2) PROJECT CASH FLOW

Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project:

The company has a 40% tax rate, and its WACC is 11%.

Write out your answers completely. For example, 13 million should be entered as 13,000,000.

What is the project's cash flow for the first year (t = 1)? Round your answer to the nearest dollar.
_______________$

If this project would cannibalize other projects by $2.5 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest dollar.
The firm's project's cash flow would now be $____________ .

Ignore part b. If the tax rate dropped to 35%, how would that change your answer to part a? Round your answer to the nearest dollar.
The firm's project's cash flow would increase by $ ____________.

Roth Inc. experienced the following transactions for Year 1, its first year of operations:

1. Issued common stock for $80,000 cash.
2. Purchased $225,000 of merchandise on account.
3. Sold merchandise that cost $168,000 for $334,000 on account.
4. Collected $282,000 cash from accounts receivable.
5. Paid $210,000 on accounts payable.
6. Paid $64,000 of salaries expense for the year.
7. Paid other operating expenses of $53,000.
8. Roth adjusted the accounts using the following information from an accounts receivable aging schedule:

Required
a. Record the above transactions in general journal form and post to T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

• Record entry for issuance of common stock.

Note: Enter debits before credits.

Forten Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses.

Additional Information on Current Year Transactions

1. The loss on the cash sale of equipment was $5,125 (details in b).
2. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash.
3. Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term note payable for the balance.
4. Borrowed $4,000 cash by signing a short-term note payable.
5. Paid $50,125 cash to reduce the long-term notes payable.
6. Issued 2,500 shares of common stock for $20 cash per share.
7. Declared and paid cash dividends of $50,100. Prepare a complete statement of cash flows using the indirect method for the current year.

5. What is meant by a base year? Why do we need one? What base year is the USA economy using, even though it is 2015?

Consider two bonds, a 3-year bond paying an annual coupon of 7.00% and a 10-year bond also with an annual coupon of 7.00%. Both currently sell at a face value of $1,000. Now suppose interest rates rise to 12%.

a. What is the new price of the 3-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. What is the new price of the 10-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. Which bonds are more sensitive to a change in interest rates?

Long-term bonds

Short-term bonds

1. Assume the following information:​

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1. An U.S. investor has $1,000,000 to invest (note: the investor uses own money, not borrowed funds). What is the yield to the U.S. investor who conducts covered interest arbitrage? Make sure you show your works step by step and explain your calculations. Does covered interest arbitrage work for the U.S. investor?

2. A Swiss investor have Swiss francs (CHF) 1,000,000 to execute covered interest arbitrage (i.e., convert CHF into US$, invest in the U.S., and use forward contracts to hedge foreign exchange rate risk). What is the yield to the Swiss investor who conducts covered interest arbitrage? Can the Swiss investor earns a higher return than investing at home (i.e., Switzerland)? (6 points in total)

Google has paid $2 in dividends one year ago and this year has just paid $4 yesterday. In the next three years the dividends are expected to be $1, $5, and $4 at the end of year three. From there on, the dividend will grow with a yearly growth rate g. What is this implied growth rate that shareholders expect if the stock price today is $40? (The required rate of return for this stock is 10%.)

Select one:

a. 4%

b. 3%

c. 2%

d. 1%

e. 5%

PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $25 million Operating costs (excluding depreciation) 17.5 million Depreciation 5 million Interest expense 5 million The company has a 40% tax rate, and its WACC is 13%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. What is the project's cash flow for the first year (t = 1)? Round your answer to the nearest dollar. $ ________ If this project would cannibalize other projects by $2.5 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest dollar. The firm's project's cash flow would now be $ ________ . Ignore part b. If the tax rate dropped to 35%, how would that change your answer to part a? Round your answer to the nearest dollar. The firm's project's cash flow would _________________ by $ ________ .

Obsolete 5-year-old motorcycle repair equipment was sold for $12,000 during the year. It was fully depreciated. The equipment cost $65,000.

determine the amount of gain or loss from that transaction

Determine the initial classification(s) of each gain and loss and place the gains/losses

Depreciation Gains & Recature

Personal Use Casualty & Theft G/L**

Other Casualty & Theft G/L

§1231 Netting Process

LTC G/L

STC G/L

Ordinary Income

Deduction for AGI

Dedcution from AGI