.Squaw Valley Recreation is in the process of analyzing a new three year project to grow their business. At the beginning of this project, Squaw Valley will need to spend $2,460,000 to build the required fixed asset. This asset will have a depreciation period of three-years and will use the straight-line method of depreciation and it will be depreciated to zero. The asset will have no salvage value at the end of the project. This new project will have an estimated annual sales amount of $2,950,000. The estimated annual costs for this project are $1,970,000. The appropriate tax rate to use for this analysis is 22 percent. The CFO of Squaw Valley has indicated that the required return for this project is 9 percent. Calculate the NPV for this project. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

what is an appropriate asset allocation for the investment portfolio of a 30 year old? what is dollar cost averaging and what should the investor do to take advantage of it? As the investor gets old, should he/she make adjustments to the allocation? If so, please discuss how the allocation in each asset class should change and why.

2. Assume the one-year interest rate is 8% on GBP and 1% on EUR. At the same time, inflation is running at an annual rate of 3% in Germany and 1.5% in UK. The current spot rate is EUR/GBP 1.17.

a) If the one-year forward premium of the euro against the pound is 8%, is there an arbitrage opportunity? Explain.

b) If there is an arbitrage opportunity, will the British or the German investor be able to make a profit? How much will an investor's profit be if he can invest GBP100,000 or EUR180,000 for 1 year? Assume that he owns this money and does not borrow. Please show your work.

Last year, 46% of business owners gave a holiday gift to their employees. A survey of business owners indicated that 40% plan to provide a holiday gift to their employees. Suppose the survey results are based on a sample of 60 business owners.

Prepare a schedule showing the amortization of a $12,000 loan to be repaid in 10 end-of-year installments that include interest at a rate of 6%. Jared and Courtney Jill own a parcel of fertile farm land which a local farmer has offered to rent for a period of 10 years. He is willing to make a payment of $20,000 today or pay an ordinary annuity of $3,400 at the end of each of the next 10 years. Which payment method should Jared and Courtney accept if the appropriate rate of return is 9%? A group of five faculty members at a Midwest University have recently purchased several acres near the school. They plan to gravel it and rent the parking spaces to commuting students. The cost of the project is $100,000. They paid $25,000 cash and are financing the balance with a note at 7.0% annual interest to be paid off in five equal annual payments with the first payment to be made at the end of the first year. The rental receipts are to be placed in an account for future improvements and cannot be used to repay the loan. If the annual payments are shared equally, how much would each member need to contribute annually to pay off the loan?

The economy has been growing at an average rate of​ 2.5% during the last year. The chairman of the Federal Reserve has stated that due to the economic growth and improvement in the labor​ markets, as evidenced by a declining unemployment​ rate, that the Fed stands ready to increase interest rates. ​ Meanwhile, the government is having to deal with a growing budget deficit and may need to borrow money from the public to fund its operations. This is easily done with the sale of Treasury bills and bonds. ​ However, such an increase in borrowing could affect the results of the​ Fed's actions. ​ Also, any tax reductions that occur will likely affect expenditures by both consumers and businesses. This in turn is expected to increase GDP assuming no surprise events that would negatively affect employment and economic growth.

1. The reaction of the Fed Chairman is that the economic growth during this phase of the economic cycle could produce higher ______

and the​ Fed's number one goal is for stable ______.

2. The phase of the business cycle given the facts in the statement above implies the economy is not in a ______ phase.  

3. The​ government's increased demand for funds attained from the bond markets implies that as the supply of

bonds ________ holding demand​ constant, the price will ________ and pushing interest rates _______.

4. If interest rates increase due to the Fed​ actions, the economic impact is a result of _______ policy.

5. If the Fed does nothing but the government decides to increase bond​ sales, the resulting impact on interest rates would be a result of _______ policy.

6. Economic variables that predict the near term future condition of the economy are grouped together and called ______ indicators.

7. Unemployment rates exceeding ______ ​(spell out the​ value) percent would indicate the economy could be heading towards

a _______.

8. If the economic environment described above​ continues, business managers could see their cost of labor _______ in the near term if the unemployment rate goes ________, and financing costs further ______ because of anticipated Fed actions. All these events could produce​ (inflation/deflation) _______ which could in turn cause the business cycle to reach its ​ (peak/trough) ______.

Assume there are three companies that in the past year paid exactly the same annual dividend of $2.27 a share. In​addition, the future annual rate of growth in dividends for each of the three companies has been estimated as​ follows:

Assume also that as the result of a strange set of​ circumstances, these three companies all have the same required rate of return (r=12%​).

a. Use the appropriate DVM to value each of these companies.

b. Comment briefly on the comparative values of these three companies. What is the major cause of the differences among these three​ valuations?

Consider a project to supply 100 million postage stamps per year to the USPS for the next five years. To pursue the project, you will need to install $4.1 million in new manufacturing plant and equipment. This will be depreciated straight-line to zero over the project’s five years. The equipment can be sold for $540,000 at the end of the project. You will also need $600,000 in initial net working capital for the project and an additional investment of $50,000 in every year thereafter. All net working capital will be recouped at the end of the project. Your production costs are $.005 per stamp and you have fixed costs of $950,000 per year. If your tax rate is 34% and your required return is 12%, what bid price should you submit on the contract? Please show step by step calculation. How do we get the sales/revenue value in order to be able to solve the rest of the problem?

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $70 per unit, and variable expenses are $40 per unit. Fixed expenses are $540,000 per year. The present annual sales volume (at the $70 selling price) is 15,000 units.

Required:

1. What is the present yearly net operating income or loss?

2. What is the present break-even point in unit sales and in dollar sales?

3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?

4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?

Assume that Miss Bebe Nouveaune is born on July 1 of this year (July 1 is the first day of the KiwiSaver financial year). On this day her grandparents deposit $4,000 into a KiwiSaver account for her ($1,000 from each). So, that’s $4,000 deposited at t = 0. Assume that on every subsequent birthday up to and including her 18th birthday, Bebe’s parents deposit an additional $1,000 into her KiwiSaver account. That’s almost $20 a week. Assume that the deposit on her 18th birthday does not attract any slice of the member tax credit. So, that’s $1,000 deposited on each of t = 1 through t = 18. Once Bebe turns 18, she starts university and her parents never again contribute money to her KiwiSaver account. Bebe studies at university for three years during which she takes a “contributions holiday” and does not contribute money to her KiwiSaver account. (As an aside, if you are working, and you take a contributions holiday, then so too does your employer.) So, that’s $0 deposited from t = 19 through t = 21. Bebe graduates from university on her 21st birthday with a BCom in Finance. Hooray! Unfortunately, Bebe is unemployed for one year after graduation (because two recessions from now she has trouble getting a job). So, she does not start working until t = 22. Bebe’s banking salary is $100,000 in her first year of work, paid annually in arrears, but grows by a 4% combined COLA and promotion adjustment per year until she is 65. So, to be clear, she gets a lump sum gross salary of $100,000 at t = 23, and then $104,000 at t = 24, etc. Note that these cash flows can go on the timeline, but they are not being discounted, because we are modelling only the KiwiSaver account itself. I figure $100,000 at t = 23 is comparable to a good banking salary for a new graduate in today’s dollars. On Bebe’s 23rd birthday, and every birthday up to an including her 65th, Bebe contributes 8% of her gross annual salary to her KiwiSaver account as a lump sum; Bebe’s employer also contributes 3% (the minimum compulsory employer contribution) of Bebe’s gross annual salary to her KiwiSaver account at the same time, but only 67% of this, that is 2.01%, actually arrives in the KiwiSaver account.12 So, that’s 10.01% of her growing salary deposited on each of t = 23 through t = 65 (i.e., 43 deposits). Assume that the Government pays into Bebe’s KiwiSaver account a “member tax credit” (it’s actually just cash) of $521.43 on each of Bebe’s birthdays from 23 through 65 (anyone 18 or over gets this $521.43 if they contribute at least $1,042.86 each year; employer contributions and government contributions do not count towards this).13 That’s an extra $521.43 deposited on each of t = 23 through t = 65 (i.e., 43 more deposits). Assume that Bebe’s KiwiSaver account earns a constant 7.5% per annum after taxes and fees over her entire lifetime.

?a?Assume that at age 65 Bebe annuitizes her KiwiSaver account balance.14 She withdraws her money as a growing annuity due, growing at a COLA adjustment of g = 0.05 per annum. That is, I want you to assume she will withdraw a cash flow C on her 65th birthday, C×(1+g) on her 66th birthday, ..., up to C×(1+g)29 on her 94th birthday (a growing annuity due of 30 payments) and show me how you solved algebraically for C. Give me a ballpark figure for what this C number represents in today’s dollars?