Assume a par value of $1,000. Caspian Sea plans to issue a 6.00 year, semi-annual pay bond that has a coupon rate of 8.16%. If the yield to maturity for the bond is 7.60%, what will the price of the bond be?

Assume you are the Director of Financial Planning and Analysis for your company. Make a recommendation to the CFO (me!) on how your company should approach capital budgeting and selection of projects for investment. Your recommendation can include discussion of any or all of the key topics studied in Chapters 10-14:

a) Preferred methodologies/tools (NPV, IRR, Payback)

b) Base Case, Scenario, & Simulation analyses

c) Real Options analysis

d) Impacts of Capital Structure and Leverage

What you choose to base your recommendation upon is less important than the articulation of the conceptual framework and the accurate application of that concept. Given this is a one-page recommendation, clearly you will not be able to incorporate all of the concepts above so pick one or two and demonstrate your comprehension of how it should be applied in financial analysis and capital budgeting. It needs to include, the recommendation, background about the recommendation, three reasons of rationale, risk analysis, and the next steps. These only need to be a few sentences each.

Please Explain the Valuation Model for a domestic corporation and a MNC. Discuss each part of the formula and how changes in exchange rates effect values.

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 $4,100 per month, and the rent is $1,500 per month. In addition, she must make a tax payment of $11,000 in December. The current cash on hand (on December 1) is $300, but Koehl has agreed to maintain an average bank balance of $5,000 - 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.)
   $____________

Please answer any or all, thank you!!

______ 30. Most industrialized nations in the world now use a _____________________________, where

exchange rates fluctuate due to changes in demand.

                                                          A. floating exchange rate system

                                                          B. fixed exchange rate system

                                                          C. purchasing power parity exchange rate system

                                                          D. central bank regulatory system

______ 31. Firms hold cash balances

                                                          A. to complete transactions that are necessary in business operations.

                                                          B. as compensation to banks for providing loans and services.

                                                          C. to earn “Interest Revenue.”

                                                          D. A and B.

                                                          E. A and B and C.

______ 32. To reduce the length of its “Cash Conversion Cycle” (CCC), a company could

                                                          A. adopt a new inventory system that reduces the inventory conversion period.

                                                          B. reduce the average “Days Sales Outstanding” (DSO) on its “Accounts                                                            Receivable.”

                                                          C. reduce the amount of time the company takes to pay its suppliers.

                                                          D. A and B.

                                                          E. A and B and C.

______ 33. A lock box system for cash collections from customers is most beneficial to firms which    

                                                          A. make collections over a wide geographic area.

                                                          B. have widely dispersed manufacturing facilities.

                                                          C. have a large marketable securities account to protect.

                                                          D. hold inventories at many different sites.

______ 34. A(n) ____________________ opportunity exists if a currency trader has the opportunity to earn a

                      positive cash flow with no risk involved in the transaction.

                      A. gold standard

                      B. arbitrage

                      C. interest rate parity

D. market equilibrium

Consider a newly issued straight bond with par value of $1,000 and 3 years until maturity. It makes semi-annual coupon payments at a coupon rate of 12%. The bond sells at a yield to maturity of 14%.

a. List the cash flows of the bond.

b. Calculate the current value of these cash flows as if they were zero-coupon bonds. For example, in half a year, the bond is going to pay a coupon of $60. Treat this coupon payment as a zero-coupon bond with par value of $60 and find its present value.

c. Determine the price of the straight bond. Compare this result to the portfolio of zero-coupon bonds from b.

d. Determine the price of the bond on the day after the first coupon, assuming that the yield to maturity has not changed.

Repeat your calculations for a yield to maturity of 10%.

No Explanation needed only True or false

1. Networking capital may be defined as “Current Assets” minus “Current Liabilities.”

2. The forward rate is the rate applied to buy currency for immediate delivery.

3. The shorter a firm’s “Cash Conversion Cycle” (CCC), the better. A shorter CCC will result in lower “Interest Expense” for the firm.

4. Exchange rates influence a multinational firm’s inventory policy because changing currency values can affect the value of inventory.

5. If a single U.S. dollar will buy fewer units of a foreign currency in the forward market than in the spot market, then the forward currency is said to be selling at a premium to the spot rate.

6. Holding minimal levels of inventory (i.e., the “lean and mean” or “restricted” working capital policy) can reduce inventory carrying costs and cannot lead to any adverse effects on profitability.

7. The sound working capital policy is designed to maximize the time between cash expenditures on raw materials and the collection of cash from credit sales.

8. The United States and most other major industrialized nations currently operate under a system of floating exchange rates.

9. A given indirect currency quotation is the reciprocal of the direct quotation.

10. Prior to 1971, the United States used a fixed exchange rate system, with the U.S. dollar being tied to gold.

11. Due to advanced technology and the similarity of general procedures, multi-national financial management is no more complex than financial management for domestic firms.

12. A country’s central bank can “prop up” or raise the value of its currency on the market by selling additional reserves of its own currency on the open market.

13. The volatility of exchange rates under a floating rate system increases the uncertainty of the cash flows for a multinational corporation.

14. According to today’s edition of The Wall Street Journal, $1.5769 U.S. dollars can purchase one euro. This is an indirect quote in terms of U.S. dollars.

15. Under a “relaxed” current asset investment policy, a firm holds only small amounts of current assets relative to sales.

ABC offers a broad portfolio of best quality vegetable oil based ingredients for application in food an non food item. The company made large profits in recent years and set aside a large reserve for future investments. The finance director of ABC bhd is in the process of preparing its capital budget for the forthcoming period and its examining a number of capital investment proposals that have been received from its directors. One of the projects coded as project R involves installation of solar panels to its existing production factory to save energy costs. The solar panels are fitted to the roof of its factory in order to reduce the company’s redendency on oil as an energy source. The solar panels would save energy cost and have an expected life of ten years. The nest cash inflow from this project is estemated at $30,000 per yearThe internal rate of return of the solar panel project is 12%. The company consultant has estimated the portfolio beta as 1.29. The project details are given below:

1. Calculate the figures which have not been provided.
2. Using capital asset pricing model, calculate the required return for each project (Risk Fre Rate 4%, market rate at 8%)
3. Diversification can eliminate all risks inherent in investment projects. Discuss in the context of the above.

Suppose you take out a 20-year mortgage for a house that costs $416,531. Assume the following:

• The annual interest rate on the mortgage is 4%.
• The bank requires a minimum down payment of 10% at the time of the loan.
• The annual property tax is 2.4% of the cost of the house.
• The annual homeowner's insurance is 1.0% of the cost of the house.
• The monthly PMI is $68
• Your other long-term debts require payments of $819 per month.

If you make the minimum down payment, what is the minimum gross monthly salary you must earn in order to satisfy the 28% rule and the 36% rule simultaneously?

Question: What happens to the price of a three-year bond with an 8% coupon when interest rates change from 8% to 6%?

Answer: Price increase of $1053.44

Please show how, thank you!

(This is all the information I was given)

The Karns Oil Company is deciding whether to drill for oil on a tract of land that the company owns. The company estimates the project would cost $11 million today. Karns estimates that, once drilled, the oil will generate positive net cash flows of $5.06 million a year at the end of each of the next 4 years. Although the company is fairly confident about its cash flow forecast, in 2 years it will have more information about the local geology and about the price of oil. Karns estimates that if it waits 2 years then the project would cost $13.5 million. Moreover, if it waits 2 years, then there is a 90% chance that the net cash flows would be $5.83 million a year for 4 years and a 10% chance that they would be $2.86 million a year for 4 years. Assume all cash flows are discounted at 11%.

If the company chooses to drill today, what is the project's net present value? A negative value should be entered with a negative sign. Enter your answer in millions.

Find the duration of a 7.6% coupon bond making semiannually coupon payments if it has three years until maturity and has a yield to maturity of 6.0%. What is the duration if the yield to maturity is 12.0%? Note: The face value of the bond is $100. (Do not round intermediate)

Kayla Sampson, an antiques dealer from Great Bend, Kansas, received her monthly billing statement for April for her MasterCard account. The statement indicated that she had a beginning balance of $600, on day 5 she charged $100, on day 12 she charged $300, and on day 15 she made a $200 payment. Out of curiosity, Kayla wanted to confirm that the finance charge for the billing cycle was correct (assume a 30-day month and that the card balance is actually reduced on the day the payment is made). What was Kayla's average daily balance for April without new purchases? Round your answer to the nearest dollar. Use rounded answer for later calculations.

What was her finance charge on the balance in part

(a) if her APR is 19.3 percent? Round your answer to the nearest cent.

$ What was her average daily balance for April with new purchases? Round your answer to the nearest dollar. Use rounded answer for later calculations.

$ What was her finance charge on the balance in part (c) if her APR is 19.3 percent? Round your answer to the nearest cent. $

The Collins Group, a leading producer of custom automobile accessories, has hired you to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below.

The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 40%.

1. What is the best estimate of the after-tax cost of debt?

2. Based on the CAPM, what is the firm's cost of common stock?  

3. Which of the following is the best estimate for the weight of debt for use in calculating the firm's WACC?

4. What is the best estimate of the firm's WACC?