a. The board of directors of Moon plc decided at present (year 0) to dissolve the company in two years (year 2). The company has 20,000 shares in circulation and the cost of capital is 9 percent. This is an all-equity firm and the Chief Financial Officer knows with certainty the future cash flows. The company expects to receive $10,600 in year 1 and another $108,000 in year 2. All cash flows received by the company will be distributed as dividends.
Calculate the current share price ignoring taxes. Suppose you own 200 shares in Moon plc and your preference is to have equal dividends in year 1 and year 2. Explain how you can achieve this by creating homemade dividends. Show how your desired position can be achieved. Calculate the present value of your cash flow under the original scenario and also the case of equal dividends.

b. Next, assume you desire to receive only $3 dividend per share in year 1. Using the information in part (a), calculate your homemade dividend in year 2 and the present value of your new cash flow. Plot and explain all three options.

Consider the following.

a. What is the duration of a four-year Treasury bond with a 7.5 percent semiannual coupon selling at par?

b. What is the duration of a three-year Treasury bond with a 7.5 percent semiannual coupon selling at par?

c. What is the duration of a two-year Treasury bond with a 7.5 percent semiannual coupon selling at par?

(For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

A corporation is considering purchasing a machine that has an 8-year life and will save the firm $3,825 per year in net operating costs. The machine would be depreciated on a straight-line basis to a zero salvage value. The firm has a 21% tax rate and a 14% p.a. required rate of return on this project.

a. If the machine costs $22,000, should it be purchased?

b. If the machine can be leased for $3,400 per year payable at the end of each year, should the firm buy the machine or lease it?

c. If the machine costs $8,500, what is the maximum lease payment the firm would be willing to pay if it was to consider a leasing alternative?

A project will produce an operating cash flow of $295,000 a year for four years. The initial cash outlay for equipment will be $721,000. The net aftertax salvage value of $72,000 will be received at the end of the project. The project requires $79,000 of net working capital that will be fully recovered when the project ends. What is the net present value of the project if the required rate of return is 15 percent?

An employee earned $155,000 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $127,200 maximum per year and the rate for FICA Medicare 1.45% of all earnings. The employee’s total FICA payroll tax is:

A.$11,857.50.

B.$9,730.80.

C.$10,133.90.

D.$2,247.50.

E.$0, since the FICA tax is paid entirely by the employer.

C and D are equal partners in the CD partnership. C starts the year with an adjusted basis of $300 in his partnership interest while D starts the year with an adjusted basis of $600. The partnership distributes cash of $200 and inventory, adjusted basis $450 fair market value $500, to C and cash of $200 and land, adjusted basis $300, fair market value $700, subject to a liability of $200, to D. The partnership continues operation thereafter. What consequences to the parties?

A payment of $16,000 is due in 1 year and $10,900 is due in 2 years. What two equal payments, one in 3 years and one in 4 years would replace these original payments? Assume that money earns 4.25% compounded quarterly.

. Lasso Corp. wants to forecast for 2020. The end of year statements for 2019 are as follows:

Income Statement

Revenues                    $245,622

COGS                          - 142,461

Gross Profits                103,161

Expenses                     - 49,124

EBIT                               54,037

- Interest                       - 9,642

EBT                                 44,395

-Taxes                            -19,090

EAT                                 25,305

Balance Sheet

Current Assets           $179,304   Current liabilities          $85,700

Fixed Assets                 $140,930   Long-term debt            78,180

Total Assets                 $320,234   Total liabilities             $163,880

Equity                         $156,354

Total Liabilities & Equity                     $320,234

Management expects the following for 2020:

An 8% increase in revenues; COGS will increase by 1% from its current percent of sales. Expenses will stay at the same percentage of sales; Current assets will also stay at their same percentage of sales. Fixed assets will increase by $15,000; All interest will be paid at a 12% interest rate and will only be on long-term debt, which is not expected to change; the tax rate is expected to stay at the same rate. No dividends are paid and any shortfalls should be made up in current liabilities.

Prepare a forecasted income statement and balance sheet for 2020. Work to the nearest dollar.

At the beginning of the current? year, Barry and Irving formed the BI Partnership by transferring cash and property to the partnership in exchange for a partnership? interest, with each having a? 50% interest.? Specifically,Barry transferred property having a $70,000 ?FMV, a $38,000 adjusted? basis, and subject to a $9,000 ?liability, which the partnership assumed.Irving contributed $35,000 cash to the partnership. The partnership also borrowed $32,000 from the bank to use in its operations. All liabilities are recourse for which the partners have an equal economic risk of loss. During the current? year, the partnership earned $26,000 of net ordinary income and reinvested this amount in new property.

Firm AAA's earnings and dividends are expected to grow by a rate of 0.04 a year. This growth will stop after year 4. In year 5 and later, it will pay out all earnings as dividends. Assume next year's dividend is 2, the cost of capital is 0.08, and next year's EPS is 12. What is AAA's stock price today? Round your answer to 2 decimal places.