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

On 1 June, 2019, immediately after payment of the interest due that day, Tim Shaw bought two bonds each with a face value of $100,000 and a coupon rate of 8% p.a., paid half-yearly. The first bond will mature on 1 December 2021 and the second bond will mature on 1 December 2025. At the date of purchase, both bonds were selling at par. Since then, yields on bonds have risen by 2% pa, compounded half-yearly. Tim now intends to sell the bonds and put a deposit on a house.

a. Calculate the price he will receive from each bond if he sells on 1 September, 2019 at the new yield. (Hint: There are 92 days from 1 June, 2019 to 1 September, 2019, and 183 days from 1 June, 2019 to 1 December, 2019 – in both cases, ignoring the first day and including the last day of the period.)

b. Explain the relative price movements in the two bonds, as evidenced in your answer to part a above.

Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Materials handling $108,000 Number of moves 4,500 Engineering 165,000 Number of change orders 10,000 Other overhead 263,200 Direct labor hours 47,000 Heitger worked on four jobs in July. Data are as follows: Job 13-43 Job 13-44 Job 13-45 Job 13-46 Beginning balance $20,000 $19,500 $2,800 $0 Direct materials $5,900 $9,750 $10,600 $9,800 Direct labor cost $950 $1,100 $1,640 $100 Job 13-43 Job 13-44 Job 13-45 Job 13-46 Number of moves 45 47 33 7 Number of change orders 34 35 21 16 Direct labor hours 950 1,100 1,640 100 By July 31, Jobs 13-43 and 13-44 were completed and sold. Jobs 13-45 and 13-46 were still in process. Required: 1. Calculate the activity rates for each of the three overhead activities. Round all activity rates to the nearest cent. Materials handling rate $ per move Engineering rate $ per change order Other overhead rate $ per direct labor hour Hide 2. Prepare job-order cost sheets for each job showing all costs through July 31. When required, round your answers to the nearest dollar. If an amount is zero, enter "0". Heitger Company Job-Order Cost Sheets Job 13-43 Job 13-44 Job 13-45 Job 13-46 Balance, July 1 $ $ $ $ Direct materials Direct labor cost Materials handling Engineering Other overhead Total $ $ $ $ 3. Calculate the balance in Work in Process on July 31. $ 4. Calculate the cost of goods sold for July. $ 5. What if Job 13-46 required no engineering change orders? What is the difference in the new cost of Job 13-46? $ How would the cost of the other jobs be affected?

Use the following information to answer the next four questions.

Your business (US company) will receive a payment of 150,000 British pounds. You have decided to fully hedge your company’s foreign exchange risk with futures contracts. Each futures contract for British pounds has an initial margin of $1500 and a maintenance margin of $1100. Each futures contract has 25,000 British pounds attached. You open your position on 11/30/2018 when the futures price was $1.955 per pound. The table below shows the futures prices for the three days immediately after you opened your position.

1) Find your initial margin balance on the day you opened your position.

2) Find your ending margin balance on 12/1. Assume any deficits are eliminated to keep the position open and any excesses remain in the account.

3) Find your ending margin balance (in dollars) on 12/3.  Assume deficits are eliminated to keep the position open and excesses remain in the account. Do not use currency symbols or words when entering your response.

4) Find the total amount of variation margin that occurred from 11/30-12/3.

What are mutual funds and why do so many investors find mutual funds a good way to invest money? What are the advantages of owning such a fund?

Cash Budgeting

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently run out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.

Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,800 per month, and the rent is $1,900 per month. In addition, she must make a tax payment of $10,000 in December. The current cash on hand (on December 1) is $600, but Koehl has agreed to maintain an average bank balance of $4,000 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)

The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $100,000.

1. Prepare a cash budget for December, January, and February.

   I. Collections and Purchases:
   	December	January	February
   Sales	$	$	$
   Purchases	$	$	$
   Payments for purchases	$	$	$
   Salaries	$	$	$
   Rent	$	$	$
   Taxes	$	---	---
   Total payments	$	$	$
   Cash at start of forecast	$	---	---
   Net cash flow	$	$	$
   Cumulative NCF	$	$	$
   Target cash balance	$	$	$
   Surplus cash or loans needed	$	$	$

   
   
2. Suppose Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.)
   $