An investor with an investment horizon of two years has two investment opportunities:

1.The first investment opportunity is to invest in two-year Treasury bond, yielding 5% per year.

2.The second opportunity is to invest in one-year Treasury bond and then after one year, to roll over an investment into another one year bond. If one year Treasury bond yields 4% and assuming that Expectation Theory holds what should one year bond yield one year from now? Explain fully and show your work. Initial response 250-300 words

A company is considering a 6-year project that requires an initial outlay of $23,000. The project engineer has estimated that the operating cash flows will be $4,000 in year 1, $6,000 in year 2, $7,000 in year 3, $7,000 in year 4, $7,000 in year 5, and $8,000 in year 6. At the end of the project, the equipment will be fully depreciated, classified as 5-year property under MACRS. The project engineer believes the equipment can be sold for $5,000 at the end of the project. If the tax rate is 26% and the required rate of return is 18%, what is the net present value (NPV) of this project? (Answer to the nearest dollar.)

Oak Branch Inc. issued $860,000 of 8%, 10-year bonds when the market rate was 7%. They received $921,127. Interest was paid semi-annually. Prepare an amortization table for the first three years of the bonds. Round intermediate and final answers to whole dollar amount.

Please use this information for the next 3 questions.

At your favorite bond store, Easy Bonds, you see the following prices:

• One year zero selling for $90.09
• Three year 10% coupon $1,000 par bond selling for $1,000
• Two year 10.5% coupon $1,000 par bond selling for $1,000

Assume that the expectations theory of interest rates holds, no liquidity premium exists and that the bonds are equally risky and liquid. What is the current one year rate?

What is the implied one-year rate for the second year?

What is the implied one-year rate for the third year?

A company is considering a 6-year project that requires an initial outlay of $30,000. The project engineer has estimated that the operating cash flows will be $3,000 in year 1, $6,000 in year 2, $7,000 in year 3, $7,000 in year 4, $7,000 in year 5, and $8,000 in year 6. At the end of the project, the equipment will be fully depreciated, classified as 5-year property under MACRS. The project engineer believes the equipment can be sold for $6,000 at the end of the project. If the tax rate is 35% and the required rate of return is 18%, what is the net present value (NPV) of this project? (Answer to the nearest dollar.)

Sam buys 100 shares of Acme stock at $100 per share on January 1, Year 1. At the end of the first year (December 31, Year 1), she buys 100 more shares at $120 per share. At the end of the second year (December 31, Year 2), she buys another 100 shares for $135 per share. The stock pays a dividend of $2.00 per share on December 29th of each year. Acme is trading at $169.80 as of December 31, Year 3. What is the time weighted return for Acme since January 1, Year 1 to today?

A company is considering a 6-year project that requires an initial outlay of $23,000. The project engineer has estimated that the operating cash flows will be $4,000 in year 1, $6,000 in year 2, $7,000 in year 3, $7,000 in year 4, $7,000 in year 5, and $9,000 in year 6. At the end of the project, the equipment will be fully depreciated, classified as 5-year property under MACRS. The project engineer believes the equipment can be sold for $5,000 at the end of the project. If the tax rate is 32% and the required rate of return is 16%, what is the net present value (NPV) of this project? (Answer to the nearest dollar.)

Ogilvy Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Ogilvy produced 74,000 units and sold 74,000 units. During its second year of operations, it produced 74,000 units and sold 69,400 units. In its third year, Ogilvy produced 74,000 units and sold 78,600 units. The selling price of the company’s product is $69 per unit.

Required:

1. Assume the company uses super-variable costing:

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

2. Assume the company uses a variable costing system that assigns $23 of direct labor cost to each unit produced:

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1, 2, and 3.

Question

Look at the Questions A and B below and answer this:

Can you perform an NPV or AW analysis comparing Questions A and B? If so explain how you would do so, and if not explain what would have to be changed to perform an NPV analysis, and what would need to be changed to perform an AW analysis. Write your entire answer.

Question A

A project you are looking at has an upfront cost of $1,471.01, and a cost in year 6 of $544.19. In exchange, the project has the following returns (income):

• $1,371.09 in the first year, increasing by $105 per year for years 2 and 3. Year 4 has the same return as year 3 (same value), and year 5 has a return that is 5% more than year 4.
• There is no return in year 6, but in year 7 the return is $1,194.00 decreasing by $105 per year till the end of the project.

If the project life is 8 years, and the discount rate is 6% what is the NPV of this project?

Question B

You're looking at doing a project with a 5 year life span. The project involves an upfront cost of $1,207.00, but also has a benefit (immediate) at the same time of $118.72. The project also has another cost in year 4 of $935.78. The return schedule is as follows:

• $1,342.33 on year 1, reducing by $52 per year for years 2 and 3. No return on year 4, and on year 5 a single return of $1,629.95

If your cost of capital is 5%, what is the  the NPV of this project?

Ogilvy Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: Variable cost per unit: Direct materials $ 31 Fixed costs per year: Direct labor $ 1,800,000 Fixed manufacturing overhead $ 850,000 Fixed selling and administrative expenses $ 296,000 The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Ogilvy produced 75,000 units and sold 75,000 units. During its second year of operations, it produced 75,000 units and sold 70,200 units. In its third year, Ogilvy produced 75,000 units and sold 79,800 units. The selling price of the company’s product is $71 per unit. Required: 1. Assume the company uses super-variable costing: a. Compute the unit product cost for Year 1, Year 2, and Year 3. b. Prepare an income statement for Year 1, Year 2, and Year 3. 2. Assume the company uses a variable costing system that assigns $24 of direct labor cost to each unit produced: a. Compute the unit product cost for Year 1, Year 2, and Year 3. b. Prepare an income statement for Year 1, Year 2, and Year 3. 3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1, 2, and 3.