Lear Inc. has $1,030,000 in current assets, $465,000 of which are considered permanent current assets. In addition, the firm has $830,000 invested in fixed assets.    
  
a. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 9 percent. The balance will be financed with short-term financing, which currently costs 6 percent. Lear’s earnings before interest and taxes are $430,000. Determine Lear’s earnings after taxes under this financing plan. The tax rate is 40 percent.

Earnings after tax-  

     

b. As an alternative, Lear might wish to finance all fixed assets and permanent current assets plus half of its temporary current assets with long-term financing and the balance with short-term financing. The same interest rates apply as in part a. Earnings before interest and taxes will be $430,000. What will be Lear’s earnings after taxes? The tax rate is 40 percent.
  

Earnings after tax-  

2.

Antonio Banderos & Scarves makes headwear that is very popular in the fall-winter season. Units sold are anticipated as:

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup.

However, Antonio decides to go with level production to avoid being out of merchandise. He will produce the 14,800 items over four months at a level of 3,700 per month.

a. What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total.

Antonio Banderos & Scarves makes headwear that is very popular in the fall-winter season. Units sold are anticipated as:

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup.

However, Antonio decides to go with level production to avoid being out of merchandise. He will produce the 14,800 items over four months at a level of 3,700 per month.

a. What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total.

b. If the inventory costs $6 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1 percent as the monthly rate.)

home / study / business / finance / finance questions and answers / ​(bond valuation​) you own a 15​-year, ​$1 comma 000 par value bond paying 6.5 percent ... Question: ​(Bond valuation​) You own a 15​-year, ​$1 comma 000 par value bond paying 6.5 percent interest a... ​(Bond valuation​) You own a 15​-year, ​$1 comma 000 par value bond paying 6.5 percent interest annually. The market price of the bond is ​$750​, and your required rate of return is 11 percent. a. Compute the​ bond's expected rate of return. b. Determine the value of the bond to​ you, given your required rate of return. c. Should you sell the bond or continue to own​ it? a. What is the expected rate of return of the 15​-year,$1,000 par value bond paying 6.5 percent interest annually if its market price is ​$750?

​(Bond valuation​) You own a 15​-year, ​$1 comma 000 par value bond paying 6.5 percent interest annually. The market price of the bond is ​$750​, and your required rate of return is 11 percent.

a. Compute the​ bond's expected rate of return.

b. Determine the value of the bond to​ you, given your required rate of return.

c. Should you sell the bond or continue to own​ it?

a. What is the expected rate of return of the

15​-year,$1,000 par value bond paying

6.5 percent interest annually if its market price is

​$750?

Assume that Walmart is considering opening a store in Argentina. Argentina is rate BB-, and its dollar-based bonds trade at a default spread of 3% over the US treasury bond rate of 6.5%. The Argentine equity market is 1.8 times more volatile than the Argentine long-term bond market. Walmart has a beta of 0.9 (already relevered to account for the Argentinian tax rate of 35% and Argentinian D/E ratio). The market risk premium in the United States is 5.5%. The firm intends to borrow in Argentina at a local rate of 12% (in pesos) and maintain a debt ratio of 25% for Argentine projects. You can assume that the inflation rate in the United States is 3% whereas it is 9% in Argentina.

(a)     Explain what we mean by “the inflation rate” in the above description.

(b)     Estimate the cost of equity and the cost of capital in dollar terms for the Argentine store.

3. Estimate the cost of equity and capital in peso terms of the Argentine store.

Bob Orleans invested $3,000 and borrowed $3,000 to purchase shares in Verizon Communications. At the time of his investment, Verizon was selling for $16 a share.

a. If Bob paid a commission of $40, how many shares could he buy if he used only his own money and did not use margin?

b.  If Bob paid a commission of $80, how many shares could he buy if he used his $3,000 and borrowed $3,000 on margin to buy Verizon stock?

c. Assume Bob did use margin and paid a commission of $80 to buy his Verizon stock. Also, assume he paid another $80 to sell his stock and sold the stock for $22 a share. How much profit did he make on his Verizon stock investment? (Use the rounded number of shares computed in part b. Round your answer to 2 decimal places.)

Zayas has identified the following two mutually exclusive projects.

a. What is the IRR for each project and if you apply the IRR decision rule which project would you accept

b. If the required return is 11% what is the NPV for each of these projects? Which project would you choose?

If possible, please show formula and do not use excel. Thanks!

(Financial

forecastinglong dash—percent

of

sales​)

Next​ year's sales for Cumberland Mfg. are expected to be ​$22.00 million. Current sales are ​$18

​million, based on current assets of $5.00 million and fixed assets of ​$5.00million. The​ firm's net profit margin is 5 percent after taxes. Cumberland estimates that its current assets will rise in direct proportion to the increase in​ sales, but that its fixed assets will increase by only​ $150,000. Currently, Cumberland has $2.00 million in accounts payable​ (which vary directly with​ sales), ​$1 million in​ long-term debt​ (due in 10​ years), and common equity​ (including​ $4 million in retained​ earnings) totaling ​$7.00 million. Cumberland plans to pay $0.75 million in common stock dividends next year.

a. What are​ Cumberland's total financing needs​ (that is, total​ assets) for the coming​ year?

b. Given the​ firm's projections and dividend payment​ plans, what are its discretionary financing​ needs?

c. Based on your​ projections, and assuming that the​ $150,000 expansion in fixed assets will​ occur, what is the largest increase in sales the firm can support without having to resort to the use of discretionary sources of​ financing?

a. What are​ Cumberland's total financing needs​ (taht is, total​ assets) for the coming​ year?

​$nothing

million  ​(Round to two decimal​ places.)

b. Given the​ firm's projections and dividend payment​ plans, what are its discretionary financing​ needs?

​$nothing

million  ​(Round to two decimal​ places.)

c. Based on your​ projections, and assuming that the​ $150,000 expansion in fixed assets will​ occur, what is the largest increase in sales the firm can support without having to resort to the use of discretionary sources of​ financing?

​$nothing

million  ​(Round to two decimal​ places.)

What are some derivative products? Illustrate their use as investment vehicles. What are convertible securities? What are the advantages and disadvantages of owning a convertible security?

the property she needed to be sure this property would serve her purposes. So she performed market research and investigated the ability to rezone the property. This was going to take about 8 months to accomplish. To prevent anybody else from purchasing the property prior to completing her due diligence, she secured an option on the property. The option cost her $25,000, but it gave her the exclusive right to buy the property for the next 9 months. The option provides that Porky retains the $25,000 if the option is not exercised. However, if it is exercised, the $25,000 becomes part of the $1,000,000 contract price of the real estate. After completing her due diligence, Jenny decides not to purchase the property. She allows the option to expire. What are the tax consequences? Check as many as are correct.

1-Porky has $25,000 of ordinary income upon receipt of the option money.

2-Porky has $25,000 ordinary income on the date the option expired.

3-Jenny has a $25,000 loss on the date she purchased the option.

4-Jenny has a capital loss of $25,000 when the option expired.

5-None of the above.