Pearl Corp. is expected to have an EBIT of $2,400,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $105,000, and $145,000, respectively. All are expected to grow at 20 percent per year for four years. The company currently has $12,500,000 in debt and 1,050,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3.5 percent indefinitely. The company’s WACC is 8.9 percent and the tax rate is 21 percent. What is the price per share of the company's stock?

At the age of 55, you want to buy a twenty year-annuity that makes payments of $2,500 per month, earning a monthly rate of 1%. Right now, you’ve got $10,000 to invest to save up and buy that annuity. What is the yearly interest rate you would need to earn to achieve your goal?

Please explain the answer, preferably using Excel

Proposal 1

Pay the family of Boone $300,000 a year for the next 20 years, and $500,000 a year for the remaining 20 years.

Proposal 2

Pay the family a lump sum payment of $5 million today.

Proposal 3

Pay the family of Boone a relatively small amount of $50,000 a year for the next 40 years, but also guarantee them a final payment of $75 million at the end of 40 years.

In order to analyze the present value of these three proposals, attorney Knox Hollister called on a financial expert to do the analysis. You will aid in the process.

Required

1. Assume a discount rate of 6 percent is used, which of the three projects has the highest present value?

In analyzing the first proposal, take the present value of the

20-year $300,000 annuity. Then take the present value of

the deferred annuity of $500,000 that will run from the 21st through the 40th year. The answer you get for the second annuity will represent the value at the beginning of the 21st year (the same as the end of the 20th year). You will need to discount this lump sum value back for 20 years as a single amount to get its present value. You then add together the present value of the first and second annuity.

The second and third proposals are straightforward and require no further explanation.

2. Now assume that a discount rate of 11 percent is used instead of

6 percent. Which of the three alternatives provides the highest present value?

3. Explain why the change in outcome takes place between question 1 and question 2.

4. If Knox Hollister thinks additional punitive damages are likely to be $4 million in a jury trial, should he be more likely to settle out-of-court or go before the jury?

The following information is available from the accounting records of DeWitt Engineering Ltd. for the year ended June 30, 2021:

Instructions
Prepare a combined Statement of Income and Comprehensive Income for the year ended June 30, 2021. The company has a 30% income tax rate and records gains and losses on equity investments as other comprehensive income.

Suppose that 1/2 of all cars sold at a Nissan dealer in a given year are Altimas, 1/3 are Maximas, and the rest are Sentras. Suppose that 3/4 of the Altimas, 1/2 of the Maximas, and 1/2 of the Sentras have a moon roof. Answer the following questions. For each question, first decide whether the probability is a conditional probability or not.

1. What is the probability a randomly selected car has a moon roof?

2. What is the probability that a randomly selected car has a moon roof given it is a Sentra?

3. What is the probability a randomly selected car is a Maxima if it has a moon roof?

Pearl Corp. is expected to have an EBIT of $3,100,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $140,000, and $180,000, respectively. All are expected to grow at 15 percent per year for four years. The company currently has $16,000,000 in debt and 1,050,000 shares outstanding. At Year 5, you believe that the company's sales will be $22,230,000 and the appropriate price-sales ratio is 2.3. The company's WACC is 8.7 percent and the tax rate is 23 percent.

What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

The following are the projected cash flows to the firm over the next five years:

The firm has a cost of capital (WACC )of 12% and the cash flows are expected to grow at the rate of 4% in perpetuity?

a) What is the value of the firm today?

b) At what growth rate will the firm have a value of $3000 Million?

The TropicalFlowers Company is evaluating an asset that may increase sales by $120,000 every year for 4 years. There is no expected change in net operating working capital. The company's cost of capital is 6%. The proposed asset costs $400,000, will require $20,000 to modify for operations, and falls in the 3-year class MACRS for depreciation rates: .33, .45, .15, and .07 for years 1 through 4, respectively. At the end of the 4 years, it is expected that the asset may sell for $30,000. The company's tax rate is 21%. SHOW ALL WORK FOR FULL CREDIT.

a) What is the initial outlay for this project?

b) What are the operating cash flows in Years 1 through 4?

c) As part of the terminal cash flow in Year 4, what is the after-tax salvage value of the asset?

d) What is the net present value of this proposed asset investment? Should it be accepted or rejected?

Given the year end prices of the following stocks, estimate the standard deviation of the returns of a portfolio of 30% AAA and 70% BBB. Enter your answer as a percent without the % sign. Round your final answer to two decimals.