Your division is considering two projects with the following cash flows (in millions):

1. What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   Project A    $   million
   Project B    $   million

   What are the projects' NPVs assuming the WACC is 10%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   Project A    $   million
   Project B    $   million

   What are the projects' NPVs assuming the WACC is 15%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   Project A    $   million
   Project B    $   million

2. What are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places. Do not round your intermediate calculations.
   Project A   %
   Project B   %

   What are the projects' IRRs assuming the WACC is 10%? Round your answer to two decimal places. Do not round your intermediate calculations.
   Project A   %
   Project B   %

   What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places. Do not round your intermediate calculations.
   Project A   %
   Project B   %

3. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 3.86%.)
   -Select-Project AProject BNeither A, nor BItem 13

   If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 3.86%.)
   -Select-Project AProject BNeither A, nor BItem 14

   If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 3.86%.)

Hawar International is a shipping firm with a current share price of $4.77 and 9.6 million shares outstanding. Suppose that Hawar announces plans to lower its corporate taxes by borrowing $8.2 million and repurchasing​ shares, that Hawar pays a corporate tax rate of 25%​ and that shareholders expect the change in debt to be permanent.

a. If the only imperfection is corporate​ taxes, what will be the share price after this​ announcement?

b. Suppose the only imperfections are corporate taxes and financial distress costs. If the share price rises to $4.82 after this​ announcement, what is the PV of financial distress costs Hawar will incur as the result of this new​ debt?

1. Net present value (NPV)

Evaluating cash flows with the NPV method

The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions.

Consider this case:

Suppose Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,225,000. The project is expected to generate the following net cash flows:

Celestial Crane Cosmetics’s weighted average cost of capital is 8%, and project Beta has the same risk as the firm’s average project. Based on the cash flows, what is project Beta’s NPV?

-$934,674

-$534,674

-$634,674

-$1,121,609

Making the accept or reject decision

Celestial Crane Cosmetics’s decision to accept or reject project Beta is independent of its decisions on other projects. If the firm follows the NPV method, it should_________ project Beta.

Suppose your boss has asked you to analyze two mutually exclusive projects—project A and project B. Both projects require the same investment amount, and the sum of cash inflows of Project A is larger than the sum of cash inflows of project B. A coworker told you that you don’t need to do an NPV analysis of the projects because you already know that project A will have a larger NPV than project B. Do you agree with your coworker’s statement?

*No, the NPV calculation will take into account not only the projects’ cash inflows but also the timing of cash inflows and outflows. Consequently, project B could have a larger NPV than project A, even though project A has larger cash inflows.

*Yes, project A will always have the largest NPV, because its cash inflows are greater than project B’s cash inflows.

*No, the NPV calculation is based on percentage returns, so the size of a project’s cash flows does not affect a project’s NPV.

Consider a 20-year mortgage for $392,076 at an annual interest rate of 4.2%. After 5 years, the mortgage is refinanced to an annual interest rate of 2.8%. What are the monthly payments after refinancing?

Bank1. The Saudi Investment Bank
Bank2. Citigroup

Name all the deposit products offered by the bank. Give some brief details as much as possible.

What is similar and different in the two banks? In this point

Consider a 30-year mortgage for $235,347 at an annual interest rate of 5.1%. After 11 years, the mortgage is refinanced to an annual interest rate of 3.4%. How much interest is paid on this mortgage?

The most recent financial statements for Bradley, Inc., are shown here (assuming no income taxes): Income Statement Sales $ 7,000 Costs (4,200 ) Net income $ 2,800 Balance Sheet Assets $ 20,300 Debt $ 10,800 Equity 9,500 Total $ 20,300 Total $ 20,300 Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s sales are projected to be $7,700. What is the external financing needed? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number.)

Expanding the number of stores in a foreign market, such as the expansion plan launched by Starbucks in China (announced in 2018), is a major capital budgeting project. A project of this scale requires coordinated planning across all functions of a business that you are studying in your Integrated Core classes. Choose and discuss three items on the income statement and balance sheet (a total of six items) that you think this new undertaking will effect. Explain why you chose those particular items, and how the marketing, management and operations decisions of the company will affect them. 2. Choose and calculate three ratios for Starbucks for the last two years. Make sure to select ratios that you think that expanding into a new market will effect, and explain your reasoning. Identify a competitor of Starbucks and contrast these three ratios for the two companies. Explain why you selected this competitor. Describe how the decisions made by management, marketing and operations functions of the company can impact, and hopefully improve, the components of firm operations that these financial ratios measure. 3. Explain how the financial decisions regarding opening a new store are related to management, marketing or operations decisions that the company must make (or has made)?

25. please answer all questions round to 4 decimal places

A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,455.00 to install, $5,130.00 to operate per year for 7 years at which time it will be sold for $6,941.00. The second, RayCool 8, costs $41,330.00 to install, $2,082.00 to operate per year for 5 years at which time it will be sold for $8,917.00. The firm’s cost of capital is 6.16%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.

A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,548.00 to install, $5,135.00 to operate per year for 7 years at which time it will be sold for $6,971.00. The second, RayCool 8, costs $41,800.00 to install, $2,115.00 to operate per year for 5 years at which time it will be sold for $9,029.00. The firm’s cost of capital is 5.06%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.

A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,232.00 per year for 8 years and costs $104,695.00. The UGA-3000 produces incremental cash flows of $27,599.00 per year for 9 years and cost $126,254.00. The firm’s WACC is 9.79%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.

A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,825.00 per year for 8 years and costs $103,756.00. The UGA-3000 produces incremental cash flows of $27,104.00 per year for 9 years and cost $126,558.00. The firm’s WACC is 9.57%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.

Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 5.1 percent and a standard deviation of 8.6 percent.

Use the information below to answer the following questions.

U.S. $ EQUIVALENT CURRENCY PER U.S.

$ Polish Zloty .2979 3.3566

Euro 1.2213 .8188

M Peso .0752 13.2987

Swiss 1.0183 .9820

C Peso .002071 482.80

NZ Dollar .8087 1.2365

Singapore Dollar .8011 1.2483

a. If you have $160, how many Polish zlotys can you get? (Do not include the Polish zlotys sign, Z. Round your answer to 2 decimal places, e.g., 32.16.) b. How much is one euro worth in U.S. dollars? (Round your answer to 4 decimal places, e.g., 32.1616.) c. If you have 5.70 million euros, how many dollars do you have? (Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.) d. Which is worth more, a New Zealand dollar or a Singapore dollar? e. Which is worth more, a Mexican peso or a Chilean peso? f-1. How many Swiss francs can you get for a euro? (Round your answer to 4 decimal places, e.g., 32.1616.) f-2. What do you call this rate?

Carly’s Winery was founded 10 years ago by owner manager Carla. Carly’s Winey is buying wines from wholesalers and sell them to retailers. Carla decided to start producing wine. She thinks that the company can produce wines for the next 7 years. In order to produce wines the company needs a new grape masher. The masher will cost $80,000 and an extra $10,000 will be needed for shipping and installation. This masher will be depreciated as a 5-year MACRS asset. Carla expects to sell the masher at the end of year 7 for $10,000. Carla estimates that the revenues will be $35,000 during year 1 and the revenues will grow by 10 percent per year for the next 7 years. Also she forecasts that annual year 1 operating expenses will be $10,000 and the expenses will grow at an annual rate of 5 percent per annum. For this new production Carla plans to use a factory which has been rented out for $7,500 per year for now. At the time the masher is purchased, Carla will invest $5,000 in net working capital. Additional investments in net working capital are required at the end of year 1 ($3,000) and year 2 ($2,000). The marginal tax rate for Carly’s Winery is 40% and the required rate of return for Carly’s Wineryis 12%.

a) Calculate the relevant cash flows for the evaluation of this project.

b) DecidewhetherCarlashouldinvestinthisproductionlineornot.

c) You think that this new production is riskier that Carly’s Winery’s ongoing operations. Briefly discuss if this new information changes your decision in part (b).

A borrower gets a fully amortizing constant amortization mortgage (CAM) for $200,000 at 12% annual interest rate for 15 years with monthly repayments.

1. Compute the loan repayments, principal amortizations, and interest payments for the first 6 months.

2. Redo the same calculations assuming the loan is a fully amortizing CPM, all else the same.

3. Which of the two amortization structures (CAM or CPM) would be riskier for the lender?

4. Which the two loan structures would provide a higher effective yield to the lender?