Q1

a)

Given the following cashflows for Project Omega, what is the payback period in years assuming the cashflows occur annually?

b)

Project X and Y. The following are the cash flows of two projects:

If the discount rate is 18% is the project with the highest profitability index also the one with the highest NPV?

Yes

No

c)

he cashflows for an investment in Factory X are listed below. Using the discounted payback method of capital budgeting, what is the payback period for this investment expressed in years, assuming that the cashflows occur annually and using a discount rate of 20%.  

A bond with exactly five years until maturity paying 6% p.a. coupons semi-annually and with a face value of $100 was purchased at a yield of 6.5% p.a. The bond was sold exactly two years later for a yield of 5% p.a. All coupons were reinvested at 6% p.a. Calculate the realised yield-to-maturity on this bond.A bond with exactly five years until maturity paying 6% p.a. coupons semi-annually and with a face value of $100 was purchased at a yield of 6.5% p.a. The bond was sold exactly two years later for a yield of 5% p.a. All coupons were reinvested at 6% p.a. Calculate the realised yield-to-maturity on this bond.

What considerations should a firm make when pricing their goods/services?

Evaluate the following projects using the payback method assuming a rule of 3 years for payback.

General Electric has just issued a callable​ (at par)​ 10-year, 5.7 % coupon bond with annual coupon payments. The bond can be called at par in one year or anytime thereafter on a coupon payment date. It has a price of $ 101.87. a. What is the​ bond's yield to​ maturity? b. What is its yield to​ call? c. What is its yield to​ worst?

Suppose you opened a new account and invested $10,000 in your asset in the beginning of 2014, that on June 30, 2016 you invested an additional $5,000, and that on January 31, 2017 you withdrew $2,000.  

If there were no other cash flows coming into or out of the account, what was the dollar balance at the end of 2018 (yes, do include the effect of the return earned during December 2018)?

Rate of return -0.88

New-Project Analysis

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $920,000, and it would cost another $19,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $630,000. The machine would require an increase in net working capital (inventory) of $18,000. The sprayer would not change revenues, but it is expected to save the firm $416,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%.

1. What is the Year 0 net cash flow?
   $
2. What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.

   Year 1	$
   Year 2	$
   Year 3	$

3. What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? Do not round intermediate calculations. Round your answer to the nearest dollar.
   $
4. If the project's cost of capital is 10 %, what is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.
   $
   
   Should the machine be purchased?
   y/n

On September 7​, the billing​ date, Verna had a balance due of ​$565.85 on her credit card. Assume that the interest rate is​ 1.1% per month. Suppose that​ Verna's bank uses the average daily balance method. Answer parts​ (a) through​ (d). Sept. 11 Payment ​$280.00 Sept. 23 ​Charge: Airline ticket ​$332.00 Sept. 24 ​Charge: Hotel bill ​$190.01 Oct. 2 ​Charge: Clothing ​$84.91 ​a) Determine​ Verna's average daily balance for the billing period from September 7 to October 7. The average daily balance for the billing period was ​$

Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2016, is shown here (millions of dollars):

Sales for 2016 were $200 million and net income for the year was $6 million, so the firm's profit margin was 3.0%. Upton paid dividends of $2.4 million to common stockholders, so its payout ratio was 40%. Its tax rate was 40%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous liabilities)/sales ratios, the profit margin, and the payout ratio remain constant in 2017. Do not round intermediate calculations.

1. If sales are projected to increase by $100 million, or 50%, during 2017, use the AFN equation to determine Upton's projected external capital requirements. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
   $ million
   
2. Using the AFN equation, determine Upton's self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? Round your answer to two decimal places.
   %
   
3. Use the forecasted financial statement method to forecast Upton's balance sheet for December 31, 2017. Assume that all additional external capital is raised as a line of credit at the end of the year and is reflected (because the debt is added at the end of the year, there will be no additional interest expense due to the new debt).
   Assume Upton's profit margin and dividend payout ratio will be the same in 2017 as they were in 2016. What is the amount of the line of credit reported on the 2017 forecasted balance sheets? (Hint: You don't need to forecast the income statements because the line of credit is taken out on last day of the year and you are given the projected sales, profit margin, and dividend payout ratio; these figures allow you to calculate the 2017 addition to retained earnings for the balance sheet without actually constructing a full income statement.) Round your answers to the nearest cent.

   Upton Computers Pro Forma Balance Sheet December 31, 2017 (Millions of Dollars)
   Cash	$
   Receivables	$
   Inventories	$
   Total current assets	$
   Net fixed assets	$
   Total assets	$
   Accounts payable	$
   Notes payable	$
   Line of credit	$
   Accruals	$
   Total current liabilities	$
   Mortgage loan	$
   Common stock	$
   Retained earnings	$
   Total liabilities and equity	$

5.

Easton Company prepares annual adjusting entries only. During the third quarter of Fiscal Year 2018, Easton Company acquired the following trading securities:

On November 10th, Easton Company sold the Y Company stock for $31 per share. On December 15th, Z Company paid dividends of $0.12 per share. The following were the year-end market values:

What the total dollar values that Easton Company should record for the Unrealized Gain or (Loss) on Trading Securities for 2018? Enter a Loss as a negative number.

6.

Arundel Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of:

The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted balance of zero. After the adjusting entry is made, what will be the dollar balances in the Allowance for Doubtful Accounts? Round to nearest whole dollar.

NPVs and IRRs for Mutually Exclusive Projects

Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $21,500, whereas the gas-powered truck will cost $17,960. The cost of capital that applies to both investments is 13%. The life for both types of truck is estimated to be 6 years, during which time the net cash flows for the electric-powered truck will be $6,860 per year and those for the gas-powered truck will be $4,600 per year. Annual net cash flows include depreciation expenses.

Calculate the NPV for each type of truck. Do not round intermediate calculations. Round your answers to the nearest dollar.

Calculate the IRR for each type of truck. Do not round intermediate calculations. Round your answers to two decimal places.

Not getting the correct answers with excel functions for some reason.

A real estate investment has the following expected cash flows:

                        Year           Cash Flows
                          1              $9,000
                          2               13,000
                          3               18,000
                          4               25,000

The discount rate is 12 percent. What is the investment’s present value? Round your answer to 2 decimal places; for example 2345.25.

Micheal wants to have $68,000 in 10 years on a savings plan that requires monthly contributions. If he can earn 11 percent APR with monthly compounding on the savings plan, what is the amount that he will have to invest every month for the next 10 years? Round it to two decimal places and do not include the $ sign, e.g., 1234.56.

1.A firm is buying a new machine that has the following cash-flows during its expected life of 4 years: Purchase Price = $250,000, Terminal Value = $100,000, and yearly cash flows of $60,000. The firm has a contract with a buyer who purchases and pays the product that the machine makes at the beginning of each year. What is the expected yield of the machine? a. 28% b. 16% c. 14% d. 11.3% e. -1.61

2.A firm wants to buy a machine that is expected to yield 12%. It plans to finance it with 50% Debt and the rest Equity, so there is no preferred stock. The cost of Debt is 7% and the tax rate is 25%. What is the expected return for the shareholders?

a.   2.63%

b.   12%

c.   17%

d.   18.75%

e.   19.5%

3.Which of the following statements is CORRECT?

a.   Financial Management decisions have to be made taking into account what is available on the Financial Markets.

b.   Only firms in the mature stage have access to the capital market.

c.   If an investor sells shares of stock through a broker, then it would be a primary market transaction.

d.   Capital markets deal only with common stocks and other equity securities.

e.   A six-month bank loan is considered to be a capital market instrument.