1. Interpret the tables trend for revenue, expense & dividend year by year comparing both company?

Lockheed Corporation reported EBITDA of $4,000 million in the year just ended (year 0), prior to interest expenses of $1,000 million and depreciation charges of $600 million. Capital expenditures in the year just ended amounted to $1,000 million, and working capital was 8% of revenues (which was $20,000 million). The tax rate for the firm was 40%.

The firm had debt outstanding of $18.00 billion (in book value terms), trading at a market value of $20.0 billion and yield a pre-tax interest rate of 8%.

There were 100 million shares outstanding, trading at $250 per share, and the most recent beta was 1.20. The Treasury bond rate was 3%, and the market risk premium was 6.5%.

The firm expected revenues, earnings (EBITDA) and depreciation to grow at 10% a year from the current year (year 0) to year 3, after which the growth rate was expected to drop to 3% a year forever.

Capital expenditures will also grow at 10% a year from year 0 to year 3, but capital spending will be 120% of depreciation in the steady state period. The company also planned to lower its debt/equity ratio to 60% for the steady state which will result in the pretax interest rate dropping to 6%. As a result of the lowering of the firm’s debt/equity ratio, the beta of the firm is also expected to decline.

1. Estimate the free cash flow to the firm.

2. Compute the beta of the firm after Year 3.

WACC Before Year 3 =

Cost of Equity After Year 3 =

WACC After Year 3 =

You plan to retire in year 20
Your retirement will last 25 years starting in year 21
You want to have $50,000 each year of your retirement.
How much would you have to invest each year, starting in one year, for 15 years , to exactly pay for your retirement ,if your investments earn 6.00% APR (compounded annually)?

The following transactions pertain to Year 1, the first-year operations of Rooney Company. All inventory was started and completed during Year 1. Assume that all transactions are cash transactions.

1. Acquired $4,600 cash by issuing common stock.

2. Paid $680 for materials used to produce inventory.

3. Paid $1,800 to production workers.

4. Paid $848 rental fee for production equipment.

5. Paid $100 to administrative employees.

6. Paid $117 rental fee for administrative office equipment.

7. Produced 320 units of inventory of which 220 units were sold at a price of $13 each.

Required

Prepare an income statement and a balance sheet in accordance with GAAP.

An investment offers €10,000 per year for 15 years, with the first payment occurring one year from now. If the required return is 10 per cent,

a) What is the value of the investment?

b) What would the value be if the payments occurred for 50 years?

c) For ever?

Lockheed Corporation reported EBITDA of $4,000 million in the year just ended (year 0), prior to interest expenses of $1,000 million and depreciation charges of $600 million. Capital expenditures in the year just ended amounted to $1,000 million, and working capital was 8% of revenues (which was $20,000 million). The tax rate for the firm was 40%.

The firm had debt outstanding of $18.00 billion (in book value terms), trading at a market value of $20.0 billion and yield a pre-tax interest rate of 8%.

There were 100 million shares outstanding, trading at $250 per share, and the most recent beta was 1.20. The Treasury bond rate was 3%, and the market risk premium was 6.5%.

The firm expected revenues, earnings (EBITDA) and depreciation to grow at 10% a year from the current year (year 0) to year 3, after which the growth rate was expected to drop to 3% a year forever.

Capital expenditures will also grow at 10% a year from year 0 to year 3, but capital spending will be 120% of depreciation in the steady state period. The company also planned to lower its debt/equity ratio to 60% for the steady state which will result in the pretax interest rate dropping to 6%. As a result of the lowering of the firm’s debt/equity ratio, the beta of the firm is also expected to decline.

1. Estimate the free cash flow to the firm. (40pts)

2. Compute the beta of the firm after Year 3. (4pts)

3. Determine the Cost of Equity and WACC for the Period from Year 0 to Year 3, and the Cost of Equity and WACC after Year 3. (16pts)

Cost of Equity Before Year 3 =

WACC Before Year 3 =

Cost of Equity After Year 3 =

WACC After Year 3 =

4. Estimate the Terminal Value of the Firm in Year 3. (3pts)

5. List the free cash flows to the firm (FCFF). FCFF in Year 3 should include the terminal value. (3pts)

6. Estimate the Enterprise Value of Lockheed (value of the firm).    (4pts)

Lockheed has $800 million in cash, and it also owns 10% of the stock of ABC Corporation. ABC Corporation has 100 million shares outstanding, and its shares are trading at $50/share. Estimate the Intrinsic Value of Equity and estimate the current share price of Lockheed.

1. Last year, the CPI Index was 102.43. Now (one year later), the index is 110.24.

Calculate the inflation rate over this period.

Enter your answer in decimals (not percent) and round to 4 decimal places, for example 0.1234.

2. Last year, the CPI Index was 205.49. Now (one year later), the index is 214.87.

Over the past year, you earned 7.6% on your deposits at the bank.

Calculate your real rate of return over the year.

Enter your answer in decimals (not percent) and round to 4 decimal places, for example 0.1234.

3.

Company A and Company B recently sold bonds to investors.

You notice that investors require a return of 4.55% to invest in the bonds of Company A, and they require a return of 8.75% to invest in the bonds of Company B.

Which of the following options would be the most likely explanation for the extra return investors require from Company B?

Group of answer choices

Company B has more default risk than Company A

Company A has more default risk than Company B

Investors are not sure how much liquidity risk there is for Company B

Investors expect more profits from Company B

4.

What is the present value of a 8-year annuity that will pay you $3,000 per year if interest rates are 10%?

Round your answer to 2 decimal places, for example 100.12.

If you set aside $5,000 per year (i.e., one deposit of $5,000 each year) in a Roth IRA for the next 25 years (the first contribution is to be made exactly one year from now, so use an ordinary annuity setup), how much will you have at your retirement in 25 years if your IRA earns 6% APR, compounded monthly?

You will need $100,000 per year for 25 years starting in year 45.    You are able to save $3000 per year from year 3 to year 15, inclusive.  How much must you save from years 16 through 37, inclusive, if interest rates will be 4% from years 0 through the end of year 25 and 7% starting at the beginning of year 26 and on?    Solve for the unknown payments:

Please show work: I do not understand my professors work

A closed-end fund starts the year with a net asset value of $30. By year-end, NAV equals $31.90. At the beginning of the year, the fund is selling at a 2% premium to NAV. By the end of the year, the fund is selling at a 7% discount to NAV. The fund paid year-end distributions of income and capital gains of $3.30. a. What is the rate of return to an investor in the fund during the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return % b. What would have been the rate of return to an investor who held the same securities as the fund manager during the year? (Round your answer to 2 decimal places.) Rate of return %