Bob’s Burgers is considering a project with an initial cost of $8 million that would produce cash flows of $1.5 million the first year, $2 million the second, and $2.5 million per year for the final two years. If the required return is 11.3%, what is the IRR of the project?

Discuss briefly and comment for accuracy the following statements.

“All else equal, higher depreciation expenses will result in larger FCF and lower net income. The specific impact can be discerned by multiplying the incremental depreciation expense by tax rate.”

The management of Madeira Manufacturing Company is considering the introduction of a new product. The fixed cost to begin the production of the product is $32,000. The variable cost for the product is expected to be between $19 and $28 with a most likely value of $26 per unit. The product will sell for $45 per unit. Demand for the product is expected to range from 300 to 1800 units, with 900 units the most likely demand.

1. Develop the profit model for this product. Enter your answer in the form of an expression. (Example: (c+10)⋅x+800)
   
   Profit =  
   
2. Provide the base-case, worst-case and best-case analyses. For those boxes in which you must enter subtractive or negative numbers use a minus sign. (Example: -300)
   

   	Base case:	Profit =	$
   	Worst case:	Profit =	$
   	Best case:	Profit =	$

South Central Airlines operates a commuter flight between Atlanta and Charlotte. The plane holds 30 passengers, and the airline makes a $100 profit on each passenger on the flight. When South Central takes 28 reservations for the flight, experience has shown that, on average, two passengers do not show up. As a result, with 30 reservations, South Central is averaging 28 passengers with a profit of 28(100) = $2,800 per flight. The airline operations office has asked for an evaluation of an overbooking strategy in which the airline would accept 32 reservations even though the airplane holds only 30 passengers. The probability distribution for the number of passengers showing up when 32 reservations are accepted is as follows:

The airline will receive a profit of $100 for each passenger on the flight, up to the capacity of 30 passengers. The airline will also incur a cost for any passenger denied seating on the flight. This cost covers added expenses of rescheduling the passenger as well as loss of goodwill, estimated to be $150 per passenger. Develop a worksheet model that will simulate the performance of the overbooking system. Simulate the number of passengers showing up for each of 500 flights by using the VLOOKUP function. Use the results to compute the profit for each flight.

A. What is the mean profit per flight if overbooking is implemented? Round your answer to the nearest dollar.

Over $   

1- There are a number of approaches may be used to estimate the market risk premium. Identify three of them and discuss/justify them in detailed

Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $138,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $593,000 per year. The fixed costs associated with this will be $197,000 per year, and variable costs will amount to 19 percent of sales. The equipment necessary for production of the Potato Pet will cost $656,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy's has a tax rate of 30 percent and a required return of 15 percent.

What is the IRR?

You are considering an investment with the following cash flows. Your required return is 8%, you require a payback of 3 years and a discounted payback of 4 years. If your objective is to maximize your wealth, should you take this investment?
Year 0 1 2 3 4 5
Cash Flow –$50,000 $20,000 $20,000 $20,000 $20,000 –$50,000

Firm B is The Bidding Firm and Firm T is the Target Firm.Their financial data is as follows:

(A) calculate the weighted average weighted average P/E for the combined Firm BT.

(B)Calculate the Maxium number of shares firm B will be willing to offer to the sockholders of firm T at the P/E calculated in Part (A) above.What will be the minimum number of shares acceptable to the stockholders of firm T at the same P/E level?

(C) If EPS was the criterion to determine the exchange ratio,how many shares firm B would offer to stockholders of firm T?in case,Market price per share was used as a basis to determine the exchange ratio,how much would your result change?which one do you think would be a better criterion for exchange rate determination?why?

15) Paradise Retailers, Inc. (PRI) determined that $1,500,000 is needed for cash transactions made during the next year. Each time PRI deposits money in its checking account, a charge of $12.95 is assessed to cover clerical costs. If PRI can hold marketable securities that yield 4.5%, and then convert these securities to cash at a cost of only the $12.95 deposit charge, what is the optimal cash amount C* to transfer from marketable securities to the checking account according to the Baumol Model? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

15) Answer=29382.53

16) Use the data from problem 15, PRI’s financial managers have not been following the Baumol Model. Instead, they have been transferring cash from marketable securities less frequently, namely, transferring cash every 3 weeks. What total cash cost including holding costs and transactions costs could PRI save by transferring the optimal cash amount C* rather than this larger transfer amount? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

17) Using the data from problem 15, PRI’s financial managers are adjusting their optimal cash amount C* from the Baumol Model to respond to changing market conditions. Interest rates have declined so that their marketable securities now yield 3.25% and their bank raised its deposit charge from $12.95 to $13.95. By what amount will PRI’s optimal cash amount C* increase from what you calculated in problem 15? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales of $45,625,000, or $125,000 a day on a 365-day basis. The firm's cost of goods sold is 60% of sales. On average, the company has $7,500,000 in inventory, $5,750,000 in accounts receivable, and $2,750,000 in accounts payable. Its CFO has proposed new policies that would result in a 25% reduction in both average inventories and accounts receivable, and a 10% increase in average accounts payable. She also anticipates that these policies would reduce sales by 5%. What effect would these policies have on the company's cash conversion cycle? Enter your answer rounded to two decimal places. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

An Overview of Financial Management Please respond to the following: Examine ethical behavior within firms in relation to financial management. Provide two (2) examples of companies that have been guilty of ethics-based action related to financial management.