Beginning of Year Assets: $26,000 $18,000

End of Year Liabilities: $62,000 $25,000

3) If the company issues common stock of $5,600 and pay dividends of $39,400, how much is net income (loss)?

4) If net income is $1,700 and dividends are $6,600, how much is common stock?

5) If the company issues common stock of $18,300 and net income is $18,400, how much is dividends?

6) If the company issues common stock of $42,700 and pay dividends of $3,400, how much is net income (loss)?

The Jones Company has just completed the third year of a​ five-year MACRS recovery period for a piece of equipment it originally purchased for $298,000.

a. What is the book value of the​ equipment?

b. If Jones sells the equipment today for $183,000 and its tax rate is 35 % what is the​ after-tax cash flow from selling​ it?

c. Just before it is about to sell the​ equipment, Jones receives a new order. It can take the new order if it keeps the old equipment. Is there a cost to taking the order and if​ so, what is​ it? Explain.​ (Assume the new order will consume the remainder of the​ machine's useful​ life.)

Note​: Assume that the equipment is put into use in year 1.

Firm Abs will incur $5,000,000 in initial capital outlays in Year 1, $3,000,0000 in Year 2 and $1,000,0000 in Year 3. Since the company does not expect to be able to produce or sell its product until Year 2, it will not incur any labor and materials cost in Year 1. Based on marketing research and forecasting tools, Firm Abs to sell 6,000 units in Year 2 at a price of $320 and then expect that quantity to double in Year 3 and remain at that level in Years 5. However, they anticipate that the price will gradually reduce to $300, $270, and $240 in Years 3-5.

a. Calculate the costs and revenues over the five-year period without taking into the time value of money. What is the net profit of undiscounted costs and revenues?

b. Now calculate the net present value under the following scenarios and compare to your answer in a.

i. Calculate the net present value using discount rates of 10, 8, and 6 percent. Show your work.

ii. What would be your decision given your answers in i and ii? Explain. iii. Regardless of your answer in

iii., assume that your company decided to go forward with the investment. What would be the relevant costs to consider when deciding whether to shutdown at the beginning of Year 3? Year 4? Year 5?

We all know the cost of benefits typically increase year over year. For the past three years, those increases to benefits cost have grown more than what is comfortable for the employer to absorb. You are the Benefits Manager for a start-up company struggling to survive. You know that offering benefits may help you attract, retain and motivate a workforce…but you are not so sure about which discretionary benefits your workforce would prefer. Your company employs a diverse population of mostly young professionals (in their 20's and 30's) who are not very knowledgeable about benefits, but they think having benefits is a good idea. As the Benefits Manager, you are faced with making strategic and difficult choices about which discretionary benefits to drop because funds are limited and the annual increases are just too high (after years of double digit expense growth in discretionary benefits). You must make strategic choices on behalf of your organization. Rank order discretionary benefits, starting with the ones you would most likely drop and going up toward the discretionary benefits you would least likely drop. Explain your reasoning why and how you chose the benefits to drop.

Max Hype Inc. is expected to have an EBIT of $440,000.00 next year. Also next year, depreciation, the increase in net working capital, and capital spending are expected to be $37,500.00, $23,000.00, and $47,500.00, respectively. All of these variables are expected to grow at 7 percent per year until the end of year 5. The company currently has $120,000.00 in debt and 450,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 4 percent indefinitely. The company's WACC is 9 percent and its tax rate is 35 percent.

1. What is the price per share of the company's stock?
2. If the company's stock price is $14.01 on the stock market, is the company overvalued, undervalued or correctly priced on the stock market?
3. Would you buy the company's stock? Why or why not?

Choctaw Co. completed the following transactions in Year 1, the first year of operation.

1. Issued 27,000 shares of $12 par common stock for $12 per share.
2. Issued 3,700 shares of $20 stated value preferred stock for $20 per share.
3. Purchased 1,700 shares of common stock as treasury stock for $14 per share.
4. Declared a $2,700 cash dividend on preferred stock.
5. Sold 1,100 shares of treasury stock for $16 per share.
6. Paid $2,700 cash for the preferred dividend declared in Event 4.
7. Earned cash revenues of $92,000 and incurred cash expenses of $48,000.
8. Appropriated $8,700 of retained earnings.

Required

a. Organize the transaction in accounts under an accounting equation.
b. Prepare a balance sheet as of December 31, Year 1.

• Required A

Organize the transaction in accounts under an accounting equation. (Enter any decreases to account balances with a minus sign. Not all cells in the "Accounts Titles for Retained Earnings" column may require an input - leave cells blank if there is no corresponding input needed.)

Required B

An investment offers $10,300 per year for 14 years, with the first payment occurring one year from now. Assume the required return is 11 percent. What is the value of the investment today? What would the value be if the payments occurred for 39 years?

Consider the following two bonds: a 5-year and a 10-year bond, each with a 7% coupon. Both bonds currently sell at par and coupon payments are made annually (i.e., one coupon payment per year).

(a) What is the current price of each bond?

Hint: answer does not require calculations; read description of bonds carefully to determine what price must be (10 points) Suppose you buy the 10-year bond. One year later, interest rates decrease to 5%.

(b) What will be the new price of the bond? (30 points)

(c) What rate of return would you have earned on the bond over the one-year period? (20 points)

(d) Which bond will have a higher rate of return over the year, the 5-year bond or the 10-year bond? Why? (5 points).

You don’t need calculations for this one and will not be given any points for a numerical answer; respond based on your understanding of interest rate risk (price sensitivity) in bonds.

The following is a four- year forecasted estimate for ABC limited.

Required

1. Estimate the fair market value of ABC limited at the end of 2018. Assume that after 2022 earnings before interest and tax will remain constant at Sh. 200 million, depreciation will equal capital expenditure in each year and working capital will not change. The weighted average cost of capital for the company is 11% and its tax rate is 30%.

2. Estimate the fair market value per share of the company’s equity at the end of 2018 if the company has 40 million shares outstanding and the market value of interest-bearing liabilities on the valuation date equals Sh. 300 million. (10 Marks)