per share, with initial margin at 50%, at what price you will receive a margin call from your broker ( assuming maintenance margin of 30%)

answers- 42.26, 57.69, 62.00, 24.44

What is your rate of return in previous problem if you purchase the stock at $40 per share?

answers- 40%, 60%, 25%, 18%

Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the project is $22971 and it will be depreciated according to the three-year MACRS schedule. The project also requires an initial increase in net working capital o

I am having a difficult time understanding this can someone show me how to calculate the MACRS. and can show me how to do this on an excel spreadsheet. thank you.Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the project is $22971 and it will be depreciated according to the three-year MACRS schedule. The project also requires an initial increase in net working capital of $308. Financial projections for sales and costs are in the table below. In addition, since sales are expected to fluctuate, NWC requirements will also fluctuate. The end-of-year NWC requirements are included below (hint: these NWC capital requirements DO NOT represent the change in NWC for the period). The $0 requirement for NWC at the end of year 4 means that all NWC is recovered by the end of the project. The corporate tax rate is 35% and the required return on the project is 12%.

What is the project’s NPV?