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!

15

What is Jensen's alpha of a portfolio comprised of 45 percent portfolio A and 55 percent of portfolio B?

Quatro Co. issues bonds dated January 1, 2019, with a par value of $710,000. The bonds’ annual contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $728,598.

1. What is the amount of the premium on these bonds at issuance?
2. How much total bond interest expense will be recognized over the life of these bonds?
3. Prepare an effective interest amortization table for these bonds.

• Required 1
• Required 2
• Required 3

What is the amount of the premium on these bonds at issuance?

repare an effective interest amortization table for these bonds. (Round all amounts to the nearest whole dollar.)

• Required 2

You are considering buying new PACS hardware/software that will require an initial outlay of $54,200. The system has an expected useful life of 5 years and will generate free cash flows to the hospital as a whole of $20,608 at the end of each year over its 5 year life. In addition, the salvage value of the system is expected to be $13,200 based on current market conditions. Given a required rate of return of 15 percent, determine the following:

a. Payback Period

b. NPV

c. IRR

d. Should this project be accepted?

Please show work in Excel!

Please answer the 3 question below about the Miller Corporation

Miller Corporation ‐ Year 20X3  During the year, you paid the amounts owed for Motorcycles at the end of year 20X2 and collected all  the amounts owed by customers for 20X2.  You purchased 25 more Motorcycles for $6,000 each and at  the same terms as in 20X2.  During the year, you sold 22 Motorcycles for $11,000 each at the same  terms as 20X2.  You paid the money owed to suppliers (Accounts Payable) at the beginning of the year  and collected all money due you at the beginning of the year (Accounts Receivable).  You use the FIFO  inventory system.     On January 1, 20X3, you purchased furniture and fixtures for $55,000.  You put $15,000 down and  financed the remaining amount at 10%.  You will make annual payments on December 31st for four years  that include the interest accrued to date plus $10,000 on the principal each year.  You estimate that you  will use them for 10 years and then they will be worth $5,000.      On June 30th, you paid $3,600 for a two‐year insurance policy; office expenses of $12,000; $4,500 for  advertising in The Post; utilities of $6,000; and Supplies of $1,500.  You also paid $26,000 for 13 months  of rent.  You paid your worker $18,000 (includes amount owed from prior year) and owed her $2,000  more at the end of the year.      On December 31st, you paid the first payment on the furniture and fixtures loan.  Paid Uncle Mike his  interest and paid the principal balance owed on December 31st.    This year you declared and paid a dividend of $4,000 to your shareholders.  On October 1st you issued 30  shares of common stock for $3,000.      You paid the 20X2 taxes.  The 20X3 taxes will be paid in 20X4.  The tax rate is 21%.      Prepare the Journal Entries (including the closing entry), T‐accounts, and all four Financial Statements  (in good form).      Miller Corporation ‐ Year 20X4  During the year, you bought 31 more Motorcycles for $6,500 each and sold 29 for $12,000 each, same  terms as last year.  You paid the money owed to suppliers (Accounts Payable) at the beginning of the  year and collected all money due you at the beginning of the year (Accounts Receivable).      On January 1st, you purchased a delivery truck for $41,000.  You made a down payment of $10,000 and  financed the balance at 7%.  You will make four equal payments that include interest @ 7%.  You make  the first payment on December 31st of this year.  You estimate the truck will last about 6 years and then  be worth $5,000.     
You paid your worker $17,000 (includes amount owed from prior year) and owed her $2,000 more at  

One part of financial analysis is analyzing the same company over many years using a trend analysis. Using the information you prepared for Assignment #3 (the Accounting Cycle Problem) for Miller Corp., answer the following questions:

Assignment 3 Answer below:

Miller Corporation has shown good financial performance year on year basis. In third year of operations, the company has generated net income $28,835 and gross profit is $114,000. The revenue of the company is $242,000 during third year of operations. The gross profit margin of the company is 47.10% and net profit margin is 11.92%. The revenue of the company is growing year on year basis, but the net profit margin and gross margin have slightly reduced in third year. The company should try to improve its gross profit margin and net profit margin to grow at speedy rate.

The company has generated $40,656 from operations which has been utilized for investing and financing activities. The net changes in cash flows have slightly reduced which shows that the company has utilized its cash balance $10,944 to pay finance obligations during the third year of operations. The total assets of the company are $345,732 as on year 20X3 and the assets partly financed from liability and equity i.e. $152,165 from liability and $193,567 from equity. It shows that the majority assets are financed from equity and the company has reduced its debt obligations during the year.

During fourth year of operations, the revenue, gross profit and net profit of the company are $348,000, $162,000 and $56,114 respectively. The gross margin of the company is 46.55% and net profit margin is 16.12%. The gross margin I fourth year is equivalent to third year of operations and the net profit margin o the company has increase in comparison to third operations and the net profit margin of the company has increased in comparison to third year. It shows that the company has improved its profitability and has utilized its resources more effectively and efficiently. The company has generated $64,060 from operations and the amount has been utilized for investing activities. Further the total asset base of the company has also increased, and the financial position and financial performance of the company has improved year on year basis which is a healthy indicator for the company.

1. How is Miller’s liquidity trending from one year to the next?

2. How is Miller’s solvency trending from one year to the next?

3. How has Miller’s asset base changed over time? Will this allow the company to meet consumer demand for their product? Why or why not?

Explain how forwards or futures can be used to manage risk. Provide an example of a hedge that uses a short futures position.   Why might you chose to use a put option as a hedge instead of a short futures position?

An asset costs $890,000 and will be depreciated in a straight-line manner over its four-year life. It will have no salvage value. The corporate tax rate is 21 percent and the appropriate interest rate is 8 percent.

a. What would the lease payment have to be to make both the lessor and lessee indifferent about the lease?

b. Assume that the lessee pays no taxes and the lessor pays taxes. For what range of lease payments does the lease have a positive NPV for both parties? (

Elaborate on four variables which affect bond default risk according to Jane Howe.