4b) The Rich Pharma Corporation has just invented a cheap form of energy. Investors with a 16% required rate of return expect this company to grow at an accelerated rate of 45% per year for the next 3 years and then continue at a constant growth rate of 15% per year. What would investors be willing to pay for the common stock if the most recent annual dividend was $4.00 per share?

You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2016. The bonds have a par value of $2,000. Company (Ticker) Coupon Maturity Last Price Last Yield EST $ Vol (000’s) Xenon, Inc. (XIC) 6.600 Jan 15, 2032 94.303 ?? 57,374 Kenny Corp. (KCC) 7.240 Jan 15, 2031 ?? 5.38 48,953 Williams Co. (WICO) ?? Jan 15, 2038 94.855 7.08 43,814

What price would you expect to pay for the Kenny Corp. bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price $

What is the bond’s current yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Current yield %

(a) Last year A Corp and $195,000 of assets, $18,775 of net income and a debt-to-total-assets ration of 32%. Now suppose the new CEO convinces the president to increase the debt ratio to $48. Sales and total assets will not be affected but interest expenses would increase. However, the CFO believes tat better cost controls would be sufficient to offset the high interest expense, thus keep net income unchanged. By how much would the change in capital in the capital structure improve the ROE?

(b) Last year A Corp had sales of $315,000 and a net income of $17,832 and its year-end assets were $210,000. The firms total=debt-to-assets ratio was 42.5%. Based on the DuPont equation, what was A Corps ROE?

ROE= (NI/Sales) x (Sales/Total Assets) x (Total Assets/Common Equity)

Calculating Nominal Cash Flow: Etonic Inc. is considering an investment of $365,000 in an asset with an economic life of five years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $245,000 and $70,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 3 percent. Etonic will use the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is estimated to be $45,000 in nominal terms at that time. The one-time net working capital investment of $10,000 is required immediately and will be recovered at the end of the project. All corporate cash flows are subject to a 34 percent tax rate. What is the project’s total nominal cash flow from assets for each year?

PLEASE SHOW CALCULATOR INPUTS

Reynolds Metals is considering a project with a life of 4 years that will produce annual operating cash flows of $57,000. During the life of the project, inventory will be lowered by $28,000, accounts receivable will increase by $15,000 and accounts payable will increase by $6,000. The project requires the purchase of equipment at an initial cost of $104,000 that will be depreciated straightline to a zero book value over the life of the project. Ignore bonus depreciation The equipment will be salvaged at the end of the project creating an aftertax cash inflow of $22,000. At the end of the project, net working capital will return to its normal level. What is the NPV of this project given a required return of 16%?

28) You have come up with a forecast of your future earnings. You believe you will earn:

• $20,000 next year (one-year from now);
• $40,000 two years from now;
• $60,000 three years from now; and,
• $100,000 four years from now and every year there-after for another 29 years (30 such years in total)

Assume your earnings in all of these years are received as one lump-sum payment at the end of every year. Assume your personal discount rate is 8%.

What is the present value of your estimated future income?

* I need to be able to show my work, the steps to understand the question.

Based on your current employment, discuss what you believe are some of the key industry trends that will have an impact on your organization’s budget. If you are not currently employed, discuss the key industry trends for the industry or position you would like to pursue after you complete your degree.

Brewsters is considering a project with a life of 5 years and an initial cost of $120,000. The discount rate for the project is 12%. The firm expects to sell 2,100 units a year at a net cash flow per unit of $20. The firm will have the option to abandon this project after 3 years at which time it could sell the project for $50,000. The firm is interested in knowing how the project will perform if the sales forecasts for years 4 and 5 of the project are revised such that there is a 50% chance the sales will be either 1,400 or 2,500 units a year. What is the NPV of this project given these revised sales forecasts (consider the option to abandon in your analysis)?

A new 5-year project has expected sales of 3,400 units, plus or minus 8%; variable costs per unit of $22, plus or minus 2%; annual fixed costs of $47,000, plus or minus 2%; annual depreciation of $33,000; and a sale price of $45 a unit, plus or minus 3%. The project initially requires $165,000 of fixed assets and $42,000 of net working capital. At the end of the project, the net working capital will be recouped and the fixed assets will produce an aftertax cash inflow of $35,000. The tax rate is 21% and the discount rate is 14%. What is the NPV of the optimistic scenario

3. Income statement

The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm’s gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders.

The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm’s revenues and expenses to the period in which they were incurred, not necessarily when cash was received or paid. Investors and analysts use the information given in the income statement and other financial statements and reports to evaluate the company’s financial performance and condition.

Consider the following scenario:

Cold Goose Metal Works Inc.’s income statement reports data for its first year of operation. The firm’s CEO would like sales to increase by 25% next year.

Complete the Year 2 income statement data for Cold Goose, then answer the questions that follow. Round each dollar value to the nearest whole dollar.

Given the results of the previous income statement calculations, complete the following statements:

suppose that you have the following bonds:

1-year ZCB, face value 1, priced at 0.98

2 year ZCB, face value 1, priced at 0.95

3-year ZCB, face value 1, priced at 0.92

4-year ZCB, face value 1, priced at 0.88

A life insurance company anticipates the following payments: $100 in one year, $250 in two years, $300 in three years, and $350 in four years..

What answer is closest to the total present value of the life insurance company’s anticipated payments? a) $880 b) $900 c) $920 d) $950 e) $980 f) $1000

8. What answer is closest to the duration of the life insurance company’s anticipated payments? a) 2.0 year b) 2.5 years c) 3.0 years d) 3.5 years e) 4.0 years

9. Given your calculation above, if you were interested in matching the life insurance company’s assets to its liabilities so that small interest rate changes would change the asset present values by about the same amount as the payment present values, and you had the present value of the payments to invest, would you rather invest in the 1-year ZCB or the 3-year ZCB?

As a homeowner in the City of Bloomington you are interested in calculating the Effective Property Tax

Rate you expect to pay on your property. Based on the following information, calculate the ETR of your

property for

BOTH

of the following scenarios. It is fine to work in groups but you must turn in your work

and your work only.

Scenario 1)

You know from government legislation that the legal tax rate on your property is 2.4% and the city’s

assessed value of your property is $145,000. However, your property is currently on the market for only

$60,500 due to a significant downturn in the housing market.

What is your Effective Property Tax Rate?

Scenario 2)

You know from government legislation that the legal tax rate on your property is 2.4% and the city’s

assessed value of your property is $145,000. However, your property is currently on the market for

$175,000 due to a recent boom in the housing market.

What is your Effective Property Tax Rate?

Analysis:

Compare and analyze the two ETRs. How did the change in market value affect the property ETR?

Would you prefer your home to be undervalued or overvalued by government assessors before you pay

your property taxes?

Axtel Company has the following financial statements.

In addition, Axtel retired stock for $1,000,000 and paid a dividend of $1,727,000. Depreciation for the year was $1,768,000. Calculate the ratios for the Axtel Company. Assume Axtel had leasing costs of $7,267,000 and amortization of $1,416,000 in 20X1, and had 1268000 shares of stock outstanding that were valued at $28.75 per share at year end. The firm must also make principal repayments of $1,012,000 on its outstanding debt this year. Assume 360 days in a year. Round your answers to two decimal places.

Part 1) Discuss the relationship between hospitals' profitability and their performance at managing two components of working capital: accounts receivable, measured in terms of hospitals' average collection periods, and accounts payable, measured in terms of hospitals' average payment periods.

Part 2) How would you describe the composition and purpose of responsibility centers?

Bergman Corp. has experienced zero growth over the last seven years, paying an annual dividend of $2.00 per share. Investors generally expect this performance to continue. Bergman stock is currently selling for $24.39. The risk-free rate is 3.0%, and Bergman's beta is 1.3.

a. Calculate the return investors require on Bergman's stock

b. Calculate the market return

c. Suppose you think Bergman is about to announce plans to grow at 3.0% into the foreseeable future. You also believe investors will accept that prediction and continue to require the same return on its stock. How much should you be willing to pay for a share of Bergman's stock?