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?

A 5-year project requires a $300,000 investment in a machine that is expected to worth $50,000 when the project ends. Operating expenses are expected to be $75,000 in the first year and are expected to increase 3% per year over the life of the project. The appropriate discount rate is 8%, the company’s tax rate is 20%, and the CCA rate is 30%. What is the present value of the CCA tax shield? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)

PVCCATS=(IdTcd+k) (1+.5k1+k)− (SndTcd+k) (1(1+k)n)PVCCATS=IdTcd+k 1+.5k1+k- SndTcd+k 1(1+k)

(1).  ABC expects sales of $21,830,000 this year. The cost of goods sold is expected to be $12,468,000 while selling, general and admin (SGA) expenses are forecast to be $4,114,000. The firm expects depreciation expenses to be $202,000 and expects to pay an average interest rate of 4% on its $4,415,000 of liabilities. Given its tax rate of 40%, what is the expected net income for ABC this year?(If it is a negative, be sure and enter a negative sign)

(2). This year, ABC expects sales of $137,328,000 and a gross profit margin of 16 percent this year, along with an Inventory Turnover Ratio (COGS / Inventory) of 6.10. What is ABC's projected level of inventory, given these numbers?

(3). This year, ABC had sales of $34,914,000 and an Accounts Receivable Turnover Ratio (Sales / Accounts Receivable) of 8.7. ABC projects that next year, its sales will grow by 10 percent while its Accounts Receivable Turnover Ratio will drop to 8.4. If that happens, what will be the total dollar amount in accounts receivable next year?

(4). In its most recent financial statements, ABC reported 93,000 of net income and 302,000 of retained earnings. The retained earnings at the end of the previous year were 282,000. Based on this information, what is the best estimate of how much in dividends was paid to shareholders during the year?

(5). ABC ended the year with inventory of 812,000. During the year, the firm purchased 5,215,000 of new inventory and the cost of goods sold reported on the income statement was 5,079,000. Assuming that there were no other changes during the year, how much was ABC's inventory at the beginning of the year?

(6). ABC extends credit to its customers on terms of 2/10, net 40. Assuming a customer pays the invoice at the end of the costly trade credit period, what is the annualized cost of trade credit? (Show your answer in decimal form to four places, e.g., 12.34% would be 0.1234)

(7). Fred deposited $3,362 in a savings account that has an Annual Percentage Rate of 8.4 percent interest per year. How much will he have in the account after 6 years? (Show your answer as a positive number)

(8). ABC has a beta of 0.53. The expected return for the S&P 500 stock index is 15 percent and U.S. Treasuries are expected to yield 3.7 percent. Based on the Capital Asset Pricing Model (CAPM), what is ABC's expected rate of return? (show your answer in decimal form to four places)

(9). Mike and Cindy are buying a new car, but they are on a budget. The think that they can afford to pay $285 per month for 3 years, based on an annual interest rate of 7.5 percent. How much can they afford to borrow, given this information? (Show your answer to the nearest dollar)

(10). What is the present value of an ordinary annuity of $666.6 per month for 7 years, evaluated at a nominal annual interest rate of 12.2 percent?

(11). Fred owes $11,000 on his credit card, which carries an annual interest rate of 16.7 percent. If he does not charge anything else and sends the credit card company $521 every month, how many months will it take to pay off the card? (Show your answer to two decimal places, e.g., 12.34)

(12). You are buying a house and have borrowed $180,000 at an annual interest rate of 7.2 percent. The terms of the loan require you to make monthly payments and to completely amortize the loan over thirty years. How much is each monthly payment?

(13). Although Bill has nothing saved for retirement so far, he has determined that he will need to have $774,000 in the account when he retires. He plans to open a retirement account and make monthly contributions from his paycheck. The account that earns 10 percent annual interest (which is compounded monthly). How much will he have to invest each month to be able to reach his goal at the end of 26 years? Show your answer as a positive number to the nearest penny.

(14). Fred is setting up a trust fund for his son. The trust will pay his son $2,000 each year for the next 34 years. If the trust fund earns 7.2 percent interest per year, how much does Fred have to put into the trust fund today in order to fund the series of annual payments? (Show your answer as a positive number).

(15). If you deposit $667 per month into a savings account that pays an annual rate of 9.8 percent, compounded monthly, how much will you have in the account after 24 years?

(16). Ted wants to purchase some outstanding shares of preferred stock that promise an annual payment of $8.82 forever. Assuming Ted requires an investment return of 5.6 percent on similar investments, what is the most he should be willing to pay per share?

Answer the questions that follow this table – TABLE 2

8. What is meant by Capital intensity? Give an example to fully describe