Glazer Drug Co. is the fourth largest generic drug company in the world, with annual sales of over $3 billion. It trails only Norvatis AG, Teva Pharmaceutical, and Mylan Labs in sales and profits. Its home office is in St. Louis, with its laboratories and sales outlets in the U.S. and 30 foreign countries, with the largest foreign operations in Great Britain and Australia. Its generic brand labels cover medication for heart disease, diabetes, acute infections, and many other ailments.

In the fall of 2012, the company decided to go public. Its investment banker was Aaron, Barkley, and Company.

Glazer Drug Co.’s most recent 12 month earnings were $150 million with one hundred million shares, providing an EPS figure of $1.50. After conducting a careful analysis of the generic drug industry, the investment banker decided a P/E of 25 would be appropriate, giving the stock a value of

$37.50. Allowing for the underwriting speed, the net to the corporation and selling stockholders was $36.68. The out-of-pocket underwriting expense was
$2 million on the 20 million chares that were to be sold to the public. Ten million of the 20 million shares in the IPO were new corporate shares and the remaining
10 million were shares currently owned by Larry Glazer, one of the founders of the company. The 10 million shares sold by Glazer represented 85 percent of his holdings.

On the day of the offering, the stock price shot up from $37.50 to $51.10 a share, and by January 1, 2013, the stock had reached a price of $61.75. Since no specific events involving the company had taken place, it appeared that the stock market had a favorable impression of the firm.

1. What was the percent underwriting speed?

2. Subsequent to the issue, by what amount would earnings per share be diluted?

3. What are the net proceeds to the corporation from the issue?

4. What rate of return would the corporation need to earn on the net proceeds to avoid dilution? Note: because of the relatively high P/E of 25, the answer is less than 5 percent. However, the P/E does not figure directly into the calculation.

5. Using the original earnings per share of $1.50, what would the P/E ratio be based on the stock price of $61.75 on January 1, 2013?

6. Should Mr. Glazer be happy about the pricing of the stock by the investment banker and the movement of the stock price after going public?

Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $27.00 million. The plant and equipment will be depreciated over 10 years to a book value of $2.00 million, and sold for that amount in year 10. Net working capital will increase by $1.21 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $8.69 million per year and cost $1.84 million per year over the 10-year life of the project. Marketing estimates 19.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 29.00%. The WACC is 13.00%. Find the NPV (net present value).

a. Find the duration of a 7% coupon bond making annual coupon payments if it has three years until maturity and has a yield to maturity of 7%. Note: The face value of the bond is $1,000.

b. What is the duration if the yield to maturity is 8.4%? Note: The face value of the bond is $1,000.

Part 8 New Primary Care Practices in Jasper

Determine the costs to MCH of establishing two new primary care practices in Jasper. The analysis should include estimates of all costs (recruitment, compensation arrangements, facility, staffing, information technology, etc.) and assess the advantages and disadvantages of leasing or purchasing building space.

Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2,000 and a cash inflow the following year of $2,400. Sandrine estimates that its risk-adjusted cost of capital is 8%. Currently, 1 U.S. dollar will buy 0.85 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding 2.6%, while similar securities in Switzerland are yielding 1.3%.

1. If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round the net present value to the nearest cent and rate of return to two decimal places.

   NPV = ----------$  

   Rate of return = ------------ %

2. What is the expected forward exchange rate 1 year from now? Do not round intermediate calculations. Round your answer to two decimal places.

   ---------- Swiss franc (SF_r) per U.S. $

3. If Sandrine undertakes the project, what is the net present value and rate of return of the project for Sandrine? Do not round intermediate calculations. Round the net present value to the nearest cent and rate of return to two decimal places.

   NPV = ------------Swiss francs

   Rate of return = ------------ %

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $13 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $5 million with a 0.2 probability, $2.9 million with a 0.5 probability, and $0.4 million with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations.

Debt/Capital ratio is 0.

Debt/Capital ratio is 10%, interest rate is 9%.

Debt/Capital ratio is 50%, interest rate is 11%.

Debt/Capital ratio is 60%, interest rate is 14%.

The following are the projected cash flows to the firm over the next five years:

The firm has a cost of capital (WACC )of 12% and the cash flows are expected to grow at the rate of 4% in perpetuity?

a) What is the value of the firm today?

b) At what growth rate will the firm have a value of $3000 Million?

(Capsim Capstone) Please comment on the importance of analyzing your results before making new decisions. Feel free to comment on any of the following areas: R & D, marketing, production, finance, HR, or TQM.

Your neighbor approached you about a dilemma he has with his mortgage. He purchased his house in 2006 with a $600,000, 6% fixed rate, 30 year mortgage. Then the great recession hit. Today his house is estimated to be worth less than the balance he owes on the mortgage. Furthermore, he was forced to take a new job at 20% less than what he was earning when he purchased the house. Here in 2012, 72 months later, he is contemplating entering into a mortgage modification program sponsored by the government. It offers 3 options.

1. reducing the interest rate to 4.5%
2. forgiveness of $100,000 of the principle due and continuing at 6%
3. refinancing the balance due with a new 15 year, 4% mortgage

Which option would minimize his monthly mortgage payment? Assume all refinancing costs will be paid by the government.

1. Broussard Skateboard's sales are expected to increase by 20% from $7.6 million in 2016 to $9.12 million in 2017. Its assets totaled $2 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations.

A stock portfolio has an expected return of 12% and a standard deviation of 20%. A bond portfolio has an expected return of 6% and a standard deviation of 9%. The two portfolios have a correlation coefficient of 0.3. T-Bills have an expected return of 2%. Your coefficient of risk aversion is 7.

1. What is the expected return and standard deviation of the minimum variance portfolio?

Retirement planning  

   Hal​ Thomas, a 35​-year-old college​ graduate, wishes to retire at age 65. To supplement other sources of retirement​ income, he can deposit ​$2,100 each year into a​ tax-deferred individual retirement arrangement​ (IRA). The IRA will earn a return of 14​% over the next 30 years.

a.  If Hal makes​ end-of-year ​$2,100 deposits into the​ IRA, how much will he have accumulated in 30 years when he turns 65​?

b.  If Hal decides to wait until age 45 to begin making​ end-of-year ​$2,100 deposits into the​ IRA, how much will he have accumulated when he retires 20 years​ later?

c.  Using your findings in parts a and ​b, discuss the impact of delaying deposits into the IRA for 10 years​ (age 35 to age 45​) on the amount accumulated by the end of​ Hal's 65th

year.

d.  Rework parts ​a, b, and c assuming that Hal makes all deposits at the​ beginning, rather than the​ end, of each year. Discuss the effect of​ beginning-of-year deposits on the future value accumulated by the end of​ Hal's 65th year.

3. Pick three things that affect the value of options and explain why they affect the value of options the way they do. (9 pts.)