A company is considering a project with the following expected cash flows:

Year 0: -$685,000
Year 1: $305,000
Year 2: $305,000
Year 3: $305,000
The company requires a 15% return on investment. Compute the NPV for the project.

Laura and John qualify for a 6-year car loan with a 9.1% APR or a 3-year car loan with an 7.5% APR. They found a new 2018 Ford Tundra listed at $49,400. Their combined monthly income is $5800 during surf season, but they know that will drop in the winter. They know they shouldn’t pay more than 10% of their income on car payments.

b. Assuming Laura and John will make payments for the entire life of the loan, how much will they pay monthly for each loan option? Are either of these options within 10% of their monthly income?

c. Assuming Laura and John will make payments for the entire life of the loan, how much will they pay in total for each loan option?

COMPSYS is a start-up computer company. This year, the first year of operations, the company expects to reach a Sales Revenue of $750,000. The company expects its sales to grow at a rate of 15% per year. Its Cost of Goods Sold (COGS) is running at 34% of Sales Revenue, and is expected to remain at that rate. Its Selling Costs are 12% of Sales in the first year and are expected to increase by an additional 3% per year after that. Its General and Administrative Costs (including Research and Development) are $410,000 this year, and are scheduled to rise at 4% every year after that. Earnings Before Taxes (EBT) is Sales Revenue less Cost of Goods Sold, Selling Costs, and General and Administrative Costs. Taxes are 25% of Earnings Before Taxes, if the Earnings Before Taxes are greater than zero but less than or equal to $50,000. If earnings are greater than $50,000 per year, then the tax rate is 35%. Use IF statements for computing taxes.

a)        Design and implement a worksheet to make a 5-year income statement projection for COMPSYS starting from this year. First, plan the format and layout of your worksheet areas. You should have separate areas for documenting the spreadsheet, indicating areas of the worksheet, and identifying assumptions with well-labeled separate cells for each of the growth rates and proportional factors. You should have a separate row for each item in the income statement and a separate column for each year. The final row should be for Earnings After Taxes. Use the Fill operation wherever possible.

b)        Calculate the Net Present Value (NPV) of the Earnings After Taxes for the 5 years. Use a Discount Rate of 7%. Provide a label to indicate the results and place the value at the bottom of your worksheet.

c)         Format your spreadsheet in an attractive manner. The first sheet should contain a brief documentation of the software package that you develop. The second sheet should be the EXCEL model. Here, the assumptions (given in the initial paragraph) should be first stated followed by the actual spreadsheet. The third sheet should contain the graphs you generate.

Optional (the following sections: d and e are optional but will be awarded bonus points if completed correctly)

d)        The management feels that the estimate for the first year's Sales Revenue, Cost of Goods Sold, Selling Costs, and General and Administrative Expenses may not be as certain. Since these four items are critical to the success of the operations, the management would like you to perform a sensitivity analysis to see what would the NPV look like when these numbers fluctuate within a range of +/- 20% of the estimate. That is, provide estimates of costs and revenues for this range which should be 80, 85, 90, 95, 100, 105, 110, 115, and 120% of the standard estimates.

(Hint: When you are formulating for these four items, add a certainty factor to the formulas. The certainty factor should not be hardcoded in the formulas. Always keep the input assumptions in a separate area in your worksheet. Use the Create Data Table under Data to perform the sensitivity analysis.)

e)        Produce the following graphs to present to the management:

• Sales and total expenses over the five-year period. Mark where the business starts to make a profit;

• The impact of fluctuations of the initial estimates for the cost of goods sold percentage; sales revenue; and the general and administrative expenses on the NPV.

(Hint: The horizontal axis should be from 80% to 120% of the original estimates, whilst the vertical axis should be the NPV. Remember, the 100% point is your original estimates. The curves for sales, cost of goods sold and the general and administrative expenses should be in the same graph.)

Assume an investor with a 5 year investment horizon is considering purchasing an 8 year semiannual 5% coupon bond that is currently selling at 99. The investor expects to reinvest the coupons at 2% and that the bond will be selling to offer a yield to maturity of 6% in five years. What is the expected total return for this bond? Express your answer on a bond-equivalent basis and on an effective annual rate basis.

Al-bracken Co. began the year with an accounts receivable balance of $78,000, and ended the year with an accounts receivable balance of $54,000. During the year, Al-bracken Co. recorded $445,400 of sales on account. How much cash did Al-bracken Co. collect from its customers during the year?

Elle’s Soap Co. began the year with an accounts payable balance related to inventory purchases of $15,000. The balance in the account at the end of the year was $26,800. During the year, Elle’s Soap Co. purchased $118,000 of inventory on account. How much cash did Elle’s Soap Co. pay for inventory purchases during the year?

Machine 1:

- Saves nothing in year 1
- Save you $2,000 in year 2
- Saves $1,000 in year 3
- Assume 5%

What is the PV of the savings for machine 1?

Machine 2:

- Saves nothing in year 1
- Save you $1,000 in year 2
- Saves $2,000 in year 3
- Assume 5%

What is the PV of the savings for machine 2?

Based on the PV of the savings for each machine, which would you buy?

Donna is a 35 year old female who is married and has a 5 year old daughter. Donna recently found out she was pregnant, but last week at 12 weeks she started to spot and went to see the doctor. At the doctors, Donna found out she was having a miscarriage and the doctors decided to look at her blood type and seemed very alarmed and asked her who her doctor was for her first child. Her blood type was A-. Here are some Leading Questions to think about:

Why was the first child okay?

What does blood type have to do with pregnancy and miscarriage?

Are antibodies involved?

What immune cells might be involved?

What do surface antigens have to do in this situation?

How can this be fixed, treated, and how does that process work?

On the first day of the fiscal year, a company issues a $1,000,000, 10%, 5-year bond that pays semiannual interest of $50,000 ($1,000,000 × 10% × ½), receiving cash of $1,081,109.

Journalize the bond issuance. If an amount box does not require an entry, leave it blank.

Cranberry Corporation has $3,240,000 of current year taxable income.

1. If the current year is a calendar year ending on December 31, 2017, calculate Cranberry's regular income tax liability.
2. If the current year is a calendar year ending on December 31, 2018, calculate Cranberry’s regular income tax liability.
3. If the current year is a fiscal year ending on April 30, 2018, calculate Cranberry's regular income tax liability. (Do not round intermediate calculations.)

A firm is evaluating a project with the following cash flow:

Year 0: -$28,000

Year 1: $12,000

Year 2: $15,000

Year 3: $11,000

A) If the required return is 14%, what is the NPV?

B) What is the IRR?

C) If the required return is 11%, using the NPV rule, should the firm accept the project?

D) What if the required return is 25%, should the firm accept the project?