We are examining a new project. We expect to sell 6,700 units per year at $61 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $61 × 6,700 = $408,700. The relevant discount rate is 15 percent and the initial investment required is $1,780,000.

a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

b. After the first year, the project can be dismantled and sold for $1,650,000. If expected sales are revised based on the first year’s performance, below what level of expected sales would it make sense to abandon the project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Describe the differences between the Treaty of Rome and the Maastricht Treaty.

Acme Miracle projects good things for their new weight loss pill, LoseIt. Revenues this year are expected to be $1.1 million, and Acme believes they will increase 15% per year for the next 5 years. What is the present value of the anticipated revenues? Acme uses an interest rate of 20%.

Acme Miracle projects good things for their new weight loss pill, LoseIt. Revenues this year are expected to be $1.1 million, and Acme believes they will increase 15% per year for the next 5 years. What is the equivalent annual amount for the anticipated revenues? Acme uses an interest rate of 20%.

Assume the following information

Given the information in this question, the return from covered interest arbitrage by U.S. investors with $479,000 to invest is about ________.

Business risk is typically described as the exposure a company or organization has to a number of factors that may lower the company’s profits, which may trigger a business failure. Although there are many business risks, two major risk categories are systematic risks and unsystematic risks. Respond to the following in a minimum of 175 words: Explain the differences between systematic risks and unsystematic risks. Briefly discuss two sources of systematic risks and two sources of unsystematic risks.

Bond yields (LO16-2) An investor must choose between two bonds:

Bond A pays $72 annual interest and has a market value of $925. It has 10 years to maturity. Bond B pays $62 annual interest and has a market value of $910. It has two years to maturity. Assume the par value of the bonds is $1,000.

a. Compute the current yield on both bonds.

b. Which bond should she select based on your answer to part a?

c. A drawback of current yield is that it does not consider the total life of the bond. For example, the yield to maturity on Bond A is 8.33 percent. What is the yield to maturity on Bond B?

d. Has your answer changed between parts b and c of this question in terms of which bond to select?

Harry and Belinda have a substantial annual joint income—more than $125,000, in fact. Nevertheless, they expect to experience some cash-flow deficits during the months of November and December of the upcoming year. To resolve this difficulty, the couple is considering opening a credit card account and using it exclusively for those expenditures that will cause the deficits they face. They could also open a line of credit that would allow them to borrow money by simply going online and having money placed in their checking account.

(a) What are the advantages and disadvantages of the Johnsons opening these accounts?

(b) What financial calculations should Harry and Belinda undertake to see whether they could afford to borrow more money at this time?

(c) What might Harry and Belinda do before applying for credit to ensure that they will pay the lowest interest rate possible?

(d) Should they use credit to resolve their budget imbalances? Why or why not?

10. What is the rationale for using PPP as a currency trading rule

You are a financial analyst for Loch Motor Company and have been asked to determine the impact of alternative depreciation methods. For your analysis, you have been asked to compare methods based on a machine that cost $206,000. The estimated useful life is 12 years, and the estimated residual value is $46,160. The machine has an estimated useful life in productive output of 222,000 units. Actual output was 31,000 in year 1 and 27,000 in year 2.

Required:

1. For years 1 and 2 only, prepare separate depreciation schedules assuming: (Do not round intermediate calculations and round your final answers to the nearest dollar amount.)

a. Straight-line method.

b. Units-of-production method.

c. Double-declining-balance method.

Health Systems Inc. is considering a 10 percent stock dividend. The capital accounts are as follows: Common stock (4,000,000 shares at $10 par) $ 40,000,000 Capital in excess of par* 25,000,000 Retained earnings 45,000,000 Net worth $ 110,000,000 *The increase in capital in excess of par as a result of a stock dividend is equal to the shares created times (Market price – Par value). The company’s stock is selling for $16 per share. The company had total earnings of $8,000,000 with 4,000,000 shares outstanding and earnings per share were $2.00. The firm has a P/E ratio of 8. a. What adjustments would have to be made to the capital accounts for a 10 percent stock dividend? Show the new capital accounts. (Do not round intermediate calculations. Input your answers in dollars, not millions (e.g. $1,230,000).) b. What adjustments would be made to EPS and the stock price? (Assume the P/E ratio remains constant.) (Do not round intermediate calculations and round your answers to 2 decimal places.) c. How many shares would an investor have if he or she originally had 70? (Do not round intermediate calculations and round your answer to the nearest whole share.) d. What is the investor’s total investment worth before and after the stock dividend if the P/E ratio remains constant? (Do not round intermediate calculations and round your answers to the nearest whole dollar.); e. Assume Mr. Heart, the president of Health Systems, wishes to benefit stockholders by keeping the cash dividend at a previous level of $1.15 in spite of the fact that the stockholders now have 10 percent more shares. Because the cash dividend is not reduced, the stock price is assumed to remain at $16. What is an investor’s total investment worth after the stock dividend if he/she had 70 shares before the stock dividend? f. Under the scenario described in part e, is the investor better off? Yes No g. As a final question, what is the dividend yield on this stock under the scenario described in part e? (Input your answer as a percent rounded to 2 decimal places.)

Strong Metals Inc. purchased a new stamping machine at the beginning of the year at a cost of $1,330,000. The estimated residual value was $70,000. Assume that the estimated useful life was five years and the estimated productive life of the machine was 300,000 units. Actual annual production was as follows:

Required:

1. Complete a separate depreciation schedule for each of the alternative methods.

a. Straight-line.

b. Units-of-production.

c. Double-declining-balance.

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 23 percent for the next 3 years, with the growth rate falling off to a constant 5 percent thereafter.

If the required return is 9 percent and the company just paid a $3.60 dividend. what is the current share price?

Part 4: UNDERSTANDING THE FINANCIAL STATEMENTS OF BUSINESS CUSTOMERS

You are provided with the following financial ratios of Rob Unlimited:

Return on assets:   Income before interest and tax/total assets x 100/1 = 61.666666%

Gross profit ratio:   Gross profit/Principal revenue x 100/1    = 30%

Operating margin    Operating income/principal revenue x 100/1       = 12.333333%

Net income margin: Net income before taxation/ Principal revenue x 100/1     = 10.666667%

Turnover ratio of fixed assets: Principal revenue / fixed assets      = 15 times          

Turnover ratio of current assets: principal revenue/ current assets      = 7.5 times

Current ratio: current assets/current liabilities   = 3:1

Asked: Use the information from the ratios to complete the statement of financial position and statement of comprehensive income for Rob Unlimited.

Statement of financial position as at 28 February 20xx                                                        

Shareholder Interest

Ordinary share capital                  $500,000

General reserves                          $_______

Non-current liabilities

Long term loan                             $600,000

Current liabilities

Trade creditors                             $200,000

Other Short term loans                  $_______

Total                                               $______

Non-current assets

Vehicles and equipment                  $______

Current assets

cash                                             $150000

Debtors                                         $_______

stock                                             $600000

Total                                              $________

Statement of comprehensive income for the year ended 28 February 20xx

Principle revenue              $9000000

Inventory beginning of year                  $900000

Plus purchase                                        $______

Less Inventory end of year   $600000

Cost of goods sold $6300000

Gross income $_______

Operating expenses    $_______

Depreciation $90000

Net income before interest and taxation $1110000

Interest payments $_______

Net income before taxation    $_______

u are required to produce a table showing bond valuesand the impact of changes in interest rate over the lifeof a bond and a diagram demonstrating the link between the changes in values(due to changes in interest rate) and time to maturity. The bond has a face value of $1,000, pays a coupon rate of 7% p.a paid annually and it is issued with 10 years to maturity. All calculations should be executed in excel.Your table should show the following:The value of the bond, year by year(from dateof issue until its maturity), assuming all other things remain the same. The value of the bond, year by year, from date of issue until its maturity, assuming that market interest rate increasesby 1.5%(hence yield to maturity increases by 1.5%), all other things remain the same.The potential%change in value, year by year, from the date of issue until its maturity.The % change in value demonstratesthe impact of the increasein interest rate on the bond value (or interest rate risk), for each year of maturity.From your table produce a diagram that demonstrates the relationship between% change in value and time to maturity. The initial market interest rate (yield to maturity) to be used is 12%. show your formulas used