A person is trying to investigate a savings pattern that follows an arithmetic gradient series. He/She opened new savings account with $35,000 in year 1 and deposited $4,000 more each year compared to the previous year for 7 years. If the rate of return is 10% per year, determine the equivalent annual worth of the account.
In: Economics
Q5) A real estate corporation is planning on spending $40,000 on maintenance now, and $28,000 four years from now, using a real interest rate of 15% per year and inflation of 4% per year. What is the equivalent annual worth of the cost over a period starting year 1 through year 6?
In: Economics
What is the amortization schedule for a mortgage of $1,600,000 in with 1). an initial ten year fixed rate of 6.5%; twenty year amortization (monthly); ballooning at the end of the tenth year; and 2) Second ten year rate "capped" at 7.5%; monthly amortization over the remaining ten years on the balance rolled-over from #1.
In: Finance
Campbell Inc. produces and sells outdoor equipment. On July 1, Year 1, Campbell issued $25,000,000 of 10-year, 10% bonds at a market (effective) interest rate of 9%, receiving cash of $26,625,925. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
In: Accounting
You are looking at a new project and need to decide if your company will want to go through with this investment.
Initial Investment = -150,000
CF year 1 = 65,000
CF year 2 = 45,000
CF year 3 = 60,000
CF year 4 = 55,000
The rate of return on this investment is 11%.
What is the IRR & Payback
In: Finance
Equipment maintenance costs for manufacturing explosion-proof pressure switches are projected to be $125,000 in year one and increase by 2.5% each year through year five. What is the equivalent annual worth of the maintenance costs at an interest rate of 10% per year, compounded MONTHLY?
Please do not use excel and show formulas.
In: Finance
Pera inc does not currently pay dividends. The company will start with an annual dividend of $13 at the end of year 4 and will pay the same amount each year until year 8. Thereafter, it will increase the dividends by 2% per year forever. If the required rate of return on this stock is 8%, what is the price of this stock today?
In: Finance
| Hyrkas Corporation's most recent balance sheet and income statement appear below: |
| Statement of Financial Position December 31, Year 2 and Year 1 (in thousands of dollars) |
||||
| Year 2 | Year 1 | |||
| Asset: | ||||
| Current assets: | ||||
| Cash | $ | 100 | $ | 110 |
| Accounts receivable | 210 | 220 | ||
| Inventory | 110 | 120 | ||
| Prepaid expenses | 10 | 10 | ||
| Total current assets | 430 | 460 | ||
| Plant and equipment, net | 900 | 880 | ||
| Total assets | $ | 1,330 | $ | 1,340 |
| Liabilities and stockholders' equity: | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 160 | $ | 170 |
| Accrued liabilities | 50 | 50 | ||
| Notes payable, short term | 100 | 90 | ||
| Total current liabilities | 310 | 310 | ||
| Bonds payable | 190 | 240 | ||
| Total liabilities | 500 | 550 | ||
| Stockholders' equity: | ||||
| Common stock, $1 par value | 100 | 100 | ||
| Additional paid-in capital--common stock | 110 | 110 | ||
| Retained earnings | 620 | 580 | ||
| Total stockholders' equity | 830 | 790 | ||
| Total liabilities and stockholders' equity | $ | 1,330 | $ | 1,340 |
| Income Statement For the Year Ended December 31, Year 2 (in thousands of dollars) |
|||
| Sales (all on account) | $ | 1,330 | |
| Cost of goods sold | 850 | ||
| Gross margin | 480 | ||
| Selling and administrative expenses | 292 | ||
| Net operating income | 188 | ||
| Interest expense | 31 | ||
| Net income before taxes | 157 | ||
| Income taxes (30%) | 47 | ||
| Net income | $ | 110 | |
|
Dividends on common stock during Year 2 totaled $50 thousand. The market price of common stock at the end of Year 2 was $9.36 per share. |
| Required: | |
| a. |
Compute the gross margin percentage for Year 2. (Round your answer to one decimal place. e.g. 0.1234 = 12.3%.) |
| b. |
Compute the earnings per share (of common stock) for Year 2. (Round your answer to 2 decimal places.) |
| c. |
Compute the price-earnings ratio for Year 2. (Do not round intermediate calculations. Round your answer to one decimal place.) |
| d. |
Compute the dividend payout ratio for Year 2. (Do not round intermediate calculations. Round your answer to one decimal place. e.g. 0.1234 = 12.3%.) |
| e. |
Compute the dividend yield ratio for Year 2. (Round your answer to 2 decimal places. e.g. 0.1234 = 12.34%.) |
| f. |
Compute the return on total assets for Year 2. (Do not round intermediate calculations. Round your answer to 2 decimal places. e.g. 0.1234 = 12.34%.) |
| g. |
Compute the return on common stockholders' equity for Year 2. (Round your answer to 2 decimal places. e.g. 0.1234 = 12.34%.) |
| h. |
Compute the book value per share for Year 2. (Round your answer to 2 decimal places.) |
| i. |
Compute the working capital for Year 2. (Input your answer in thousands of dollars, e.g. $100,000 is 100.) |
| j. |
Compute the current ratio for Year 2. (Round your answer to 2 decimal places.) |
| k. | Compute the acid-test ratio for Year 2. (Round your answer to one decimal place.) |
| l. | Compute the accounts receivable turnover for Year 2. (Round your answer to 2 decimal places.) |
| m. |
Compute the average collection period for Year 2. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to one decimal place.) |
| n. |
Compute the inventory turnover for Year 2. (Round your answer to 2 decimal places.) |
| o. |
Compute the average sale period for Year 2. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to one decimal place.) |
| p. |
Compute the times interest earned for Year 2. (Round your answer to 2 decimal places.) |
| q. |
Compute the debt-to-equity ratio for Year 2. (Round your answer to 2 decimal places. e.g. 0.1234 = 0.12) |
In: Accounting
Sadik Industries must install $1 million of new machinery in its Texas plant. It can obtain a 6-year bank loan for 100% of the cost at a 14% interest rate with equal payments at the end of each year. Sadik’s tax rate is 40%. The equipment falls in the MACRS 3-year class.
| Year | 3-year MACRS |
| 1 | 33.33% |
| 2 | 44.45% |
| 3 | 14.81% |
| 4 | 7.41% |
Alternatively, a Texas investment banking firm that represents a group of investors can arrange a guideline lease calling for payments of $320,000 at the end of each year for 3 years. Under the proposed lease terms, the Sadik must pay for insurance, property taxes, and maintenance.
Sadik must use the equipment if it is to continue in business, so it will almost certainly want to acquire the property at the end of the lease. If it does, then under the lease terms it can purchase the machinery at its fair market value at Year 3. The best estimate of this market value is $210,000, but it could be much higher or lower under certain circumstances. If purchased at Year 3, the used equipment would fall into the MACRS 3-year class. Sadik would actually be able to make the purchase on the last day of the year (i.e., slightly before Year 3), so Sadik would get to take the first depreciation expense at Year 3 (the remaining depreciation expenses would be from Year 4 through Year 6). On the time line, Sadik would show the cost of purchasing the used equipment at Year 3 and its depreciation expenses starting at Year 3.
To assist management in making the proper lease-versus-buy decision, you are asked to answer the following questions:
What is the net advantage of leasing? Should Sadik take the
lease? (Round your answer to the nearest dollar.) Explain.
Net advantage to leasing $
Since the cost of leasing the machinery is -Select-lessgreaterItem
2 than the cost of owning it, the firm should -Select-leasebuyItem
3 the equipment.
Consider the $210,000 estimated residual value. How high could
the residual value get before the net advantage of leasing falls to
zero? (Round your answer to the nearest dollar.)
$
In: Finance
Problem 19-05
Lease versus Buy
Sadik Industries must install $1 million of new machinery in its Texas plant. It can obtain a 6-year bank loan for 100% of the cost at a 15% interest rate with equal payments at the end of each year. Sadik’s tax rate is 33%. The equipment falls in the MACRS 3-year class.
| Year | 3-year MACRS |
| 1 | 33.33% |
| 2 | 44.45% |
| 3 | 14.81% |
| 4 | 7.41% |
Alternatively, a Texas investment banking firm that represents a group of investors can arrange a guideline lease calling for payments of $320,000 at the end of each year for 3 years. Under the proposed lease terms, the Sadik must pay for insurance, property taxes, and maintenance.
Sadik must use the equipment if it is to continue in business, so it will almost certainly want to acquire the property at the end of the lease. If it does, then under the lease terms it can purchase the machinery at its fair market value at Year 3. The best estimate of this market value is $190,000, but it could be much higher or lower under certain circumstances. If purchased at Year 3, the used equipment would fall into the MACRS 3-year class. Sadik would actually be able to make the purchase on the last day of the year (i.e., slightly before Year 3), so Sadik would get to take the first depreciation expense at Year 3 (the remaining depreciation expenses would be from Year 4 through Year 6). On the time line, Sadik would show the cost of purchasing the used equipment at Year 3 and its depreciation expenses starting at Year 3.
To assist management in making the proper lease-versus-buy decision, you are asked to answer the following questions:
In: Accounting