Boston Cube Inc. currently has no debt, annual free cash flows of $74 million and an average tax rate of 34%. Free cash flows are expected to grow by 5% per year forever.

Using the CAPM, the firm estimates that its cost of equity is 12%. The risk-free rate is 2% and the expected equity market risk premium (MRP) is 7%. There are 8 million shares outstanding.

The firm is considering a new capital structure with a debt-to-capital ratio of 20%. The company would issue bonds to repurchase its own shares at the market price. An investment bank has estimated that the yield to maturity on the company's bonds would be 3%.

stock price before the recapitalization is 138.75

Part 2: What will be the WACC after the recapitalization?

Part 3: What will be the stock price after the recapitalization and how many shares will be outstanding at that price?

Vardon Golf Ltd. is a privately held maker of golf clubs. For decades, it produced a full range of clubs, but recently most of its sales have come from hybrids, clubs that combine the best attributes of fairway woods and long irons. The company also produces putters that are starting to find some traction among professionals and low‐handicap amateurs. The company is profitable, but Cooper Palmer, a private equity firm based in London, believes that it has underperformed relative to its potential.

You are an analyst at Cooper Palmer and have been asked to perform a valuation of Vardon Golf. Financial data for 2012, the year just past, include the following:

^* Net fixed assets = Property, plant and equipment, net of depreciation.

If the company continues under current management, the following performance parameters are expected:

^* For the years 2013 through 2017.

However, the partners at Cooper Palmer are convinced that if they ran the company, Vardon could realize growth opportunities and operating efficiencies not expected under current ownership. For example, cost savings would boost EBIT margins, and improved asset utilization would reduce required investments in WCR and NFA. Based on your discussion with the partners, you reestimate the parameters as follows:

Required

1. Assuming a 5‐year explicit forecast horizon and an opportunity cost of capital of 9%, estimate the value of Vardon Golf under current ownership.
2. Reestimate the value of Vardon Golf based on the partners' assessments of potential operating improvements. Vardon's current owners are willing to sell the company for £17.75 million. Is that an attractive price for Cooper Palmer?

THE Company employs a periodic inventory system and
sells its inventory to customers for $10 per unit.
THE Company had the following inventory information
available for the month of May:

May 1    Beginning inventory 280 units @ $3.80 cost
         per unit
May 6    Purchased 350 units @ $4.90 cost per unit
May 8    Purchased 240 units @ $4.10 cost per unit
May 14   Sold 410 units
May 19   Purchased 400 units @ $5.75 cost per unit
May 23   Sold 270 units
May 27   Sold 120 units
May 29   Purchased 230 units @ $3.90 cost per unit

1.The amount of gross profit reported on THE Company's
income statement for May using the FIFO method was
equal to:

Group of answer choices

$3,066

$3,248

$3,476

$3,484

$3,712

$3,894

$4,106

$4,288

$4,524

$4,730

none of the above choices are correct

2.

The dollar amount of ending inventory shown on THE

Company's May 31 balance sheet using the weighted
average method was equal to:

Group of answer choices

$3,066

$3,248

$3,476

$3,484

$3,712

$3,894

$4,106

$4,288

$4,524

$4,730

none of the above choices are correct

3.

The amount of cost of goods sold reported on THE
Company's income statement for May using the LIFO
method was equal to:

Group of answer choices

$3,066

$3,248

$3,476

$3,484

$3,712

$3,894

$4,106

$4,288

$4,524

$4,730

none of the above choices are correct

The working assumption in the company is that customers spend on average $300 on the company's services. Recently, you started to suspect that things maybe not going to well and that your customers are not spending as much as they did. Set the null and alternative hypotheses that would reflect your concern and then test them at the 5% level of significance using the data in the After_Class_Assignment_Data Excel file.

The following information is available for Snider Company:                  
Receipts from customers           $190,000       
Dividends from stock investments           3,000      
Proceeds from sale of equipment           18,000      
Proceeds from issuance of stock           90,000      
Payments for goods           100,000      
Payments for operating expenses           75,000      
Interest paid           5,000      
Taxes paid           4,000      
Dividends paid           20,000      
                  
Instructions                  
Based on the preceding information, compute the net cash provided by operating activities.                  

For customers with a particular phone company, the amount that is paid monthly (in dollars) is normally distributed, with a mean of 83 and a standard deviation of 2.75.

Find the value k such that 80% of all customers pay less than k dollars per month. Select the closest to your answer.

options:

1. A fashion company is expecting a sudden and massive increase in # of customers visiting their website. Management has decided to use cloud services to prevent their website from crashing. Which capabilities is the primary reason why it will help the company in this case?
   1. Scalable
   2. Pooled
   3. Elastic
   4. The internet

The goal of this problem is to design a system to manage a moving company.

Customers who are planning to move (e.g., moving from a house to another one) call the moving assistant at the company to schedule their moving. The customer provides potential moving dates as well as the moving-from address and moving-to address. The assistant replies with a list of available dates. The customer picks a moving date and time. The assistant then schedules a virtual tour (with a date and time) with the customer (typically within the following 3 days) to provide a more accurate estimate about the moving price.

At the virtual tour date and time, the assistant calls the customer (e.g., via Zoom). The customer shows the major items to be moved. At the end of the virtual tour, the assistant gives the hourly rate, estimated total price, and estimated moving duration (number of hours). The assistant also emails a contract to the customer. If interested, the customer signs the contract and emails it back to the assistant. To validate the contract, the assistant calls the customer back. The customer provides credit card information to pay a deposit. Payment information is sent to the credit card company for authorization. If authorized, a deposit receipt is given to the customer.

At moving date, a crew of the company’s movers starts the actual moving. The head of the moving crew records the start time and share it with the customer. At the end of the moving, the head of the moving crew records the end time and calculates the actual total price. The customer provides credit card information. Payment information is sent to the credit card company for authorization. If authorized, a final receipt is given to the customer.

One week after the moving, the customer receives a survey form by email to evaluate the moving experience. The customer emails back the filled out form.

1. Give the context level diagram for the “Moving Company System”.
2. Give Diagram 0. IMPORTANT: in your diagram 0, you are required to have a process named “Manage Virtual Tours” that includes all tasks summarized in the underlined paragraph (see description above). Other processes need also to be included in Diagram 0.
3. Give the child diagram of the process “Manage Virtual Tours” mentioned in the previous question. IMPORTANT: All processes included in this child diagram should be primitive.

Neil is a director of HRM Pty Ltd (the ‘Company’), a concreting company. The company had the following transactions during the year ended 30 June 2019. How are the transactions treated for income tax purposes by HRM Pty Ltd? You can assume in this question that the numbers exclude GST, unless otherwise stated. 1. HRM Pty Ltd borrowed $500,000 from the Bank on 15 April 2019. 30% of the funds were used for personal purposes by Neil and the balance by the company. The bank charged the company an application fee of $5,000. Interest paid on the loan was $30,000. The loan is for seven years. 2. HRM Pty Ltd bought a second-hand commodore car. The company traded in a Toyota corolla and received $3,000 trade-in-value. The balance the company had to pay for the commodore car was $27,000. The new car was bought on 1 July 2018. The effective life of the new car is 6 years. 3. The old Toyota car had a written-down value at the date of sale of $2,000. 4. The company employed Deb, Neil’s wife as the receptionist. The company paid her a wage of $35,000. The reasonable wage for a receptionist on market-rate doing the same work is $50,000. 5. The company also donated $1,000 to a registered political Party during this year’s federal election. Page 2 of 3 REQUIRED: Explain to Neil the company director how each of the above items are treated for tax purposes. In your answer please carry out calculations where necessary and also refer to relevant case law and legislation. The company wishes to maximise its tax deductions. You are NOT required to calculate the company’s taxable income. [10 marks]

You are running a small software firm producing games for mobile devices and are considering introducing a new adventure game to customers. You plan to sell the product for the next 3 years and then exit before the competition catches up.  Based on the market research done last year for $30,000, you believe that, in year 1, the project will generate $4,800,000 of revenue with the cost of goods sold of $2,850,000. The revenue and the cost will diminish by 2% each year after that. The project will immediately require new computer equipment valued at $1,800,000. This equipment will be depreciated to $0 over 3 years using the straight-line method. The net working capital will increase immediately by $400,000 from the current level, stay at the level in year 1 and then decrease by $250,000 in year 2 and again decrease by $150,000 in year 3, returning to the current level. The introduction of the new game will affect the revenues from your other existing adventure games negatively by $190,000 per year.

Forecast all of the annual free cash flows for this project, and then compute its net present value and IRR using a discount rate of 9%. Is this project worth taking? Your company’s tax rate is 35%.