XYZ stock price and dividend history are as follows:

An investor buys five shares of XYZ at the beginning of 2015, buys another two shares at the beginning of 2016, sells one share at the beginning of 2017, and sells all six remaining shares at the beginning of 2018. What is the dollar-weighted rate of return? (Hint: If your calculator cannot calculate internal rate of return, you will have to use a spreadsheet or trial and error.) (Negative value should be indicated by a minus sign. Round your answer to 4 decimal places.)

QUESTION 20

1. Carrie, after selling all of her shares of DD Company, decided to transact in a mutual fund in January 1, 2010. She listed the fund’s returns over a three-year period as shown below:

2. Based on these data, the money-weighted return for the investor is closest to:

CORPORATE VALUATION

Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Brandtly's stock. The pension fund manager has estimated Brandtly's free cash flows for the next 4 years as follows: $2 million, $6 million, $11 million, and $15 million. After the fourth year, free cash flow is projected to grow at a constant 8%. Brandtly's WACC is 10%, the market value of its debt and preferred stock totals $58 million; and it has 17 million shares of common stock outstanding.

Write out your answers completely. For example, 13 million should be entered as 13,000,000.

1. What is the present value of the free cash flows projected during the next 4 years? Round your answer to the nearest cent. Do not round your intermediate calculations.
   
   $
2. 
   
3. What is the firm's horizon, or continuing, value? Round your answer to the nearest cent.
   
   $
4. 
   
5. What is the firm's total value today? Round your answer to the nearest cent. Do not round your intermediate calculations.
   
   $
6. 
   
7. What is an estimate of Brandtly's price per share? Round your answer to the nearest cent. Do not round your intermediate calculations.

What are the two components of total risk? Which component is part of the risk-return relationship? Why?

(Please thoroughly explain the the 2 components firm-specific risk and market risk. )

Could anyone explain why a Profitability Index may lead to inaccurate decisions when comparing mutually exclusive investments? Thanks

Your boss has asked you to analyze a potential new product, and to recommend if the company should produce and sell the product. Specifically, your boss wants you to prepare a spreadsheet that shows the free cash flows the product would generate and shows what the product's net present value and internal rate of return are and what your recommendation is.

Marketing information

Your company already has spent $125,000 to conduct market research about the demand for the product, which indicates the optimal wholesale price for the product would be $14.00 per unit, based on the prices of similar products that competitors sell. The market research also indicates that demand for the product would last for five years. At a price of $14.00 per unit, the market research suggests that sales would be 300,000 units in the first year, and unit sales would increase 5% per year over the remaining four years of the product's life.

Production information

Your company's production manager estimates manufacturing the product would require a machine that costs $900,000 and falls in the 3-year MACRS depreciation class. The machine's expected salvage value in five years is expected to be $200,000. The production manager also estimates the product's variable costs, consisting of raw materials and labor, would be $12.00 per unit, and the annual fixed costs excluding depreciation would be $300,000. He states the product could be manufactured in a building your company owns, which has no other use.

Financial information

Your company's stock price is $41.09 per share, the last annual dividend was $2.00 per share, and market analysts who follow your company's stock expect the dividends to grow forever at a rate of 5.0% per year. The company's beta is 1.6 and Treasury bills are paying 2.4% per year. The company's bonds have a par value of $1,000, pay a coupon of 6% per year, semiannually, have 10 years to maturity, and are trading at $903.

The company's treasurer estimates that the new product would require a $,350,000 increase in net working capital. She also has told you the company's target capital structure is 40% debt and 60% equity, the company's tax rate is 30%, and she expects the stock market return over the next year will be 8.0%.

Why can't the future value of a perpetual stream of cash flows be found?

Your firm is contemplating the purchase of a new $610,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $59,400 at the end of that time. You will be able to reduce working capital by $82,500 (this is a one-time reduction). The tax rate is 33 percent and your required return on the project is 19 percent and your pretax cost savings are $185,700 per year. Requirement 1: What is the NPV of this project? Requirement 2: What is the NPV if the pretax cost savings are $257,900 per year? Requirement 3: At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

Lower interest rates can be attractive for consumers and businesses. But when the federal government lowers interest rates, the amount of loans granted increases, making it more difficult to obtain a loan. So, in some cases, this can be bad ... for the most part, it is good to a lot to be able to have a credit card or a home loan with a low interest rate. The lower the interest rate, the more you can repay the loan principle.
What do you think?

Please use excel and demonstrate the formulae used.

A new project will cost $32,356 initially and will last for 7 years, at which time its salvage value will be $2,500. Annual revenues are anticipated to be $15,000 per year. For a MARR of 6% percent every year, plot a sensitivity graph for annual worth versus initial cost, annual revenue, and salvage value, varying only one parameter at a time, each within the range of +/- 50% increments of 10%.

Great Seneca Inc. sells $100 million worth of 23-year to maturity 6.50% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $985 for each $1,000 bond. The firm's marginal tax rate is 40%. What is the after-tax cost of capital for this debt financing?

By lowering interest rates, it becomes cheaper to borrow money and less profitable to save, which encourages individuals and businesses to spend. Now, since rates are lowered, savings are denied, more money is borrowed and spent. As borrowing increases, the total money supply increases in the economy. Reducing interest rates therefore ultimately results in reduced savings, increased money supply and better spending, which translates into higher overall economic activity, which is a good thing. The bad side is the decline in interest rates tend to increase inflation. There must be a kind of balance because there will be unpleasant effects on the economy. The trick to manipulate the interests is not to overdo it, which is easier said than done, but it's better than doing nothing.
What do you think?

A real estate developer is evaluating a 40-unit apartment development. The expected average occupancy is 90%. Cost of land: $1,200,000 Construction: $$4,800,000 Project Life: 25 years Maintenance: $100 per unit per year (regardless of weather a unit is occupied). Annual insurance and property taxes: $400,000 Required return: 12% per year (0.9489% per month) Assume that the building will have NO salvage value at the end of 25 years, BUT the land will appreciate at a rate of 5% per year. Determine the total minimum monthly rent (all units combined) that should be charged, given the required return. (Round your answer to the nearest dollar. Do not enter the $ symbol or use commas.)

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt–equity ratio of .56. It’s considering building a new $71.3 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $7.88 million in perpetuity. There are three financing options: A new issue of common stock: The required return on the company’s new equity is 15.1 percent. A new issue of 20-year bonds: If the company issues these new bonds at an annual coupon rate of 7.3 percent, they will sell at par. Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .14. (Assume there is no difference between the pretax and aftertax accounts payable cost.) If the tax rate is 38 percent, what is the NPV of the new plant? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to 2 decimal places, e.g., 32.16.)

• An all-equity firm with 200,000 shares outstanding, has $2,000,000 of EBIT, which is expected to remain constant in the future. The company pays out all of its earnings, so earnings per share (EPS) equals dividends per share (DPS). Its tax rate is 40%. The company is considering issuing $5,000,000 of 10% bonds and using the proceeds to repurchase stock. The risk free rate is 6.5%, the market risk premium is 5.0%, and the beta is currently 0.90, but the CFO believes that the beta would rise to 1.10 if the recapitalization occurs. Assuming that the shares can be repurchased at the price that existed prior to the recapitalization, what would the price be following the recapitalization?