Monitoring the Cost Of Money: Interest Rates

Interest rates, the cost of money, influence most all factors related to personal and corporate capital budgeting. The more obvious personal information for the cost of money is the rates associated with a mortgage or car loan. As a CFO you would “shop” interest rates to find the best rate for your financing needs.

1. Would you, as the CFO, finance your projects as soon as possible if the cost of capital was expected to drop? Please explain.

2. More importantly, where do you find the information to analyze expected changes in interest rates?

3. Please list references and in-text citations.

4. PLEASE LOOK AT YOUR GRAMMER WHEN YOU ARE WRITING. MAKE SURE YOU HAVE COMPLETE SENTENCES SO THAT I CAN READ IT AND LIST REFERENCES PLEASE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

MyPhone, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,380 cell phones are as follows:

MyPhone desires a profit equal to a 16% rate of return on invested assets of $600,700.

a. Determine the amount of desired profit from the production and sale of 5,380 cell phones.
$

b. Determine the product cost per unit for the production of 5,380 of cell phones. Round your answer to the nearest whole dollar.
$ per unit

c. Determine the product cost markup percentage for cell phones. Round your answer to two decimal places.
%

d. Determine the selling price of cell phones. Round your answers to the nearest whole dollar.

MyPhone, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,380 cell phones are as follows:

MyPhone desires a profit equal to a 16% rate of return on invested assets of $600,700.

a. Determine the amount of desired profit from the production and sale of 5,380 cell phones.
$

b. Determine the product cost per unit for the production of 5,380 of cell phones. Round your answer to the nearest whole dollar.
$ per unit

c. Determine the product cost markup percentage for cell phones. Round your answer to two decimal places.
%

d. Determine the selling price of cell phones. Round your answers to the nearest whole dollar.

Kelley, Inc. provided the following account balances for 2018:

Calculate the average number of days that inventory was held by Kelley, Inc. during 2018. (Assume 365 days in a year. Round your intermediate calculations and final answer to two decimal places.)

cost of common stock equity.Ross Textiles wishes to measure its cost of common stock equity. The​ firm's stock is currently selling for $35.41 . The firm expects to pay a $3.25 dividend at the end of the year​ (2016). The dividends for the past 5 years are shown in the following​ table:

Year   Dividend per share

2015   2.97
2014   2.65
2013   2.44
2012   2.14
2011   2.06

After underpricing and flotation​ costs, the firm expects to net $32.93 per share on a new issue.

a.  Determine the growth rate of dividends from 2011 to 2015.

b.Determine the net​ proceeds,Nn, that the firm will actually receive.

c.  Using the​ constant-growth valuation​ model, determine the cost of retained​ earnings, Rs.

d.  Using the​ constant-growth valuation​ model, determine the cost of new common​ stock,Rn

Define each of the following terms:

a. Weighted average cost of capital, WACC; after-tax cost of debt, rd 1 T ; after-tax
cost of short-term debt, rstd 1 T
b. Cost of preferred stock, rps; cost of common equity (or cost of common stock), rs
c. Target capital structure
d. Flotation cost, F; cost of new external common equity, re

Allergan (AGN):

corporate tax rate = 12.5%

cost of debt = 3.4867%

cost of preferred stock = 13.75/161.62 (1-0.055) = 9%

cost of common equity = 8.28%

capital structure =

Total Debt to Total Equity = 40.74

Total Debt to Total Capital = 28.95

Total Debt to Total Assets = 25.41

Interest Coverage = -0.26

Long-Term Debt to Equity = 37.51

Long-Term Debt to Total Capital = 24.87

Long-Term Debt to Assets = 0.22

1) Determine the weighted average cost of capital (WACC) forAllergan (AGN). Create an Excel spreadsheet where you explain how you calculated those numbers and what was your reasoning.

Cost of Common Equity:

Cost of Retained Earnings, rs:

Suppose that (1) the risk-free return is 5.5%; (2) the average stock return (i.e. the market return) is 11.5%; (3) your firm stock’s beta (i.e. stock’s risk) is 0.8; (4) the next dividend payment will be $1; (4) the growth rate of the dividend is 6%; (5) the current market price of the stock is $25; (6) the yield of your firm’s long-term bond is 6.5%; and (7) the risk premium on your firm’s stock over your firm’s bond is 4%.

Given the information above, calculate the cost of retained earnings using (1) Capital Asset Pricing Model, CAPM, approach; (2) Bond-yield-plus-risk-premium approach; and (3) Discounted Cash Flow, DCF, approach.

(1) CAPM approach:

(2) Bond-yield-plus-risk-premium approach:

(3) DCF approach:

What is the range of your estimations? What is the midpoint of this range (i.e. the final estimation of the cost of retained earnings)?

Cost of New Common Stock, re:

The flotation cost of issuing new common stock, F, is 15% of the issue price. According to the previously provided information of your outstanding common stock, estimate the cost of new common stock using the DCF approach.

According to the DCF approach cost of new common stock calculated above, (1) figure out the flotation cost adjustment for new common stock; and then (2) considering the cost of retained earnings from all three approaches, adjust for this flotation cost. What is the cost of new common stock?

1.What is working progress for Design for cost? 2.What is working progress for Design to cost?