Ramblin Wreck is a firm specializing in engineering components. The firm is publicly traded and is considering the following project:

The project will last 5.00 years with an annual cash flow of $40.00 million. The project will require an initial investment of $140.00 million

The firm must determine the cost of capital to evaluate the project. (The project is within the firm’s normal activities)

Ramblin Wreck, Inc. Financial Data:

The risk free rate in the economy is currently 2.00%, while investors have a market risk premium of 6.00%. Ramblin Wreck, Inc. has a beta of 1.40. The tax rate is 40.00%.

What is the NPV of the project? (express in millions, so 1000000 would be 1.00)

Ramblin Wreck is a firm specializing in engineering components. The firm is publicly traded and is considering the following project:

The project will last 5.00 years with an annual cash flow of $40.00 million. The project will require an initial investment of $140.00 million

The firm must determine the cost of capital to evaluate the project. (The project is within the firm’s normal activities)

Ramblin Wreck, Inc. Financial Data:

The risk free rate in the economy is currently 2.00%, while investors have a market risk premium of 8.00%. Ramblin Wreck, Inc. has a beta of 1.42. The tax rate is 36.00%.

a) What is the yield to maturity on Ramblin Wreck, Inc. bonds?

b) What is the cost of equity?

c) What is the weight in debt for the project?

Ramblin Wreck is a firm specializing in engineering components. The firm is publicly traded and is considering the following project:

The project will last 5.00 years with an annual cash flow of $40.00 million. The project will require an initial investment of $140.00 million

The firm must determine the cost of capital to evaluate the project. (The project is within the firm’s normal activities)

Ramblin Wreck, Inc. Financial Data:

The risk free rate in the economy is currently 2.00%, while investors have a market risk premium of 7.00%. Ramblin Wreck, Inc. has a beta of 1.50. The tax rate is 40.00%.

a. What is the yield to maturity on Ramblin Wreck, Inc. bonds?

b. What is the cost of equity?

c. What is the weight in debt for the project?

d. What is the WACC for the project?

e. What is the NPV of the project? (express in millions, so 1000000 would be 1.00)

Blockbuster FY2003 10K states, "Blockbuster Inc. is a leading global provider of in-home rental and retail movie and game entertainment, with approximately 8,900 stores in the United States, its territories and 27 other countries as of December 31, 2003." John F. Antioco serves as chairman, president and chief executive officer. Mr. Antioco signed the 10K reflecting his assessment of Blockbuster Inc at the time of its writing.   Also in 2003, Mr Antioco identified "Netflix, (as) our primary domestic competitor in online rental" and planned a competing online service. According to Blockbuster's 2003 10K and using Lovallo & Sibony cognitive bias types, what three statement:cognitive bias couples are true? Select the single best available answer from those presented below.

A) "We expect this (online) service to ultimately drive store revenues by not only attracting new customers who want the convenience that both the online and store channels provide, but also by bringing back customers who we have lost to competing online rental services": Competitor Neglect; "During 2003, we opened or purchased 341 company-operated stores (180 in the United States and 161 outside of the United States)": Confirmation bias; "During 2004, we plan to invest significantly in new systems and infrastructure to support our new initiatives, such as the expansion of our rental subscription programs, which includes our online rental subscription service; the continued development of our games store-in-store concepts; and the continued development and implementation of our movie and games trading model": Anchoring and insufficient adjustment.

B) "We expect this (online) service to ultimately drive store revenues by not only attracting new customers who want the convenience that both the online and store channels provide, but also by bringing back customers who we have lost to competing online rental services": Sunflower Management; "During 2003, we opened or purchased 341 company-operated stores (180 in the United States and 161 outside of the United States)": Confirmation bias; "During 2004, we plan to invest significantly in new systems and infrastructure to support our new initiatives, such as the expansion of our rental subscription programs, which includes our online rental subscription service; the continued development of our games store-in-store concepts; and the continued development and implementation of our movie and games trading model": Anchoring and insufficient adjustment.

C)"We expect this (online) service to ultimately drive store revenues by not only attracting new customers who want the convenience that both the online and store channels provide, but also by bringing back customers who we have lost to competing online rental services": Competitor Neglect; "During 2003, we opened or purchased 341 company-operated stores (180 in the United States and 161 outside of the United States)": Confirmation bias; "During 2004, we plan to invest significantly in new systems and infrastructure to support our new initiatives, such as the expansion of our rental subscription programs, which includes our online rental subscription service; the continued development of our games store-in-store concepts; and the continued development and implementation of our movie and games trading model": Sunflower Management

D) "We expect this (online) service to ultimately drive store revenues by not only attracting new customers who want the convenience that both the online and store channels provide, but also by bringing back customers who we have lost to competing online rental services": Competitor Neglect; "During 2003, we opened or purchased 341 company-operated stores (180 in the United States and 161 outside of the United States)": Status quo bias; "During 2004, we plan to invest significantly in new systems and infrastructure to support our new initiatives, such as the expansion of our rental subscription programs, which includes our online rental subscription service; the continued development of our games store-in-store concepts; and the continued development and implementation of our movie and games trading model": Anchoring and insufficient adjustment.

E) "We expect this (online) service to ultimately drive store revenues by not only attracting new customers who want the convenience that both the online and store channels provide, but also by bringing back customers who we have lost to competing online rental services": Sunflower Management; "During 2003, we opened or purchased 341 company-operated stores (180 in the United States and 161 outside of the United States)": Status quo bias; "During 2004, we plan to invest significantly in new systems and infrastructure to support our new initiatives, such as the expansion of our rental subscription programs, which includes our online rental subscription service; the continued development of our games store-in-store concepts; and the continued development and implementation of our movie and games trading model": Power of storytelling.

1. Which of the following is correct about the income statement: *

It is an equation used by financial analysts

It is an equation used by politicians

It is a report that shows the cash inflows and cash outflows of the company

It is a report that shows the revenues and expenses of the company

None of the above

2. Which of the following is correct about cash flows statement: *

It includes only the cash outflows

It shows the cash flows from operating, investing, and financing activities

It shows the profitability of the company

It is an optional statement reported by the company

None of the above

3. ABC. Co, recently reported $200,000 of sales during the year 2016. The company had $20,000 of outstanding bonds carrying 10% interest rate.Operating costs were $80,000 other than depreciation, and the firm was facing $12,000 as depreciation. Noting that the federal-plus-state income tax rate was 40%. What is the firm's net income at the end of the year 2016? *

$ 60,600

$ 63,600

$ 53,800

$ 69,800

None of the above

4. LSP Construction recently reported $100 million of sales, $50 million of operating costs other than depreciation, and $30 million of depreciation. It had $10 million interest expense, and its federal-plus-state income tax rate was 40%. What was LSP operating income, or EBIT, in millions? *

$ 20

$ 30

$ 10

$ 6

None of the above

5. Assume that Icon Co. 2014 current assets totaled for $40,000, they paid out $16,000 in the form of account payable and $4,000 as accruals and $5,000 in notes payable and in 2015 they had a NWC of $20,000. Calculate the change in net working capital. *

$ 20,000

$ 15,000

$ 0

$ 2,000

None of the above

6. PLI Corporation had net fixed assets of $2,500,000 at the end of 2006 and $1,800,000 at the end of 2005. In addition, the firm had a depreciation expense of $200,000 during 2006. Using this information, how much was PLI's net fixed asset investment for 2006? *

$ 700,000

$ 900,000

$ 500,000

$ 850,000

None of the above

7. During 2006, LSP Corporation had EBIT of $100,000, a change in net fixed assets of $400,000, a change in NWC of $100,000, a depreciation expense of $50,000, and a tax rate of 30%. Based on this information, Calculate LSP free cash flow. *

-$430,000

$430,000

$30,000

$400,000

None of the above

1. Which of the following is correct about the income statement: *

It is an equation used by financial analysts

It is an equation used by politicians

It is a report that shows the cash inflows and cash outflows of the company

It is a report that shows the revenues and expenses of the company

None of the above

2. Which of the following is correct about cash flows statement: *

It includes only the cash outflows

It shows the cash flows from operating, investing, and financing activities

It shows the profitability of the company

It is an optional statement reported by the company

None of the above

3. ABC. Co, recently reported $200,000 of sales during the year 2016. The company had $20,000 of outstanding bonds carrying 10% interest rate.Operating costs were $80,000 other than depreciation, and the firm was facing $12,000 as depreciation. Noting that the federal-plus-state income tax rate was 40%. What is the firm's net income at the end of the year 2016? *

$ 60,600

$ 63,600

$ 53,800

$ 69,800

None of the above

4. LSP Construction recently reported $100 million of sales, $50 million of operating costs other than depreciation, and $30 million of depreciation. It had $10 million interest expense, and its federal-plus-state income tax rate was 40%. What was LSP operating income, or EBIT, in millions? *

$ 20

$ 30

$ 10

$ 6

None of the above

5. Assume that Icon Co. 2014 current assets totaled for $40,000, they paid out $16,000 in the form of account payable and $4,000 as accruals and $5,000 in notes payable and in 2015 they had a NWC of $20,000. Calculate the change in net working capital. *

$ 20,000

$ 15,000

$ 0

$ 2,000

None of the above

6. PLI Corporation had net fixed assets of $2,500,000 at the end of 2006 and $1,800,000 at the end of 2005. In addition, the firm had a depreciation expense of $200,000 during 2006. Using this information, how much was PLI's net fixed asset investment for 2006? *

$ 700,000

$ 900,000

$ 500,000

$ 850,000

None of the above

7. During 2006, LSP Corporation had EBIT of $100,000, a change in net fixed assets of $400,000, a change in NWC of $100,000, a depreciation expense of $50,000, and a tax rate of 30%. Based on this information, Calculate LSP free cash flow. *

-$430,000

$430,000

$30,000

$400,000

None of the above

Many publicly traded financially distressed companies are purchased by private equity funds and delisted from the stock exchange. Several years later they are brought back to the exchange for a new share listing. Why do you think private equity firms delist financially distressed firms? Why do they bring them back to market?

Ratio Analysis

Review and compare the following ratios for both companies: Choose two publicly traded companies in the same industry.

• Working capital
• Current ratio
• Debt ratio
• Net Profit Margin

Review the most recent ear

Review the Earning's call for both companies and report your findings to include, but not limited to, results and projections.

an audit committee must be comprised of "outside" members that sit on the board of directors, must be "financially literate" and have at least one "financial expert". With this in mind I want you to find a publicly traded company and review their audit committee. Pick whatever company you wish! Please report as your discussion topic the following:

Company you selected (along with company url)

Names of individuals on the audit committee

Which member of the audit committee would you consider to be the "financial expert", why?

Do you think the audit committee is "financially literate" - why or why not?  

Is the audit committee comprised of solely "outside" members? Why do you think this is important?

(OPTIONAL): Do you see any potential conflicts of interest or issues with the audit committee you reviewed?