Failure rate of electrical components manufactured by a company is 6 every year, and the time to failure of each component follows the exponential distribution. Write the failure density, failure distribution function and survival function of each component. Hence,(

a) calculate the probability that any one component supplied by the company will fail in less than half a year.

b) determine the probability that any one component will survive more than 10 months.

c) determine the mean, median and standard deviation of the failure time of any one component supplied by the company. Hence, deduce the shape of the failure density you gave in part (a).

Reddick Enterprises' stock is going to pay a dividend of $5 in the next year. Since then the dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock, rs, is 9.00%. What is the present value of the 3rd year dividend? What is the price of the stock at the end of the 3rd year? (6 points Hint: to solve for P3 you need to use Div4)

You are looking to purchase a new car with the assistance of a $22,000, five-year loan at an APR of 5.4%, compounded monthly.

Required:

a. What is the monthly payment on this loan?

b. What is the amount of interest and principal on the loan’s first monthly payment?

c. What is the amount of interest and principal on the loan’s sixteenth monthly payment?

d. Show a second method to determine the amount of interest and principal on the loan’s sixteenth monthly payment.

e. How many months would it take to pay this loan down to $8,000? f. What is the total amount of interest and principal that you would pay over five years?

Brodrick Company expects to produce 20,400 units for the year ending December 31. A flexible budget for 20,400 units of production reflects sales of $571,200; variable costs of $61,200; and fixed costs of $144,000.

QS 23-3 Flexible budget LO P1

If the company instead expects to produce and sell 27,200 units for the year, calculate the expected level of income from operations.

QS 23-4 Flexible budget performance report LO P1

Assume that actual sales for the year are $713,600 (27,200 units), actual variable costs for the year are $114,000, and actual fixed costs for the year are $134,000.

Prepare a flexible budget performance report for the year.

The following data are available for Sellco for the fiscal year ended on January 31, 2017:

Required:

a. Calculate cost of goods sold and ending inventory under the cost flow assumptions, FIFO, LIFO and Weighted average (using a periodic inventory system): (Round unit cost to 2 decimal places.)

b. Assume that net income using the weighted-average cost flow assumption is $14,500. Calculate net income under FIFO and LIFO. (Round unit cost to 2 decimal places.)

Calculate the present value of $1 million paid at the end of every year in perpetuity,

assuming a rate of return of 10% and a constant growth rate of 6%.

An extraction from the balance of payments for the current year shows that your country has undergone a deterioration in its net international investment position. Suppose you are part of the policy analysts discussing the pros and cons of such a change, what would be your arguments?

Assume that dividends in the next three years (starting from year 2017) will grow at a rate of 13% annually. Further, it is assumed that dividends will grow at a rate of 11% for the next four years (year 4 to 7). Thereafter it is assumed that the company will grow at a constant growth rate of 7% per annum. The last dividend paid (for 2016) is $1.52. Assume a required rate of return of 12%.

Clearly show the following:

Present Value of First Stage

Present Value of Second Stage

Present Value with constant growth rate

Stock Intrinsic Value

At the beginning of its fiscal year 2020, an analyst made the following forecast for ABC, Inc. (in millions of dollars):

Suppose these numbers were given to you at the end of 2019, as forecasts, when the book value was 890 million, as indicated and market price of the stock was $10.5 per share. Use a required return of 10 percent for calculations below. Show your working process.

1. Calculate residual earnings and return of common equity (ROCE) for each year, 2020–2024.                                                                                      

[5 marks]

2. Value the firm at the end of 2019 under the assumption that the RE in 2024 will continue at the same level subsequently.                                                            

[2 marks]

3. Based on you analysis, if the number of shares outstanding at the end of 2019 was 220 million, what should be the share price of ABC?                                      

[1 mark]

4. Based on your estimate, should investors buy the share of this company?          

[1 mark]