Assume the current interest rate on a 1-year Treasury bond (1R1) is 6.50 percent, the current rate on a 2 year treasury bond (1R2) is 7.25 percent and the current rate on a 3 year treasury bond (1R3) is 8.50 percent. If the biased expectations theory of the term structure of interest rates is correct, what is the 1 year foward rate expected on treasury bills during year 3, 3f1? what is the formula to put into excel?

Wilde Software Development has a 12% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 4% rate after Year 3. Wilde’s tax rate is 25%.

Good Morning Food, Inc. is using the profitability index (PI) when evaluating projects. You have to find the PI for the company’s project, assuming the company’s cost of capital is 12.05 percent. The initial outlay for the project is $374,333. The project will produce the following end-of-the-year after-tax cash inflows of

Year 1: $138,270

Year 2: $1,735

Year 3: $13,342

Year 4: $254,678

Round the answer to two decimal places.

ABC Corp. is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 21%. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. Depreciation is calculated using the 5-year MACRS schedule, and the fixed asset will have a salvage value equal to 25% of the original cost at the end of year 4. All net working capital is recovered at the end of the project

1. Compute the values of annual depreciation expenses (B, C, D and E), the after-tax salvage cash flow (A) and the Net working Capital recovery value (F)

2. Compute the incremental net income of the investment for each year.

3. Compute the incremental cash flows of the investment for each year

4. Suppose the appropriate discount is 10 percent. What is the NPV of the project? Should the project go ahead?

Your company is considering a machine that will cost $ 4,520 at Time 0 and which can be sold after 3 years for $ 872 . To operate the machine, $ 490 must be invested at Time 0 in inventories; these funds will be recovered when the machine is retired at the end of Year 3. The machine will produce sales revenues of $ 1,178 /year for 3 years; variable operating costs (excluding depreciation) will be 41 percent of sales. Operating cash inflows will begin 1 year from today (at Time 1). The machine is in the 3-year MACRS class. The MACRS class has depreciation of 33% in year 1, 45% in year 2, 15% in year 3, and 7% in year 4. The company has a 31 percent tax rate, enough taxable income from other assets to enable it to get a tax refund from this project if the project's income is negative, and a 10 percent cost of capital. Inflation is zero. What are the terminal cash flows associated with ending this project? Note, I want only the Year 3 terminal cash flows, not the year 3 operating cash flows. Show your answer to the nearest $.01 Do not use the $ symbol in your answer

fiscal policy

ANSWER 1 IT IS SOLVE ALREADY, PLEASE ANSWER QUESTION 2

1. A government starts off with a total debt of $3.5 billion. In year one, the government runs a deficit of $400 million. In year two, the government runs a deficit of $1 billion. In year three, the government runs a surplus of $200 million. What is the total debt of the government at the end of year three?

1) Total debt was $3.5 billion=$3500 million

In year 1 deficit=$400 million

Therefore after year 1 debt was 3500+400=$3900 million

In year 2 deficit=$1 billion=$1000 million

After year 2 debt was 3900+1000=$4900 million

In year 3 surplus was $200 million

After year 3 debt was 4900-200=$4700 million

2. Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below. Indicate which direction aggregate demand and /or aggregate supply shifts.:
   1. A recession.
   2. A stock market collapse that hurts consumer and business confidence.
   3. Extremely rapid growth of exports.
   4. Rising inflation.
   5. A rise in the natural rate of unemployment.
   6. A rise in oil prices.

You are the head of Corporate Investments for Everspring, Corp., which has a cost of capital (discount rate) of 10%. You are deciding on whether to invest your firm’s money in the three projects below. All cash flows for each project are shown; all projects are abandoned after Year 5.

  Project A Project B   Project C
Initial Investment ($100,000) ($500,000)   ($6,500,000)
Year 1 $30,000 ($100,000) $1,000,000
Year 2 $40,000 $200,000 $1,500,000
Year 3 $50,000 $200,000 $2,000,000
Year 4 $60,000 $200,000 $2,500,000
Year 5 $70,000 $200,000 $3,000,000

1. Assume each year’s cash flows occur evenly over the year. If your required payback period is 30 months, in which projects would you invest?

2. Assume each year’s cash flows occur at the end of the year. What is the net present value (NPV) of Project A?

3. Assume each year’s cash flows occur at the end of the year. What is the internal rate of return (IRR) of Project B?

4. Assume each year’s cash flows occur at the end of the year. What is the profitability index (PI) of Project C?

During calendar-year 2019, The Hammond Corporation had the following information in its accounting records: Paid cash dividends of $42,000. Issued common stock for $30,000 in cash. Cash balance, December 31, 2019 - $________. Acquired land costing $80,000, in exchange for a long-term note payable. A building with an adjusted cost basis of $42,000 was destroyed by fire. Increase in the inventory account during the year - $5,000. Depreciation expense for the year was $28,000. Amortization expense for a trademark was $1,000. A 2016 investment in bonds, originally purchased for $33,000, was sold for $38,000. Hammond’s earnings for the year from an equity-method investee was $6,000. Issued preferred stock for $50,000 in cash. Increase in net accountants receivable account during the year - $9,000. Decrease in accounts payable account during the year - $20,000. Retired debentures payable at their face value for $130,000 in cash. Increase in the deferred income tax liability balance during the year - $3,000. Cash balance, January 1, 2019 - $55,000. Net sales for the year were $320,000. Net income for the year was $22,000. Using the information above, prepare a statement of cash flows (indirect method) for The Hammond Corporation, for the year ended December 31, 2019.

During calendar-year 2019, The Hammond Corporation had the following information in its accounting records: Paid cash dividends of $42,000. Issued common stock for $30,000 in cash. Cash balance, December 31, 2019 - $________. Acquired land costing $80,000, in exchange for a long-term note payable. A building with an adjusted cost basis of $42,000 was destroyed by fire. Increase in the inventory account during the year - $5,000. Depreciation expense for the year was $28,000. Amortization expense for a trademark was $1,000. A 2016 investment in bonds, originally purchased for $33,000, was sold for $38,000. Hammond’s earnings for the year from an equity-method investee was $6,000. Issued preferred stock for $50,000 in cash. Increase in net accountants receivable account during the year - $9,000. Decrease in accounts payable account during the year - $20,000. Retired debentures payable at their face value for $130,000 in cash. Increase in the deferred income tax liability balance during the year - $3,000. Cash balance, January 1, 2019 - $55,000. Net sales for the year were $320,000. Net income for the year was $22,000. Using the information above, prepare a statement of cash flows (indirect method) for The Hammond Corporation, for the year ended December 31, 2019.

Gadgets&Co sells refrigerators. Any refrigerator that malfunctions within 3 years of purchase is replaced with a new one for free. Of all refrigerators, 3% fail during their first year of operation; 5% of the one-year-old refrigerators fail within their second year of operation, and 7% of the two-year-old refrigerators fail within their 3rd year of operation.

a) Estimate analytically the fraction of all refrigerators that will have to be replaced under the 3-year warranty scheme.

b) Construct and execute a simulation model (with 120 pseudo-realities) to estimate the fraction of all refrigerators that will have to be replaced under the 3-year warranty scheme. Explain and motivate your approach.

c) Assume that it costs $650 to replace a refrigerator, and Gadgets&Co sells 15,000 refrigerators per year. Estimate analytically the replacement cost savings per year that Gadgets&Co would achieve if they decreased their warranty period to 2 years. Explain and motivate your approach and results.

d) Use the results from part b to find a simulation-based estimate of the replacement cost savings per year that Gadgets&Co would achieve if they decreased their warranty period to 2 years. Explain and motivate your approach.