the difference between the internal rate of return method and the modified internal

After the acquisition, the good doctor was presented by his Finance Manager the following costs in performing a particular procedure using the equipment:

4.1.      Share in the monthly salaries of the Admin staff                   $20,000

4.2.      Share in maintenance Costs                                                   $10,000

4.3.      Share in other monthly overhead costs                                 $130,000

4.4.      Supplies, medication needed in the procedure                     $15,000

Assuming the procedure’s price is pegged at $20,000, determine the needed total number of patients per month to break even. Assume a net income of $150,000 per month is desired, how many procedures must be done to accomplish this? How would the picture look assuming the cost of supplies and medication from the procedure increases to $22,000.

The company  is deciding on which equipment to acquire. Each is worth 20Million. The company thinking if financing the 50% equity, 25 % via 5 year term loan at 7.5 % annual effective interest and the balance via $100/ share callable preferred shares of stock that promises to pay 4% quarterly dividends. The company consistently paid the 5% semi annual dividends on its common shares. Calculate the weighted average cost of capital of the project. Disregard taxes in your computations. Assume full principal payment on year 5.

After receiving proposals from suppliers, the finance manager came up with the following comparative cash flow projection:

                        Equipment A                           Equipment B

Year 1              $2,000,000                              $4,000,000

Year 2              $2,000,000                              $4,000,000

Year 3              $5,000,000                              $4,000,000

Year 4              $5,000,000                              $4,000,000

Year 5              $6,000,000                              $4,000,000

Using the information derived above, and using the Net Present Value (NPV), Discounted Payback Period and Profitability Index, which will you recommend of the two equipment to acquire?

A firm is considering a project that requires an initial investment of $250,000. The life of this project is five years. Cash flows for each year are estimated as follows:

The cost of capital of this project is 8%. Calculate the profitability index and make a decision.

1.) badBanana co. has an average age of inventory equal to 25 days. if its end of year inventory level is $8,500, then what does that imply for the cost of goods sold during the year? (round to the nearest dollar)

a.) $582

b.) $4964

c.) $21,250

d.) $124,100

2.) What Ratio measures the ability of the firm to satisfy its short term obligations as they come due?

a.) TImes Interest and earned ratio

b.) current ratio

c.) Inventory turnover ratio

3.) Which of the following represents an inflow of cash?

a.) A decrease in any liability

b.) repurchase or retirement of stock

c.) A decrease in any asset

Last year Swensen Corp. had sales of $303,225, operating costs of $267,500, and year-end assets of $163,000. The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, and the firm's tax rate was 37%. The new CFO wants to see how the ROE would have been affected if the firm had used a 45% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant. By how much would the ROE change in response to the change in the capital structure? Select the correct answer. a. 3.27% b. 4.47% c. 4.17% d. 3.87% e. 3.57%

What are the causes of poverty and instability in least developed countries?

Precision Tool is trying to decide whether to lease or buy some new equipment for its tool and die operations. The equipment costs $55,000, has a 3-year life and will be worthless after the 3 years. The pre-tax cost of borrowed funds is 6 percent and the tax rate is 33 percent. The equipment can be leased for $17,500 a year. What is the net advantage to leasing?

Suppose that you are a consultant that gives advice to small entrepreneurial firms that want to become corporations. As you know, becoming incorporated and publicly-traded (issuing common stock) involves adopting Articles of Incorporation, which establish the corporation’s Board of Directors structure, the number of authorized and issued shares, voting procedures, etc.

Today, a client walks in your office and explains that she has successfully operated a small restaurant for many years and is ready to expand. Therefore, she wishes to incorporate and raise enough common equity to open new locations all over Texas.

The client, however, is concerned about other firms trying to acquire control of her firm in the future and asks your advice about 1) what voting rules, if put in the articles of incorporation, might discourage a takeover, 2) whether the number of directors and the timing of their re-election is an important consideration, and 3) if there are any other ideas you might have to help her fend off possible take-over attempts. Give her some advice.

If a firm’s ROE is low and management wants to improve it, explain how using more debt might help.

During the last year, Globo-Chem Co. generated $702 million in cash flow from operating activities and had negative cash flow generated from investing activities (-$384 million). At the end of the first year, Globo-Chem Co. had $120 million in cash on its balance sheet, and the firm had $380 million in cash at the end of the second year.

What was the firm’s cash flow (CF) due to financing activities in the second year? -$29.00 million $72.50 million -$58.00 million $43.50 million

A firm just made a $1,000,000.00 sale to a retail chain. The firm will be 50.00% in cash today, and then pay the remainder in 30 days (a receivable for the firm). The firm fills the sale with $400,000.00 in inventory. Consider how an accountant will handle this transaction.

A.) Revenues will be adjusted by ___________________

B.) Accounts receivable will be adjusted by ______________

C.) Cash will be adjusted by ________________

D.) Inventory will be adjusted by _________________

E.) If COGS is 40% of sales, COGS will be adjusted by _________________

You have $5,000 to invest for the next year and are considering three alternatives: A money market fund with an average maturity of 30 days offering a current yield of 2.0% per year A 1-year savings deposit at a bank offering an interest rate of 4.0% A 20-year U.S. Treasury bond offering a yield to maturity of 4.0% per year A 20-year corporate bond offering a yield to maturity of 7. What is the risk profile of each of these assets? What role does your forecast of future interest rates play in your decisions?

A company intends to pay a $1 dividend at the end of each of the next 3 years. After which it expects its dividends to increase by 3% per year forever. The required return on the company’s equity is 7%. What is the current price?

1. Premium Pie Company needs to purchase a new baking oven to replace an older oven that requires too much energy to run. The industrial size oven will cost $1,200,000. The oven will be depreciated on a straight-line basis over its six-year useful life. The old oven cost the company $800,000 just four years ago. The old oven is being depreciated on a straight-line basis over its expected ten-year useful life. (That is, the old oven is expected to last six more years if it is not replaced now.) Due to changes in fuel costs, the old oven may only be sold today for $100,000. The new oven will allow the company to expand, increasing sales by $300,000 per year. Expenses will also decrease by $50,000 per year due to the more energy efficient design of the new oven. Premium Pie Company is in the 40% marginal tax bracket and has a required rate of return of 10%.

a. Calculate the net present value and internal rate of return of replacing the existing machine

b. Explain the impact on NPV of the following:
i) Required rate of return increases
ii) Operating costs of new machine are increased
iii) Existing machine sold for less