1) Assume that the average firm in C&J Corporation's industry is expected to grow at a constant rate of 7% and that its dividend yield is 6%. C&J is about as risky as the average firm in the industry and just paid a dividend (D0) of $1.75. Analysts expect that the growth rate of dividends will be 50% during the first year (g0,1 = 50%) and 30% during the second year (g1,2 = 30%). After Year 2, dividend growth will be constant at 7%. What is the required rate of return on C&J's stock? What is the estimated intrinsic price per share? Do not round intermediate calculations. Round the monetary value to the nearest cent and percentage value to the nearest whole number.

2)Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $2.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 75% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 5% per year. If the required return on the stock is 14%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round your answer to the nearest cent.

3)

Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 9% rate. Dozier's weighted average cost of capital is WACC = 18%.

1. What is Dozier's horizon value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places.

   $   million

2. What is the current value of operations for Dozier? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places.

   $   million

3. Suppose Dozier has $10 million in marketable securities, $100 million in debt, and 10 million shares of stock. What is the intrinsic price per share? Do not round intermediate calculations. Round your answer to the nearest cent.

   $   per share

A store has issued two different coupons for its customers to use. One coupon gives customers $25 off their purchase price, and the other coupon gives customers 35% off of their purchase. The store allows customers to use both coupons and choose which coupon to apply first. For this context, ignore sales tax. Let f be the function that inputs a cost (in dollars) and outputs the cost after applying the "$25 off" coupon, and let g be the function that inputs a cost (in dollars) and outputs the cost after applying the "35% off" coupon.

A.) A customer purchases an item for $120 and asks the cashier to apply the "$25 off" coupon first, followed by the "35% off" coupon. What is the cost of the item after the two coupons are applied?

b.) A customer purchases an item for $120 and asks the cashier to apply the "$25 off" coupon first, followed by the "35% off" coupon. Use function notation to represent the cost of the item (in dollars) after the two coupons are applied.

c.) A customer purchase an item for $120 and asks the cashier to apply the "35% off" coupon first, followed by the "$25 off" coupon. What is the cost of the item after the two coupons are applied?

a. Jade Berhad is a manufacturer of plastic products. The company has consistently used FIFO (first-in, first-out) in valuing inventory, but it is interested to know the effect on its inventory valuation of using weighted average cost instead of FIFO.
At 31 December 2017 the company had inventory of 8,500 standard plastic tables, and has computed its value of the tables on the two bases as:

Basis Unit cost (RM) Total value (RM)

FIFO 20 170,000
Weighted average 22 187,000

During January 2018 the movements on the inventory of tables were as follows:

Date Number of unit Production Cost per unit
Production:
8 January   4,200 18
22January 6,000 18

Revenue: Selling price per unit
12January 9,000 22
18January 1,500 20
24January 2,200 20
28January 4,700 20

Required:
Compute the value of the inventory and gross profit at 31January 2018:
a. Using weighted average cost. (15marks)
b. Using First in First Out (FIFO) method.

Note: In arriving at the total inventory values you should make calculations to two decimal places (where necessary) and deal with each inventory movement in date order.

[The following information applies to the questions displayed below.]

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

During its first year of operations, O’Brien produced 95,000 units and sold 71,000 units. During its second year of operations, it produced 83,000 units and sold 102,000 units. In its third year, O’Brien produced 85,000 units and sold 80,000 units. The selling price of the company’s product is $71 per unit.

4. Assume the company uses absorption costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):

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.

Required information [The following information applies to the questions displayed below.] O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: Variable costs per unit: Manufacturing: Direct materials $ 29 Direct labor $ 18 Variable manufacturing overhead $ 4 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 560,000 Fixed selling and administrative expenses $ 180,000 During its first year of operations, O’Brien produced 96,000 units and sold 77,000 units. During its second year of operations, it produced 82,000 units and sold 96,000 units. In its third year, O’Brien produced 87,000 units and sold 82,000 units. The selling price of the company’s product is $74 per unit. 2. Assume the company uses variable costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first): 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.

Geralt Technologies is considering a major expansion program that has been proposed by the company’s information technology group. Before proceeding with the expansion, the company need to develop an estimate of its cost of capital. Assume that you are an assistant to Henry Cavill, the financial vice-president. Your first task is to estimate Geralt’s cost of capital. Henry has provided you with the following data, which he believes may be relevant to your task:

(i) The firm’s tax rate is 40%.

(ii) The current market price of Geralt’s $1,000 par value, 12 percent coupon, semi-annual payment, non-callable bonds with 15 years remaining to maturity is $1,153.72. Geralt does not use short-term interest-bearing debt on a permanent basis.

(iii) The current price of the firm’s 10%, $100 par value, annual dividend, perpetual preferred stock is $111.10. The company would incur a issuing cost of 6%.

(iv) Geralt’s common stock is currently selling at $50 per share. Its last dividend was $4.19, and dividends are expected to grow at a constant rate of 5% in the foreseeable future. Geralt’s beta is 1.2, the yield on T-bonds is 7%, and the market risk premium is estimated to be 6%. For the bond-yield-plus-risk-premium approach, the firm uses a 4% point risk premium.

(v) Geralt’s target capital structure is 30% long-term debt, 10% preferred stock, and 60% common equity.

To structure the task somewhat, Henry has asked you to answer the following questions ( Without using financial Calculator ):

(a) (1) What sources of capital should be included when you estimate Geralt’s weighted average cost of capital (WACC)?

(2) Should the component costs be figured on a before-tax or an after-tax basis?

(b) What is the market interest rate on Geralt’s debt? What is its component After-tax cost of debt?

(c) What is the firm’s cost of preferred stock?

During the last few years, Jana Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department.

Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Jana’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task:

● The firm’s tax rate is 25%.            

● The current price of Jana’s 12% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,153.72. There are 70,000 bonds. Jana does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost.

● The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $116.95. There are 200,000 outstanding shares. Jana would incur flotation costs equal to 5% of the proceeds on a new issue.

● Jana’s common stock is currently selling at $50 per share. There are 3 million outstanding common shares. Its last dividend (D0) was $3.12, and dividends are expected to grow at a constant rate of 5.8% in the foreseeable future.

Jana’s beta is 1.2, the yield on T-bonds is 5.6%, and the market risk premium is estimated to be 6%. For the own-bond-yield-plus judgmental-risk-premium approach, the firm uses a 3.2% risk premium. To help you structure the task, Leigh Jones has asked you to answer the following questions:

g. What is your final estimate for the cost of equity, rs?

h. Jana’s target capital structure is 30% long-term debt, 10% preferred stock, and 60% common equity. How does this compare with the current market value capital structure?

i. Use Jana’s target weights to calculate the weighted average cost of capital (WACC).

Rock-Steady Ballast Solutions can produce maritime ballast (literal dead weight!) according to the cost function C ( q ) = 5 q, where cost is measured in dollars and q is tons of ballast produced. Rock-Steady's marginal cost of ballast production is therefore M C = 5 dollars per ton. Rock-Steady faces the demand curve q = 35 − p, where q is quantity demanded in tons and p is price per ton in dollars.

A.)

First suppose that Rock-Steady acts as a price taker. Using the rule describing optimal choices of a price taking firm, show that Rock-Steady will supply the quantity q ∗ = 30. Find the equilibrium price p ∗ at this quantity q ∗ = 30, and Rock-Steady's profit at this price and quantity.

B.)

Now suppose instead that Rock-Steady acts as a price-setting monopolist. Using the rule describing the optimal quantity choice of a price-setting firm, show that in this case Rock-Steady will supply the quantity q m = 15. Find the monopoly price p m corresponding to this quantity supplied. What is Rock-Steady's profit as a price-setting monopolist?

C.)Using two graphs, one describing equilibrium when Rock-Steady acts as a price taker, and the other describing equilibrium when Rock-Steady acts as a price setter, illustrate how Rock-Steady's monopoly power affects price, quantity sold, producer surplus, consumer surplus, and total surplus. Briefly discuss.

D.)

What is consumer surplus at the price p ∗ and quantity q ∗ arising when Rock-Steady acts as a price-taker? What is consumer surplus at the price p m and quantity q m arising when Rock-Steady acts as a monopolist? What is the dead-weight loss of monopoly in the ballast market?

[Hint: Remember that since Rock-Steady has no fixed costs of production, producer surplus is the same as profit. You thus don't need to re-calculate producer surplus; you can simply use the profit numbers you found in parts (a) and (b).]