outline and carefully analyze Porter's generic determinants of strategy?

Edna Recording​ Studios, Inc., reported earnings available to common stock of $5,000,000 last year. From those​ earnings, the company paid a dividend of ​$1.33 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 45% ​debt, 20​% preferred​ stock, and 35​% common stock. It is taxed at a rate of 26​%.

a.  If the market price of the common stock is $42 and dividends are expected to grow at a rate of 6% per year for the foreseeable​ future, what is the​ company's cost of retained earnings financing​?

b.  If underpricing and flotation costs on new shares of common stock amount to $8 per​ share, what is the​company's cost of new common stock

financing​?

c.  The company can issue $2.15 dividend preferred stock for a market price of ​$27

per share. Flotation costs would amount to $2 per share. What is the cost of preferred stock financing​?

d.  The company can issue $1,000​-par-value, 10% coupon, 15​-year bonds that can be sold for $1,170 each. Flotation costs would amount to $30

per bond. Use the estimation formula to figure the approximate​after-tax cost of debt​ financing?

e.  What is the retained earnings and cost of new common stock WACC​?

You decide to sell short 50 shares of Ford at $10 per share. The initial margin requirement is 50%. The maintenance margin is 40%. (Please show the work/equations!!! Thanks!)

1) How much cash (X) must we put into the brokerage account?

2) How high can the stock price be before a margin call?

3) Suppose stock price immediately declines to P = $9. What is the rate of return for this investor?

4) Suppose stock price immediately rises to P = $11. What is the rate of return for this investor?

You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97.

What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Sharpe ratio _____

Treynor ratio _____

You are given the following information for Smashville, Inc.  

During the year, Smashville, Inc., had 20,000 shares of stock outstanding and depreciation expense of $15,000. Calculate the book value per share, earnings per share, and cash flow per share. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Price Book Ratio_____

Price Earning ______

Price cash flow _____

Suppose a two-stock portfolio is created with 50% invested in bond X and 50% invested in bond Z.

Determine the portfolio returns in each city.


Determine the expected rate of returns for bond X, bond Z, and the Portfolio.


Determine the standard deviations for bond X, bond Z, and the Portfolio

A project has annual cash flows of $5,500 for the next 10 years and then $7,500 each year for the following 10 years. The IRR of this 20-year project is 12.34%. If the firm's WACC is 12%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.

Acme Storage has a market capitalization of 92 million, and debt outstanding of 43 million. Acme plans to maintain this same debt-equity ratio in the future. The firm pays an interest of 7.8% on its debt and has a corporate tax rate of 30%.

a. If Acme's free cash flow is expected to be $12.15 million next year and is expected to grow at a rate of 2% per year, what is Acme's WACC?
b. What is the value of Acme's interest tax shield?
Click the icon to see the Worked Solution (Formula Solution).
a. If Acme's free cash flow is expected to be $12.15 million next year and is expected to grow at a rate of 2% per year, what is Acme's WACC?
The WACC is %_________. (Round to the nearest integer.)
b. What is the value of Acme's interest tax shield?
The value of Acme's interest tax shield is__________ $ million. (Round to two decimal places.)

Hardmon Enterprises is currently an​ all-equity firm with an expected return of 11.1%. It is considering a leveraged recapitalization in which it would borrow and repurchase existing shares. Assume perfect capital markets.

a. Suppose Hardmon borrows to the point that its​ debt-equity ratio is 0.50. With this amount of​ debt, the debt cost of capital is 4% What will be the expected return of equity after this​ transaction?

b. Suppose instead Hardmon borrows to the point that its​ debt-equity ratio is 1.50. With this amount of​ debt, Hardmon's debt will be much riskier. As a​ result, the debt cost of capital will be 6%. What will be the expected return of equity in this​ case?

c. A senior manager argues that it is in the best interest of the shareholders to choose the capital structure that leads to the highest expected return for the stock. How would you respond to this​ argument?

Earleton Manufacturing Company has $2 billion in sales and $900,000,000 in fixed assets. Currently, the company's fixed assets are operating at 80% of capacity.

1. What level of sales could Earleton have obtained if it had been operating at full capacity? Write out your answer completely. Round your answer to the nearest whole number.
   $  
2. 
   
3. What is Earleton's target fixed assets/sales ratio? Do not round intermediate calculations. Round your answer to two decimal places.
   %
4. 
   
5. If Earleton's sales increase 40%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio? Write out your answer completely. Do not round intermediate calculations. Round your answer to the nearest whole number.
   $

Your mining company is considering an expansion of operations into iron ore. Your engineers surveyed a particular piece of land three weeks ago (the survey cost $45,000) and concluded the following:

• You can extract 2,500 tons of iron ore per year.
• There are 10,000 tons of iron ore underneath this land. Once all the ore has 
been extracted, the project will cease to produce any revenues.
• The price of ore will remain constant for the next 4 years. Currently ore sells 
for $120 per ton.
• The operating cost to extract the ore will be $80 per ton for the next 4 years.
• We can invest in the equipment for this project right now for $100,000.
• The equipment will be fully depreciated over a period of four years using the 
straight-line method.
• At the end of year 4, we can sell the equipment involved in the project for 
$25,000
• The expansion requires additional working capital (NWC) of $15,000 from 
the start (at time t=0) until the end of year 4. At time t=4, working capital 
decreases to $0.
• The tax rate is assumed to be 35%. Your cost of capital is 11%.

Please provide the Free Cash Flow for each year of this project (times t=0 through t=4) and compute the project’s NPV.

(Enter the full dollar amount for each cash flow/NPV. Round your answer to the nearest dollar. For example, a cash flow of $273,610.68 would be entered as 273611. Negative values should be entered appropriately using the "-" symbol before the dollar amount.)

T = 0 Cash Flow:

T = 1 Cash Flow:

T = 2 Cash Flow:

T = 3 Cash Flow:

T = 4 Cash Flow:

Project NPV:

REGRESSION AND INVENTORIES

Jasper Furnishings has $250 million in sales. The company expects that its sales will increase 11% this year. Jasper's CFO uses a simple linear regression to forecast the company's inventory level for a given level of projected sales. On the basis of recent history, the estimated relationship between inventories and sales (in millions of dollars) is as follows:

Inventories = $40 + 0.26(Sales)

1. Given the estimated sales forecast and the estimated relationship between inventories and sales, what are your forecasts of the company's year-end inventory level? Enter your answer in millions. For example, an answer of $25,000,000 should be entered as 25. Round your answer to two decimal places.
   $ million
2. 
   
3. What are your forecasts of the company's year-end inventory turnover ratio? Round your answer to two decimal places.

1. Project L requires an initial outlay at t = 0 of $40,000, its expected cash inflows are $15,000 per year for 9 years, and its WACC is 10%. What is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.

2. Project L requires an initial outlay at t = 0 of $43,775, its expected cash inflows are $9,000 per year for 8 years, and its WACC is 13%. What is the project's IRR? Round your answer to two decimal places.

3. Project L requires an initial outlay at t = 0 of $55,000, its expected cash inflows are $11,000 per year for 9 years, and its WACC is 9%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

C. What is the project's Year 2 net cash flow?

D. What is the project's Year 3 net cash flow?

E. What is the NPV?

(Related to Checkpoint 13.2 and Checkpoint​ 13.3) ​ (Comprehensive risk​ analysis) Blinkeria is considering introducing a new line of hand scanners that can be used to copy material and then download it into a personal computer. These scanners are expected to sell for an average price of ​$95 ​each, and the company analysts performing the analysis expect that the firm can sell 105,000 units per year at this price for a period of five​ years, after which time they expect demand for the product to end as a result of new technology. In​ addition, variable costs are expected to be ​$18 per unit and fixed​ costs, not including​ depreciation, are forecast to be ​$1,100,000 per year. To manufacture this​ product, Blinkeria will need to buy a computerized production machine for $9.1 million that has no residual or salvage​ value, and will have an expected life of five years. In​ addition, the firm expects it will have to invest an additional ​$304,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided​ here: 

Initial cost of the machine    $9,100,000
Expected life    5 years
Salvage value of the machine    $0
Working capital requirement    $304,000
Depreciation method    straight line
Depreciation expense    $1,820,000 per year
Cash fixed costs—excluding depreciation    $1,100,000 per year
Variable costs per unit   $18
Required rate of return or cost of capital    9.1%
Tax rate    34%

a.  Calculate the​ project's NPV.

b.  Determine the sensitivity of the​ project's NPV to​ a(n) 8 percent decrease in the number of units sold.

c.  Determine the sensitivity of the​ project's NPV to​ a(n) 8 percent decrease in the price per unit.

d.  Determine the sensitivity of the​ project's NPV to​ a(n) 8 percent increase in the variable cost per unit.

e.  Determine the sensitivity of the​ project's NPV to​ a(n) 8 percent increase in the annual fixed operating costs.

f.  Use scenario analysis to evaluate the​ project's NPV under​ worst- and​ best-case scenarios for the​ project's value drivers. The values for the expected or​ base-case along with the​ worst- and​ best-case scenarios are listed​ here:

   Expected or Base Case   Worst Case   Best Case
Unit sales    105,000   72,450   137,550
Price per unit    $95   $83.60   $112.10
Variable cost per unit    $(18)   $(19.80)   $(16.56)
Cash fixed costs per year    $(1,100,000)   $(1,298,000)   $(1,001,000)
Depreciation expense    $(1,820,000)   $(1,820,000)   $(1,820,000)