On September 10, 2009, U.S. Treasury Bonds futures for Dec 2009 delivery was traded at 116-20 at CBOT. On September 13, the futures was traded at 114-29. You opened your position by taking 10 long positions on the T-bond futures on Sept 10. As of Sept 10, the initial margin is $4,995 per contract and the maintenance margin is $3,700.

i) Calculate your gains (losses) on your position as of September 13.

ii) What is the highest price at which you will be required to deposit funds to your margin account (a margin call)?

iii) Would you have faced a margin call on September 13? If so, what is the amount to deposit?

A small, private firm has approached you for advice on its capital structure decision. It is in the specialty retailing business, and it had earnings before interest and taxes last year of $ 500,000.

• The book value of equity is $1.5 million, but the estimated market value is $ 6 million.
• The firm has $ 1 million in debt outstanding, and paid an interest expense of $ 80,000 on the debt last year. (Based upon the interest coverage ratio, the firm would be rated AA, and would be facing an interest rate of 8.25%.)
• The equity is not traded, but the average beta for comparable traded firms is 1.05, and their average debt/equity ratio is 25%.

a) Estimate the current cost of capital for this firm.

b) Assume now that this firm doubles it debt from $1million to $2million, and that the interest rate at which it can borrow increases to 9%. Estimate the new cost of capital, and the effect on firm value.

A small, private firm has approached you for advice on its capital structure decision. It is in the specialty retailing business, and it had earnings before interest and taxes last year of $ 500,000.

• The book value of equity is $1.5 million, but the estimated market value is $ 6 million.
• The firm has $ 1 million in debt outstanding, and paid an interest expense of $ 80,000 on the debt last year. (Based upon the interest coverage ratio, the firm would be rated AA, and would be facing an interest rate of 8.25%.)
• The equity is not traded, but the average beta for comparable traded firms is 1.05, and their average debt/equity ratio is 25%.

a) Estimate the current cost of capital for this firm

b) Assume now that this firm doubles it debt from $1million to $2million, and that the interest rate at which it can borrow increases to 9%. Estimate the new cost of capital, and the effect on firm value.

Table 1

Quantity Total Revenue

0 $0

1 $5

2 $10

3 $15

4 $20

Refer to Table 1. For this firm, the average revenue is

$0.00

$5.00

$15.00

$20.00

8th State Bank prepares interim financial statements and follows an investment strategy of investing in trading securities. At the beginning of the third quarter of 2018, the bank held the following portfolio of trading securities:

During the third quarter of 2018, the bank entered into the following trading securities transactions:

On September 30, 2018, the Porter Company common stock had a quoted market price of $36.50 per share and the Union Company common stock had a quoted market price of $21 per share.

Required:

On July 31, 2017, Coronado Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Coronado issued a $303,600, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $208,600 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Coronado made a final $95,000 payment to Minsk. Other than the note to Netherlands, Coronado’s only outstanding liability at December 31, 2017, is a $28,200, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31.

Collapse question part

(a)

Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017.

Interest revenue

$

Weighted-average accumulated expenditures

$

Avoidable interest

$

Interest capitalized

$

1. A researcher estimates that the average revenue of the largest businesses in the U.S. is greater than $24 billion. A random sample of 50 companies is selected, and the revenues in billions of dollars are recorded. Assume a Normal distribution with a standard deviation of $30 billion. Is there enough evidence at an 8% level of significance to support the researcher’s claim?

1. Identify the proper Test or Confidence interval:

2. Complete the Test or Confidence Interval.

ArticPalmTree Ltd. is evaluating the following two independent short-term financing arrangements.  What is the annual percentage cost for each financing alternative?

a. A 30-day loan secured against inventory from First Financial Co. with the following terms: (3 points)

1. • Inventory value equals $27 million
   • The financing company will lend up to 50% of the inventory value.
   • 0.20% processing fee (every 30 days) based on the total inventory value
   • Loan rate is 6% annually.
   • Calculate the effective annual interest rate.

b. Delay payments we make to our suppliers: (2 points)

• We currently have terms of 2/10 net 30 days and pay on the 10^th day.
• We now will pay on the 30^th day
• Calculate the effective annual interest rate.

Question 1:   

Consider the following Table: (1x5=5)

With the help of the above Table, calculate the following:

ATC of 5 units  ______________________________________________

AFC of 2 units _______________________________________________

AVC of 6 units _______________________________________________

MC of 2 units ________________________________________________

AFC of 1 unit ________________________________________________

What would happen to the demand for "Minarda" in the following situations? Will the demand curve shift to the left, shift to the right or stay unchanged?

Dew's price reduces by 10%. ( ________________________________________)

Shani and Coca-Cola raise their prices by 25%. ( _____________________________)

7'Up'sprice declines by 20%. ( _____________________)

XYZ Company has terminated 300employees. ( ________________________________________)

Sprite reduces its price by 20%. ( __________________________________________)

Problem 1:

An ophthalmologist’s office operates 52 weeks per year. It purchases disposable contact lenses for $11.70 per pair. The following information is available about these lenses.

Demand = 90 pairs/week

Order cost = $54/order

Annual holding cost = 27% of purchasing cost

Desired cycle-service level = 80%

Lead time = 3 weeks

Standard deviation of weekly demand = 15 pairs

Current on-hand inventory is 320 pairs, with no open orders or backorders.

Part I   Currently, the company uses a continuous review system,

A) What is the EOQ? What would be the average time between orders (in weeks)?

B) What should be the safety stock? What should the reorder point be?

c) An inventory withdrawal of 10 pairs was just made. Is it time to reorder?