2. 2. A firm has the following three projections of revenue estimates:

Current Year1 Year 2 Year 3

Revenue $1,500 $1,650 $1,815 $2,000

EAT $95 $106 $117 $130

The company also receives a royalty net after taxes of $10 million per year. It is expected that the cash flows equal to depreciation will have to be reinvested to keep the firm operating. Further, capital expenditures equal to 60 percent of the net cash flow will need to be invested to keep the firm growing. Other items on the balance sheet remain unchanged. The CFO believes that it will just forecast for the first three years and then simply assume a 6 percent annual growth rate after the third year.

T-bills yield 8 percent and the market return is 13 percent. The company’s beta using Hamada equation is 1.2. What is the value of the company or what would you pay for the firm if you were interested in it.

2. A firm has the following three projections of revenue estimates:

Current        Year1            Year 2           Year 3

       Revenue       $1,500                 $1,650          $1,815          $2,000

       EAT        $95               $106             $117             $130

  The company also receives a royalty net after taxes of $10 million per year. It is expected that the cash flows equal to depreciation will have to be reinvested to keep the firm operating. Further, capital expenditures equal to 60 per cent of the net cash flow will need to be invested to keep the firm growing. Other items on the balance sheet remain unchanged. The CFO believes that it will just forecast for the first three years and then simply assume a 6 percent annual growth rate after the third year.

T-bills yield 8 percent and the market return is 13 percent. The company’s beta using Hamada equation is 1.2. What is the value of the company or what would you pay for the firm if you were interested in it.

Explain the Sales Order Procedures for ABC Company assuming they are a company that has the following:

Online Orders

In-Person Store Purchases

Extended credit to customers

Third-Party inventory provider

Ships goods

Bills customer

Sales Returns

Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose that a random sample of companies yielded the following data:

B: Percent increase for company 37 7 12 7 21 18 17 10

A: Percent increase for CEO 28 10 9 3 26 16 20 7

Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Assume that the distribution of differences is approximately normal, mound-shaped and symmetric. Use a 1% level of significance. Find (or estimate) the P-value.

Select one answer:

a. 0.02 < P-value < 0.05

b. 0.01 < P-value < 0.02

c. 0.25 < P-value < 0.50

d. P-value = 0.05

e. P-value = 0.25

Following are the 2016 income statements for Apple Inc. and Microsoft Corporation, competitors in the computer industry. Use these financial statements to answer the required.

Required:

a) How do Apple Inc. and Microsoft Corporation account for R&D expenditures?

b) Apple Inc.’s and Microsoft Corporation’s R&D expense includes many different types of costs. List three specific costs that could be included in R&D expense on the income statement.

c) What trend do you notice in the R&D expenses of each company over time?

A company that produces racing motorbikes has several models that sell well within the motorcycle racing community and which are very profitable for the company. These motorbikes are sold to retail customers and also business customers who were provided with 60-day credit terms. Despite having a profitable product, why must this company take care to ensure that it has sufficient cash on hand to meet its obligations?

(a) The company will have built up debts which must be repaid in order to bring the current models to market.

(b) Profits from the sales of popular models will be lost when returned to the shareholders in the form of dividends.

(c) Profits are not necessary reflected in the current cash balance of its bank account.

(d) Equity must be raised to finance the development of new models to replace the existing models.

At a Noodles & Company restaurant, the probability that a customer will order a nonalcoholic beverage is .49.

a. Find the probability that in a sample of 13 customers, none of the 13 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.) Probability

b. Find the probability that in a sample of 13 customers, at least 6 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.) Probability

c. Find the probability that in a sample of 13 customers, fewer than 7 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.) Probability

d. Find the probability that in a sample of 13 customers, all 13 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.) Probability

At a Noodles & Company restaurant, the probability that a customer will order a nonalcoholic beverage is .48.

a. Find the probability that in a sample of 12 customers, none of the 12 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.)

Probability          

b. Find the probability that in a sample of 12 customers, at least 5 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.)

Probability          

c. Find the probability that in a sample of 12 customers, fewer than 6 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.)

Probability          

d. Find the probability that in a sample of 12 customers, all 12 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.)

Probability          

At a Noodles & Company restaurant, the probability that a customer will order a nonalcoholic beverage is .51.

a. Find the probability that in a sample of 10 customers, none of the 10 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.)

Probability           

b. Find the probability that in a sample of 10 customers, at least 7 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.)

Probability           

c. Find the probability that in a sample of 10 customers, fewer than 8 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.)

Probability           

d. Find the probability that in a sample of 10 customers, all 10 will order a nonalcoholic beverage. (Round your answer to 4 decimal places.)

Probability