Ben bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow hi to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $53,000 per year, and his salary is expected to increase at 3 percent year until retirement. He is currently 28 years old and expects to work for 38 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a saving account with enough money to cover the entire cost of his MBA program.

The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $58,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,000 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $87,000 per year, with a $10,000 signing bonus. The salary at this job will increase a 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent.

The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated one-year program, with a tuition cost of $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,200. Ben thinks that he will receive an offer of $78,000 per year upon graduation, with an $8,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29 percent.

Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben has also found that both schools offer graduate housing. HIs room and board expenses will decrease by $4,000 per year at either school he attends. The appropriate discount rate is 5.5 percent.

5. What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position?

6. Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4 percent. How would this affect his decision?

NEED EXCEL USE OF PV and FV.Thanks

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Ben currently works at the money management firm of Dewey and Louis. On average, his annual salary until retirement is expected to be $80,000 per year. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and the tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $80,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3,000 per year. Ben expects that after graduation from Wilton, he will receive a job offer of approximately $135,000 annual salary on average until retirement. Because of the higher salary, his average income tax rate will increase to 32 percent. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one-year program, with a tuition cost of $100,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,500. Ben thinks that he will receive an offer of approximately $118,000 annual salary on average until retirement. His average tax rate at this level of income will be 29 percent. Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6 percent.  

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $53,000 per year, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 38 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $58,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,000 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $87,000 per year, with a $10,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated one-year program, with a tuition cost of $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,200. Ben thinks that he will receive an offer of $78,000 per year upon graduation, with an $8,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29 percent. Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben has also found that both schools offer graduate housing. His room and board expenses will decrease by $4,000 per year at either school he attends. The appropriate discount rate is 5.5 percent.

1.

A)How does Ben’s age affect his decision to get an MBA?

B) What other, perhaps nonquantifiable, factors affect Ben’s decision to get an MBA?

C) Assuming all salaries are paid at the end of each year, what is the best option for Ben from a strictly financial standpoint?

Spartan Spaces creates room set-ups for college dorms.

Spartan Spaces purchases

Bedding for room set-ups from companies in the US for $8,000;

wall shelving for room set-ups from companies in China for $2,300;

equipment for packaging the set-ups to mail from a Chicago company for $1,000

Spartan Spaces sells

50 room set-ups to students at MSU for $100 per room;

50 room set-ups to students at Western Ontario University for $120 per room.

a.How much does each component of US GDP change?

US Consumption_______________

US Investment________________

US Government purchases____________

US Net Exports ____________________

b. What is the change in GDP? ___________________

You have just graduated from the MBA program of a large university, and one of your favorite courses was “Today’s Entrepreneurs.” In fact, you enjoyed it so much you have decided you want to “be your own boss.” While you were in the master’s program, your grandfather died and left you $1 million to do with as you please. You are not an inventor and you do not have a trade skill that you can market; however, you have decided that you would like to purchase at least one established franchise in the fast-foods area, maybe two (if profitable). The problem is that you have never been one to stay with any project for too long, so you figure that your time frame is three years. After three years you will sell off your investment and go on to something else.

You have narrowed your selection down to two choices; (1) Franchise L, Lisa’s Soups, Salads, & Stuff and (2) Franchise S, Sam’s Fabulous Fried Chicken. The net cash flows shown below include the price you would receive for selling the franchise in Year 3 and the forecast of how each franchise will do over the three-year period. Franchise L’s cash flows will start off slowly but will increase rather quickly as people become more health conscious, while Franchise S’s cash flows will start off high but will trail off as other chicken competitors enter the marketplace and as people become more health conscious and avoid fried foods. Franchise L serves breakfast and lunch, while Franchise S serves only dinner, so it is possible for you to invest in both franchises. You see these franchises as perfect complements to one another: You could attract both the lunch and dinner crowds and the health conscious and not so health conscious crowds without the franchises directly competing against one another.

Here are the net cash flows (in thousands of dollars):

                                                                                 Expected Net Cash Flows

                                            Year                 Franchise L                    Franchise S

                                                               0                             ($100)                             ($100)

                                               1                                  10                                   70

                                               2                                  60                                   50

                                               3                                  80                                   20

Depreciation, salvage values, net working capital requirements, and tax effects are all included in these cash flows.

You also have made subjective risk assessments of each franchise, and concluded that both franchises have risk characteristics that require a return of 10%. You must now determine whether one or both of the franchises should be accepted.

What is each franchise’s IRR?

How is the IRR on a project related to the YTM on a bond? For example, suppose the initial cost of a project is $100 and it has cash flows of $40 at Years 1, 2, and 3. What is its IRR?

What is the logic behind the IRR method? According to IRR, which franchises should be accepted if they are independent? Mutually exclusive?

Would the franchises’ IRRs change if the cost of capital changed?

You have just graduated from the MBA program of a large university, and one of your favorite courses was Today’s Entrepreneurs. In fact, you enjoyed it so much you have decided you want to “be your own boss.” While you were in the master’s program, your grandfather died and left you $1 million to do with as you please. You are not an inventor, and you do not have a trade skill that you can market; however, you have decided that you would like to purchase at least one established franchise in the fast-foods area, maybe two (if profitable). The problem is that you have never been one to stay with any project for too long, so you figure that your time frame is 3 years. After 3 years you will go on to something else. You have narrowed your selection down to two choices: (1)Franchise L, Lisa’s Soups, Salads & Stuff, and (2)Franchise S, Sam’s Fabulous Fried Chicken. The net cash flows that follow include the price you would receive for selling the franchise in Year 3 and the forecast of how each franchise will do over the 3-year period. Franchise L’s cash flows will start off slowly but will increase rather quickly as people become more health-conscious, while Franchise S’s cash flows will start off high but will trail off as other chicken competitors enter the marketplace and as people become more health-conscious and avoid fried foods. Franchise L serves breakfast and lunch, whereas Franchise S serves only dinner, so it is possible for you to invest in both franchises. You see these franchises as perfect complements to one another: You could attract both the lunch and dinner crowds and the health-conscious and not-so-health-conscious crowds without the franchises directly competing against one another.

Here are the net cash flows (in thousands of dollars):

Depreciation, salvage values, net working capital requirements, and tax effects are all included in these cash flows.

You also have made subjective risk assessments of each franchise and concluded that both franchises have risk characteristics that require a return of 10%. You must now determine whether one or both of the franchises should be accepted.

Question: Please show all your work including formulas in excel if used.

You are also considering another project that has a physical life of 3 years—that is, the machinery will be totally worn out after 3 years. However, if the project were terminated prior to the end of 3 years, the machinery would have a positive salvage value. Here are the project’s estimated cash flows:

Using the 10% cost of capital, what is the project’s NPV if it is operated for the full 3 years? Would the NPV change if the company planned to terminate the project at the end of Year 2? At the end of Year 1? What is the project’s optimal (economic) life?

You have just graduated from the MBA program of a large university, and one of your favorite courses was “Today’s Entrepreneurs.” In fact, you enjoyed it so much you have decided you want to “be your own boss.” While you were in the master’s program, your grandfather died and left you $1.5 million to do with as you please. You are not an inventor, and you do not have a trade skill that you can market; however, you have decided that you would like to purchase at least one established franchise in the fast-foods area, maybe two (if profitable). The problem is that you have never been one to stay with any project for too long, so you figure that your time frame is 3 years. After 3 years you will go on to something else.

You have narrowed your selection down to two choices: (1) Franchise L, Lisa’s Soups, Salads & Stuff, and (2) Franchise S, Sam’s Fabulous Fried Chicken. The net cash flows shown below include the price you would receive for selling the franchise in Year 3 and the forecast of how each franchise will do over the 3-year period. Franchise L’s cash flows will start off slowly but will increase rather quickly as people become more health-conscious, while Franchise S’s cash flows will start off high but will trail off as other chicken competitors enter the marketplace and as people become more health-conscious and avoid fried foods. Franchise L serves breakfast and lunch whereas Franchise S serves only dinner, so it is possible for you to invest in both franchises. You see these franchises as perfect complements to one another: You could attract both the lunch and dinner crowds and the health-conscious and not- so-health-conscious crowds without the franchises directly competing against one another.

Here are the net cash flows (in thousands of dollars):

Franchise L:

Franchise S:

Depreciation, salvage values, net working capital requirements, and tax effects are all included in these cash flows.

You also have made subjective risk assessments of each franchise and concluded that both franchises have risk characteristics that require a return of 12.5%. You must now determine whether one or both of the franchises should be accepted.

a.         (1) Define the term net present value (NPV). What is each franchise’s NPV?

(2) According to NPV, which franchise or franchises should be accepted if they are independent? Mutually exclusive?

(3) Would the NPVs change if the cost of capital changed to 10%?

b.         (1) Define the term internal rate of return (IRR). What is each franchise’s IRR?

(2) What is the logic behind the IRR method? According to IRR, which franchises should be accepted if they are independent? Mutually exclusive?

(3) Would the franchises’ IRRs change if the cost of capital changed to 10%?

c.         (1) Draw NPV profiles for Franchises L and S. At what discount rate do the profiles cross?

(2) Look at your NPV profile graph without referring to the actual NPVs and IRRs. Which franchise or franchises should be accepted if they are independent? Mutually exclusive? Explain. Are your answers correct at any cost of capital less than 23.6%?

d.         Define the term modified IRR (MIRR). Find the MIRRs for Franchises L and S.

e.         What does the profitability index (PI) measure? What are the PIs of Franchises S and L?

f.          (1) What is the payback period? Find the paybacks for Franchises L and S.

(2) According to the payback criterion, which franchise or franchises should be accepted if the firm’s maximum acceptable payback is 2 years and if Franchises L and S are independent? If they are mutually exclusive?

(3) What is the discounted payback periods for Franchise L and S?

g.         In an unrelated analysis, you have the opportunity to choose between the following two mutually exclusive projects, Project T (which lasts for 2 years) and Project F (which lasts for 4 years):

Expected Net Cash Flows:

Project T:

Project F:

The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have a 10% cost of capital.

(1) What is each project’s initial NPV without replication?

(2) What is each project’s equivalent annual annuity?

(3) Apply the replacement chain approach to determine the projects’ extended NPVs. Which project should be chosen?

(4) Assume that the cost to replicate Project T in 2 years will increase by 5% due to inflation. How should the analysis be handled now, and which project should be chosen?

Margaret Jones established the “Jones Family Trust” in 2000 with XYZ Pty Ltd as the corporate trustee. Margaret and her husband Dean are the directors of the trustee company. The trust holds a variety of investments in property and cash. The trust was established to protect investments as Dean is always concerned that he could be sued for negligence.

The trust records for the 2019-20 income tax year disclose the following:

Receipts ($)

95,000 Rent from investment properties

5,000   Interest from a bank account

Payments ($)

1,500   Accounting expenses for tax return

12,000 Repairs to investment properties

8,000   Interest on a loan for the investment property

2,000   Legal expenses incurred in defending a claim by a tenant

Margaret does not work. Dean is a senior tax manager and received a salary of $180,000 in 2019-20 income tax year.

They have three children:

•           a son, Paul, aged 22 years, a student at university who earned $10,000 for the year;

•           a daughter, Racheal, aged 18, also a university student who earned only $3,000 for the year; and

•           a second daughter, Kate, aged 14 years, a full time high school student with no other income.

Dean has his grandfather living with him and he had no income for the year. All family members are beneficiaries of the trust and Dean had also established a corporate beneficiary which was able to receive trust distributions.

Required:

Advise as to how the net income can be distributed in the most tax-effective way citing relevant legislation to support your answer.

Napoleon is contemplating four institutions of higher learning as options for a Master’s in Business Administration. Each university has strong and weak points and the demand for MBA graduates is uncertain. The availability of jobs, student loans, and financial support will have a significant impact on Napoleon’s ultimate decision. Vanderbilt and Seattle University have comparatively high tuition, which would necessitate Napoleon take out student loans resulting in possibly substantial student loan debt. In a tight market, degrees with that cachet might spell the difference between a hefty paycheck and a piddling unemployment check. Northeastern State University and Texas Tech University hold the advantage of comparatively low tuition but a more regional appeal in a tight job market. Napoleon gathers his advisory council of Jim and Pedro to assist with the decision. Together they forecast three possible scenarios for the job market and institutional success and predict annual cash flows associated with an MBA from each institution. All cash flows in the table are in thousands of dollars.

Suppose that the likelihood for each of scenarios 1 through 3 is 0.3, 0.4, and 0.3, respectively. What is the optimal decision under the EVM criterion?

In the past, 60 % of all undergraduate students enrolled at state university earned their degrees within four years of matriculation. a random sample of 95 students from the class that matriculated in the fall of 2012 was recently selected to test whether there has been a change in the proportion of students who graduate within four years. Administrators found that 40 of these 95 students graduated in the spring of 2016 (i,e. , four academic years after matriculation) .

a . given the sample outcome , calculate a 95 % confidence interval for the relevant population proportion . does this interval estimate suggest that there has been a change in the proportion of students who graduate within four years? why or why not ? Please do in excel

b. suppose now that state university administrators want to test the claim made by faculty that the proportion of students who graduate within four years at state university has fallen below the historical value of 60\% this year. use this sample proportion to test their claim . report a p -value and interpret it . Please do in excel