RAK, Inc., has no debt outstanding and a total market value of $165,000. Earnings before interest and taxes, EBIT, are projected to be $21,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT wIll be 25 percent higher. If there is a recession, then EBIT will be 35 percent lower. The company is considering a $60,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock.There are currently 5,500 shares outstanding. Ignore taxes for this problem.

a. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. Also calculate the percentage changes in EPS when the economy expands or enters a recession.

b. Repeat part (a) assuming that the company goes through with recapitalization. What do you observe?

Bill Guerin, an entrepreneur, has a project available for investment with two pro-duction techniques, Safe and Risky, both requiring an initial investment of $100. Next year, the Safe technique provides a payoff of $120 with certainty, and the Risky technique pays $124 if successful, but only $94 if unsuccessful, where the risk-neutral probability of success is ½. The risk-free rate is 5%.

Can Guerin obtain a $100 loan to be repaid next year to finance the project at the risk-free rate?

What is the NPV for the bank if it charges 15% interest on the loan?

What is the NPV for the bank if it charges 17% interest on the loan?

(1 mark) Suppose the bank has a monopoly on providing financing. Discuss how parts b) and c) relate to the bank’s decision about what interest rate to charge.

Q:

You must evaluate a proposal to buy a new milling machine. The base price is $138,000, and shipping and installation costs would add another $13,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $62,100. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $9,500 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $47,000 per year. The marginal tax rate is 35%, and the WACC is 11%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.

1. How should the $5,000 spent last year be handled?
   1. The cost of research is an incremental cash flow and should be included in the analysis.
   2. Only the tax effect of the research expenses should be included in the analysis.
   3. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initial investment outlay.
   4. Last year's expenditure is considered as an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.
   5. Last year's expenditure is considered as a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.
   
   -Select-IIIIIIIVVItem 1

2. What is the initial investment outlay for the machine for capital budgeting purposes, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent.
   $

3. What are the project's annual cash flows during Years 1, 2, and 3? Round your answer to the nearest cent. Do not round your intermediate calculations.

   Year 1 $

   Year 2 $

   Year 3 $

4. Should the machine be purchased?
   -Select-Yes or No

Delamont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck's 4-year life, so the interest expense for taxes would decline over time. The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $10,000. If DTC buys the truck, it would purchase a maintenance contract that costs $1,000 per year, payable at the end of each year. The lease terms, which include maintenance, call for a $10,000 lease payment (4 payments total) at the beginning of each year. DTC's tax rate is 40%. What is the net advantage to leasing? (Note: Assume MACRS rates for Years 1 to 4 are 0.3333, 0.4445, 0.1481, and 0.0741.)

A bank's operational risk includes the risk of very large losses because of employee fraud, natural disasters, litigation, and so on. Do you think operational risk is best handled by risk decomposition or risk aggregation?

assume quotes are based on units of foreign currency per dollar and the us dollar appreciated against the euro today. this means that :
a. the exchange rate between the dollar and the euro weakened
b. the us interest rate is less than the interest rate in euroland
c. the us inflation rate exceeds the inflation rate in euroland
d. it now takes more dollars to buy one euro
e. it now takes more euros to buy one dollar

a) The following information relates to open-end Mutual Fund A:

Calculate the rate of return to an investor in the fund during the year, assuming all 12b-1 fees and fund expenses were paid before year-end.

b) Fund B is closed-end fund and has the same NAVs as Mutual Fund A on 1/1/2019 and 31/12/2019. At the beginning of the year, the fund was selling at a 2% discount to NAV. By the end of the year, the fund is selling at 3% premium to NAV. Brokerage commission and expenses ratio are 1.5% of sales proceeds. No interim dividends were declared.

Present value.  Two rival football fans have made the following​ wager: if one​ fan's college football team wins the conference title​ outright, the other fan will donate ​$2000 to the winning school. Both schools have had relatively unsuccessful​ teams, but are improving each season. If the two fans must put up their potential donation today and the discount rate is 7.5​% for the​ funds, what is the required upfront deposit if we expect a team to win the conference title in 5 ​years?  10 ​years?  15 ​years? What is the required upfront deposit if we expect a team to win the conference title in 5 ​years? ​(Round to the nearest​ cent.)

Joe's retirement scheme at work pays $500 at the end of each month. Joe puts his money in an account which earns nominal 12% converted monthly, the interest is reinvested at a nominal 4% converted monthly. Carol's account also pays $500 at end of each month, but earns nominal 12% convertible monthly (principal and interest both earn 12%). After 20 years, they retire. Carol has $184,465.8246 more than Joe at this time.

Same scenario above: How long until Carol's account exceeds Joe's by $1,000,000?

Mom's Cookies Inc. is considering the purchase of a new cookie oven. The original cost of the old oven was $30,000; it is now fie years old, and it has a current market value of $13,333.33. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $15,000 and an annual depreciation expense of $3,000. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new oven are $4,000 a year over its full MACRS depreciable life. Depreciation is computed using MACRS over a five-year life, and the cost of capital is 10 percent. Assume a 40 percent tax rate. What will the cash flows for this project be? (LG5)

I have to show the work and I do not get it. There is no missing data this is the entire question. Please tell me what data is missing?

Olin Packett is a CGA-CPA and has been employed for over 5 years by a Canadian private corporation and recently promoted to a management position. He works in their Victoria, BC office. For 2017, his gross salary was $120,000. While he does not receive commissions, he was awarded a bonus of $10,000 for 2017 based on the performance of the business. One-half of this was paid in February 2018, with the balance paid in March 2018. The following amounts were withheld from his gross salary in 2017: Federal Income Tax $25,000 Employment Insurance Premiums 955 Canada Pension Plan Contributions 2,544 Registered Pension Plan Contributions 5,000 Charitable contributions (Centraide) 1,000 Other Information: 1. During 2017, Olin was provided with an automobile that the corporation bought at a cost of $75,300, including all taxes. The total operating costs of the car were $4,200 for the year and they were all paid by the corporation. The car was available to Olin the entire year, except that he didn't use the car for a 2-month period while he was in hospital due to a sky-diving accident. Olin drove the car a total of 33,000 kms during the year, all but 7,500 kms were employment related (fully documented). Olin reimbursed his employer $1,000 for his personal use of the automobile for the year. 2. During 2014, Olin was granted the option to buy 1,000 shares of his employer's common shares at a price of $31.00 per share. At that time, the shares were worth $33.00 each. On June 1, 2015, Olin exercised his option and acquired 1,000 shares at $31 each. At that time, the shares were worth $37.00 each. Olin sold all the 1,000 shares on May 1, 2017 for proceeds of $45.00 per share. 3. In order to assist Olin in purchasing a new luxury boat, his employer granted him a 3-year, interest-free loan of $175,000. The loan was granted on July 1, 2017. At that time, the interest rate on an open 5-year mortgage was 4.5%. The prescribed interest rate for 2017 was 2% for the period of July to September and 2.5% for the period of October to December 2017. 4. Olin has been a member of his employer’s defined benefits Registered Pension Plan ("RPP") for the last 3 years. For 2017, his employer made a $5,000 matching contribution to the RPP on his behalf. 5. Other disbursements made by Olin during 2017 include the following: Tuition fees for a business management course $1,500 Tuition fees for a sailing course $1,000 Professional dues paid to CPA association $1,600 Premiums paid on life insurance policy $720 Mortgage payments on home $24,000 Olin's employer reimbursed the tuition fees for both the business management and the sailing courses but none of the other costs paid personally by Olin, given his recent promotion to a manager's position. Required: Calculate Olin's net employment income for tax purposes for the year 2017. Explain your answer, including detailed calculations, and provide reasons for omitting items that you have not included in your calculations. Ignore all GST/HST considerations. Assume all applicable elections were made.

The most recent financial statements for Alexander Co. are shown here: Income Statement Balance Sheet Sales $ 39,200 Current assets $ 24,800 Long-term debt $ 55,000 Costs 29,600 Fixed assets 81,000 Equity 50,800 Taxable income $ 9,600 Total $ 105,800 Total $ 105,800 Taxes (34%) 3,264 Net income $ 6,336 Assets and costs are proportional to sales. The company maintains a constant 40 percent dividend payout ratio and a constant debt–equity ratio. What is the maximum dollar increase in sales that can be sustained assuming no new equity is issued? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Maximum increase in sales $

THREES ELECTRONICS COMPANY Threes Electronics is a mid-sized electronics manufacturer located in Santa Monica, California. The company president is Jack Tripper, who inherited the company. The company originally repaired radios and other household appliances when it was founded over 70 years ago. Over the years, the company has expanded, and it is now a reputable manufacturer of various specialty electronic items. One of the major revenue-producing items manufactured by Threes Electronic is a Personal Digital Assistant (PDA). Threes Electronics currently has one PDA model on the market and sales have been excellent. The PDA is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffet music. However, as with any electronic item, technology changes rapidly, and the current PDA has limited features in comparison with newer models. Threes Electronic spent $750,000 to develop a prototype for a new PDA that has all the features of the existing one, but adds new features such as cell phone capability. The company has spent a further $200,000 for a marketing study to determine the expected sales figures for the new PDA. Threes Electronic can manufacture the new PDA for $86 each in variable costs. Fixed costs for the operation are estimated to run $3 million per year. The estimated sales volume is 70,000, 80,000, 100,000, 85,000, and 75,000 per each year for the next five years, respectively. The unit price of the new PDA will be $250. The necessary equipment can be purchased for $15 million and will be depreciated on a 7-year MACRS schedule. It is believed the value of the equipment in five years will be $3 million. Net working capital for the PDAs will be 20 percent of sales and will occur with the timing of the cash flows for the year (i.e., there is a no initial outlay for NWC). Changes in NWC will thus first occur in Year 1 with the first year’s sales. Threes Electronic has a 35 percent (federal & state) corporate tax rate. Threes Electronic plans to finance by a combination of 1/3 debt and 2/3 internal equity (i.e., retained earnings). The beta of the firm’s stock is 1.75. The firm uses a risk-free rate of 4% and the market risk premium of 7%. Threes has 15,000 9 percent semi-annual coupon bonds outstanding, $1,000 par value per bond, 15 years to maturity, selling for 108 percent of par. Threes Electronic can issue bonds for $5 ~ $6 million in the similar terms. Construct a project cash flow statement; estimate the cost of capital; and provide NPV, IRR, payback period (our target PB is 3 years) and profitability index of this project.

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $655,000. This cost will be depreciated straightline to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $85,000. The sausage system will save the firm $183,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $35,000. If the tax rate is 22 percent and the discount rate is 8 percent, what is the NPV of this project?

If you currently own a business or are thinking about starting a business. What are defensive actions you would take to protect your business against some of the perils over which you have minimal control (taxes, interest rate, etc.)? Please I need a mini essay thanks