How are financial institutions profitable from risk management ?

A. What is the value today of a money machine that will pay $1,385.00 per year for 13.00 years? Assume the first payment is made 5.00 years from today and the interest rate is 6.00%.

B. What is the value today of a money machine that will pay $3,787.00 every six months for 29.00 years? Assume the first payment is made 4.00 years from today and the interest rate is 12.00%.

Financial information for Powell Panther Corporation is shown below:

Powell Panther Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)

Powell Panther Corporation: Balance Sheets as of December 31 (Millions of Dollars)

Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answers to the nearest dollar, if necessary. Negative values, if any, should be indicated by a minus sign.

1. What was net operating working capital for 2018 and 2019? Assume the firm has no excess cash.

   2018:  $   

   2019:  $   

2. What was the 2019 free cash flow?

   $   

3. How would you explain the large increase in 2019 dividends?

   1. The large increase in net income from 2018 to 2019 explains the large increase in 2019 dividends.
   2. The large increase in EBIT from 2018 to 2019 explains the large increase in 2019 dividends.
   3. The large increase in sales from 2018 to 2019 explains the large increase in 2019 dividends.
   4. The large increase in retained earnings from 2018 to 2019 explains the large increase in 2019 dividends.
   5. The large increase in free cash flow from 2018 to 2019 explains the large increase in 2019 dividends.

   -Select-IIIIIIIVVItem 4

question 7 chapter 3

Describe the purposes of the antitrust laws. What are the major anti-trust statutes / Acts and their stated objectives. What penalties, if any, are available to address violations of the major antitrust laws. Explain fully.

Pizza di Joey operates several food trucks that provide hot food and beverages in the Washington DC area. The company has annual sales of $625,400. Cost of goods sold average 32 percent of sales and the profit margin is 4.5 percent. The average accounts receivable balance is $34,700. Assume 365 days per year. [Please show your work on an Excel sheet]

a. On average, how long does it take the company to collect payment for its services?

b. What is the change in the Payables deferral period if the payables turnover has gone from an average of 10.50 times to 11.45 times per year?

c. What is the length of the company's cash conversion cycle after the change in the Payables deferral period if the inventory turnover is 22.20 times?

Edmonds Industries is forecasting the following income statement:

The CEO would like to see higher sales and a forecasted net income of $1,970,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 10%. The tax rate, which is 25%, will remain the same. (Note that while the tax rate remains constant, the taxes paid will change.) What level of sales would generate $1,970,000 in net income? Round your answer to the nearest dollar, if necessary.

$ _____

chapter 3 question 9

A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:

1. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent.

   Project A: $ ?

   Project B: $ ?

2. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: ? %

   Project B: ? %

3. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: ? %

   Project B: ? %

4. Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent.

5. Discount Rate	NPV Project A	NPV Project B
   0%	$ ?	$ ?
   5	?	?
   10	?	?
   12	?	?
   15	?	?
   18.1	?	?
   24.18	?	?

6. Calculate the crossover rate where the two projects' NPVs are equal. Do not round intermediate calculations. Round your answer to two decimal places.

   ? %

7. What is each project's MIRR at a WACC of 18%? Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: ? %

   Project B: ? %

Holmes Manufacturing is considering a new machine that costs $275,000 and would reduce pretax manufacturing costs by $90,000 annually. The new machine will be fully depreciated at the time of purchase. Management thinks the machine would have a value of $23,000 at the end of its 5-year operating life. Net operating working capital would increase by $25,000 initially, but it would be recovered at the end of the project's 5-year life. Holmes's marginal tax rate is 25%, and an 11% WACC is appropriate for the project.

1. Calculate the project's NPV. Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent.
   $   
   
   Calculate the project's IRR. Do not round intermediate calculations. Round your answer to two decimal places.
     %
   
   Calculate the project's MIRR. Do not round intermediate calculations. Round your answer to two decimal places.
     %
   
   Calculate the project's payback. Do not round intermediate calculations. Round your answer to two decimal places.
     years
2. 
   
3. Assume management is unsure about the $90,000 cost savings-this figure could deviate by as much as plus or minus 20%. What would the NPV be under each of these situations? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent.
   20% savings increase: $   
   20% savings decrease: $   

Glitter Inc. uses one-quarter common stock and three-quarters debt to finance their operations. The after-tax cost of debt is 7 percent and the cost of equity is 13 percent.
The management of Glitter Inc. is considering an expansion project that costs $1.2 million. The project will produce a cash inflow of $45,000 in the first year and 150,000 in each of the following 10 years (i.e., $150,000 in years 2 through 11.. What is the WACC and should Glitter Inc. invest in this project?

a. 10 percent, no because the NPV is negative

b. 10 percent, yes because the NPV is positive

c. 8.5 percent, no because the NPV is negative

d. 8.5 percent, yes because the NPV is positive

HOW CAN I SOLVE IT BY HAND STEP BY STEP PLEASE

DO NOT USE EXCEL

suppose you purchase a 7-year AAA-rated Swiss bond for par that is paying an annual coupon of 7 percent and has a face value of 1,300 Swiss francs (SF). The spot rate is U.S. $0.66667 for SF1. At the end of the year, the bond is downgraded to AA and the yield increases to 9 percent. In addition, the SF depreciates to U.S. $0.74074 for SF1.

a. What is the loss or gain to a Swiss investor who holds this bond for a year?
b. What is the loss or gain to a U.S. investor who holds this bond for a year?

Company is planning on investing in a new project. This will involve the purchase of some new machinery costing $450,000. The company expect cash inflows from this project as detailed below:

Year One Year Two Year Three Year Four

$200,000 $225,000 $275,000 $200,000

The appropriate discount rate for this project is 12%.

The discounted payback period for this project is closest to:

Answer

2.1 years

3 years

2.0 years

2.5 years

National Corporation has semiannual bonds outstanding with nine years to maturity and the bonds are currently priced at $754.08. If the bonds have a coupon rate of 7.25 percent, then what is t

he after-tax cost of debt for Beckham if its marginal tax rate is 30 percent? Solution

• Number of periods = 9 * 2 = 18

  Coupon = (0.0725 * 1000) / 2 = 36.25

  Yield to maturity = 11.7499%

  Keys to use in a financial calculator: 2nd I/Y 2, FV 1000, PMT 36.25, PV -754.08, N 18, CPT I/Y

  After tax cost of debt = YTM (1 - tax)

  After tax cost of debt = 0.117499 (1 - 0.3)

  After tax cost of debt = 0.0822 or 8.22%

HOW DID THEY FIND THE  Yield to maturity = 11.7499%

HOW CAN I DO THIS PROBLEM BY HAND STEP BY STEP OR BY FINANCE CALCULATOR STEP BY STEP ?? PLEASE HELP

Assume that today is December 31,2018 and that the following information applies to Vermeil Airlines:

• After-tax operating income [EBIT(1 – T)] for 2019 is expected to be $518 million.
• The depreciation expense is expected to be $122 million.
• The capital expenditures are expected to be $241 million.
• No change is expected in net operating working capital.
• The free cash flow is expected to grow at a constant rate of 2.0% per year.
• The required return on equity is 12.4%.
• The WACC is 10.3%.
• The market value of the company’s debt is $2.4 billion.
• 207 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company’s stock price today?

Please extend answer to 4 decimal places.

You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 11 percent and 14 percent. The standard deviations of the assets are 35 percent and 43 percent. The correlation between the two assets is .53 and the risk-free rate is 3.8 percent. What is the optimal Sharpe ratio in a portfolio of the two assets? What is the smallest expected loss for this portfolio over the coming year with a probability of 1 percent? ( do not round intermediate calculations. (Round Sharpes ratio answer to 4 decimal places and the s-score value to 3 decimal places when calculating answer. Enter your smallest expected loss as a percent rounded to 2 decimal places).