AFN equation

Broussard Skateboard's sales are expected to increase by 20% from $8.4 million in 2016 to $10.08 million in 2017. Its assets totaled $2 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 3%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Round your answer to the nearest dollar.

Use Scenario 3 to answer questions 3A, 3B, and 3C (8-10 below).

Scenario 3: A machine costs $7,500 to buy (today) and has no salvage value. Maintenance costs are expected to be $0 the first year, but will increase by $900 every year after that. Operating costs are expected to be $1,200 every year. The machine will last 4 years and the firm has a MARR of 8% per year.

3B. Calculate the minimum equivalent uniform annual cost of the machine. (note: do not include currency signs, spaces, or commas).

Consider a 20-year, $115,000 mortgage with a rate of 5.55 percent. Eight years into the mortgage, rates have fallen to 5 percent. What would be the monthly saving to a homeowner from refinancing the outstanding mortgage balance at the lower rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

A- Project A requires an initial outlay at t = 0 of $4,000, and its cash flows are the same in Years 1 through 10. Its IRR is 16%, and its WACC is 12%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

B- Project L requires an initial outlay at t = 0 of $63,000, its expected cash inflows are $14,000 per year for 10 years, and its WACC is 12%. What is the project's payback? Round your answer to two decimal places.

C- Project L requires an initial outlay at t = 0 of $75,000, its expected cash inflows are $11,000 per year for 9 years, and its WACC is 14%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

ABC is a new company established in Victoria. The new equipment XYZ is considering costs $765,000 and is expected to last for 5 years. The equipment can be sold at $137,000 at the end of the project. The initial net working capital investment is 52,000 and will remain constant throughout the period and 100% will be recovered at the end of the final year. The new equipment will save $120,000 annually before taxes. If the company's required rate of return is 15% and the PVCCATs value is $123,765 determine the NPV value of the project. Assume a tax rate of 30%. The CCA rate is 35%.

Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $4 million as a result of an asset expansion presently being undertaken. Fixed assets total $2 million, and the firm plans to maintain a 40% debt-to-assets ratio. Rentz's interest rate is currently 9% on both short-term and long-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current assets level are under consideration: (1) a restricted policy where current assets would be only 45% of projected sales, (2) a moderate policy where current assets would be 50% of sales, and (3) a relaxed policy where current assets would be 60% of sales. Earnings before interest and taxes should be 14% of total sales, and the federal-plus-state tax rate is 40%.

1. What is the expected return on equity under each current assets level? Round your answers to two decimal places.
   

   Restricted policy		%
   Moderate policy		%
   Relaxed policy		%

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3. In this problem, we assume that expected sales are independent of the current assets investment policy. Is this a valid assumption?
   1. Yes, this assumption would probably be valid in a real world situation. A firm's current asset policies have no significant effect on sales.
   2. Yes, sales are controlled only by the degree of marketing effort the firm uses, irrespective of the current asset policies it employs.
   3. Yes, the current asset policies followed by the firm mainly influence the level of long-term debt used by the firm.
   4. Yes, the current asset policies followed by the firm mainly influence the level of fixed assets.
   5. No, this assumption would probably not be valid in a real world situation. A firm's current asset policies may have a significant effect on sales.
   
   -Select-IIIIIIIVVItem 4
4. 
   
5. How would the firm's risk be affected by the different policies?
   
   The input in the box below will not be graded, but may be reviewed and considered by your instructor.
   

Your company is considering a new project that will require $10,000 of new equipment at the start of the project. The equipment will have a depreciable life of five years and will be depreciated to a book value of $3,000 using straight-line depreciation. The cost of capital is 9 percent, and the firm's tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation.

David Palmer identified the following bonds for investment: 1) Bond A: A $1 million par, 10% annual coupon bond, which will mature on July 1, 2025. 2) Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031. 3) Bond C: A $1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026. The three bonds were issued on July 1, 2011. (Each Part is Independent)

(a) If Bond B is issued at face value and both Bond B and Bond A are having the same yield to maturity (EAR), calculate the market price of Bond A on July 1, 2011. [Note: Full mark would only be given to correct answer of which the values of those variables not provided in the question directly are derived.]

(b) David purchased the Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016 when it was priced to have a yield to maturity (EAR) of 12.550881%. Assume all interests received were reinvested to earn a rate of return of 3% per quarter (from another investment account), calculate the current yield, capital gain yield and the 2-year total rate of return (HPY) on investment for David on January 1, 2016. [Hint: Be careful with how many rounds of coupons has David received during the holding period and thus how much interests (coupons and reinvestment of coupons) he has earned in total during the 2-year holding period.]

(c) David purchased Bond B on a coupon payment day. Bond B is priced to have a yield to maturity (EAR) of 12.36% and its market value is $1,101,058.953 on the date of purchase. Find the remaining life until maturity (in terms of 6-month period or year) of Bond B.

Hardrock Mining Corporation has seven million shares of common stock outstanding, and 100,000 8-percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $32.60 per share and has a beta of 1.3. The bonds have 15 years to maturity and sell for 93.1 percent of par. The market risk premium is 6.5 percent, 10-year Treasury bonds are yielding 4.7 percent, and HardrockMining’s tax rate is 34 percent. If HardrockMining is evaluating a new investment project that is slightly riskier than the firm’s typical projectand would require adding a subjective premium of 4%, what WACC should the firm use to discount the project’s cash flows? PLEASE SHOW STEP BY STEP WORK

Discuss the individual ways of financing healthcare.

Question 1) A one bedroom unit in Darwin can be purchased now for $160,000 cash, or an $80,000 cash deposit today and $110,000 cash payable in five years. If interest rates are 9% p.a. compounding monthly, which method of payment is better? Explain.

Question 5 (25 marks / Risk, Return and CAPM) (Each of the following parts is independent.) (a) According to the Capital Asset Pricing theory, what return would be required by an investor whose portfolio is made up of 40% of the market portfolio (m) and 60% of Treasury bills (i.e. risk-free asset)? Assume the risk-free rate is 3% and the market risk premium is 7%? ​​​​ (b) You are considering investing in the following two stocks. The risk-free rate is 7 percent and the market risk premium is 8 percent. Stock Price Today Expected Price in 1 year Expected Dividend in 1 year Beta X $20 $22 $2.00 1.0 Y $30 $32 $1.78 0.9 i) Compute the expected and required return (using CAPM) on each stock. ii) Which asset is worth investing? Support your answer with calculations. (c) Which pair of stocks used to form a 2-asset portfolio would have the greatest diversification effect for the portfolio? Briefly explain. Correlation Stocks A & B -0.66 Stocks A & C -0.42 Stocks A & D 0 Stocks A & E 0.75 ​​​​​​​​​​​ (d)​Explain the terms systematic risk and unsystematic risk and their importance in determining ​investment return.​​​​​​