## Finance Question Rate of Return Calculation

Question 5-12

Rate of Return

Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average stock is 13 percent, and the risk-free rate of return is 7 percent.  By how much does the required return on the riskier stock exceed the required return on the less risky stock.

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## FIN 534 Financial Management Homework

FIN 534 Financial Management Homework in \$61 only

FIN 534 Week 2 Homework Set 1

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 through 8: Assume that you recently graduated and have just reported to work as an investment advisor at the one of the firms on Wall Street. You have been presented and asked to review the following Income Statement and Balance Sheets of one of the firm’s clients. Your boss has developed the following set of questions you must answer.

1. What is the free cash flow for 2013?

2. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow?

3. Calculate the 2013 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company’s liquidity position in 2013?

4. Calculate the 2013 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover.

5. Calculate the 2013 debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDA coverage ratios. What can you conclude from these ratios?

6. Calculate the 2013 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios?

7. Calculate the 2013 price / earnings ratio, price / cash flow ratio, and market / book ratio.

8. Use the extended DuPont equation to provide a summary and overview of company’s financial condition as projected for 2013. What are the firm’s major strengths and weaknesses?

FIN 534 Week 4 Homework Set 2

## Debt, CR and REs After Paying Dividends Calculation

Debt, CR and REs After Paying Dividends Calculation in \$6.50 only

PSU Manufacturing Inc. has the following financial statements data for 2012.

Income Statement
Sales                      \$102,500
Cost of Goods           \$50,000
SG & E Expenses       \$35,000
EBIT                         \$17,000
Interest Expenses        \$2,500
Taxes                         \$6,000
Net Income                 \$9,000

Balance Sheet
Cash                              \$40,000
Fixes Assets                   \$55,000
Total Assets                   \$95,000
Accounts Payable           \$12,000
Long-term Debt              \$25,000
Retained Earnings           \$28,000
Paid-in Common Equity   \$30,000

## Case Problem 9.2: Deb Takes Measure of the Market

Assignment case problem 9.2 of Gitman/Joehnk (2010), 11th editions: Deb Takes Measure of the Market

Several months ago, Deb Forrester received a substantial sum of money from the estate of her late aunt. Deb initially placed the money in a savings account because she was not sure what to do with it. Since then, however, she has taken a course in investments at the local university.  Excited about what she has learned in class, Deb has decided that she definitely wants to invest in stocks. But before she does, she wants to use her newfound knowledge in technical analysis to determine whether now would be a good time to enter the market.

Deb has decided to use all 5 of the following measures to help her determine if now is a good time to start putting money into the stock market:

•  Dow Theory

•  New highs-new lows (NH-NL) indicator (Assume the current 10-day moving average is zero and the last 10 periods were each zero.)

•  Arms index

•  Mutual fund cash ratio

## FIN 571 Week 5 Individual Assignment Text Problem Sets

FIN571 Week 5 Individual Assignment Text Problem Sets

A1. (Bond valuation) A \$1,000 face value bond has a remaining maturity of 10 years and a required return of 9%. The bond’s coupon rate is 7.4%. What is the fair value of this bond?

A10. (Dividend discount model) Assume RHM is expected to pay a total cash dividend of \$5.60 next year and its dividends are expected to grow at a rate of 6% per year forever. Assuming annual dividend payments, what is the current market value of a share of RHM stock if the required return on RHM common stock is 10%?

A12. (Required return for a preferred stock) James River \$3.38 preferred is selling for \$45.25. The preferred dividend is nongrowing. What is the required return on James River preferred stock?

A14. (Stock valuation) Suppose Toyota has nonmaturing (perpetual) preferred stock outstanding that pays a \$1.00 quarterly dividend and has a required return of 12% APR (3% per quarter). What is the stock worth?

B16. (Interest-rate risk) Philadelphia Electric has many bonds trading on the New York Stock Exchange. Suppose PhilEl’s bonds have identical coupon rates of 9.125% but that one issue matures in 1 year one in 7 years, and the third in 15 years. Assume that a coupon payment was made yesterday.

a. If the yield to maturity for all three bonds is 8%, what is the fair price of each bond?

## WACC Calculation for Filer Manufacturing

Filer manufacturing has 7.5 millions shares of common stock outstanding. The current share price is \$49, and the book value per share is \$4. Filer also has 2 bond issues outstanding the first bond issue has a face value of \$60 millions and a 7% coupon and sells for 93% of par. The second issue has a face value of \$50 million and a 6.5% coupon and sells for 96.5 percent of par. The first issue matures in 10 years, the second in 6 years. Suppose the company’s stock has a beta of 1.2. The risk free rate is 5.2%, and the market risk premium is 7%. Assume that the overall cost of debt is the weighted average implied by the 2 outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35%. What is the company’s WACC?

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## Clark Paints: Calculate Annual cash flows, Payback Period NPV & IRR

Clark Paints: Calculate Annual cash flows, Payback Period NPV & IRR

Clark Paints: The production department has been investigating possible ways to trim total production costs. One possibility currently being examined is to make the paint cans instead of purchasing them. The equipment needed would cost \$200,000, with a disposal value of \$40,000, and it would be able to produce 5,500,000 cans over the life of the machinery. The production department estimates that approximately 1,100,000 cans would be needed for each of the next five years.

The company would hire three new employees. These three individuals would be full-time employees working 2,000 hours per year and earning \$12.00 per hour. They would also receive the same benefits as other production employees, 18% of wages, in addition to \$2,500 of health benefits.

It is estimated that the raw materials will cost 25¢ per can and that other variable costs would be 5¢ per can. Since there is currently unused space in the factory, no additional fixed costs would be incurred if this proposal is accepted.

## Cost of Capital Mini Case: Cascade Water Company

Source Book : Corporate Finance: Linking Theory to What Companies Do By John Graham, Scott B. Smart, William L. Megginson

Chapter 9: Cost of Capital and Project Risk

Mini Case

Cascade Water Company (CWC) currently has 30,000,000 shares of common stock out- standing that trade at a price of \$42 per share. CWC also has 500,000 bonds outstanding that currently trade at \$923.38 each. CWC has no preferred stock outstanding and has an equity beta of 2.639. The risk-free rate is 3.5%, and the market is expected to return 12.52%. The firm’s bonds have a 20-year life, a \$1,000 par value, a 10% coupon rate and pay interest semi-annually.

CWC is considering adding to its product mix a “healthy” bottled water geared toward children. The initial outlay for the project is expected to be \$3,000,000, which will be depreciated using the straight-line method to a zero salvage value, and sales are expected to be 1,250,000 units per year at a price of \$1.25 per unit. Variable costs are estimated to be \$0.24 per unit, and fixed costs of the project are estimated at \$200,000 per year. The project is expected to have a 3-year life and a terminal value (excluding the operating cash flows in year 3) of \$500,000. CWC has a 34% marginal tax rate. For the purposes of this project, working capital effects will be ignored. Bottled water targeted at children is expected to have different risk characteristics from the firm’s current products. Therefore, CWC has decided to use the “pure play” approach to evaluate this project. After researching the market, CWC managed to find two pure-play firms. The specifics for those two firms are:

## Full Course ACC 230 Entire Class (Weeks 1-9) – Individual Assignments, DQs, LTAs, Final Project

Purchase ACC 230 Week 3 \$4

Purchase ACC 230 Week 5 \$4

Purchase ACC 230 Week 6 \$4

Purchase ACC 230 Week 7 \$4

## Finance Questions

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Finance Questions in \$5 only

1. Investors in a limited company have their liability limited to:

a. The nominal value of their holding

b. The capital value of their holding

c. The market price of the shares

d. The fully paid value of the shares

2. A LLP differs from a limited company in that:

a. At least one member must have unlimited liability

b. It is not a seperate legal entity

c. It has no Memorandum and Articles of Association

d. Action cannot be taken against individual members for fraud or negligence

## Financial Management: Unit 3 Individual Project

Assignment Name:               Unit 3 Individual Project
Deliverable Length:              2 pages

By walking through a set of financial data for XYZ, this assignment will help you better understand how theoretical stock prices are calculated and how prices may react to market forces such as risk and interest rates. You will use both the CAPM (capital asset pricing model) and the constant growth model (CGM) to arrive at XYZ’s stock price.

To receive full credit on this assignment, please show all work, including formulae and calculations used to arrive at financial values.

Assignment Guidelines:

• Find an estimate of the risk-free rate of interest (krf). To obtain this value, go to Bloomberg.com: Market Data and use the “U.S. 10-year Treasury” bond rate (middle column) as the risk-free rate. In addition, you also need a value for the market risk premium. Use an assumed market risk premium of 7.5%.
• Using the information from the XYZ Stock Information document, record the following values:
• XYZ’s beta (ß)
• XYZ’s current annual dividend
• XYZ’s 3-year dividend growth rate (g)
• Industry P/E
• XYZ’s EPS

## Financial Statement Comparison of PepsiCo and Coca-Cola

Financial Statement Comparison of PepsiCo and Coca-Cola in \$21 Only (Instant Download)

PepsiCo’s financial statements are presented in Appendix A. Financial statements of The Coca-Cola Company are presented in Appendix B.
This is from the appendixes in the 7th edition of financial accounting byWeygandt, kimmel, and kieso.

Instructions:

(a) Based on the information contained in these financial statements, determine each of the following for each company. Please show all numerical equations including numerator and denominator, not just a final number. Present your work in a comparative format using a table as illustrated:
1) Gross profit for 2008 PepsiCo Coca-Cola and Gross profit rate for 2008.

2) Percent change in operating income from 2007 to 2008.

3) Accounts receivable turnover for 2008.

4) Days sales in receivable for 2008.

5) Inventory turnover for 2008.

6) Days inventory on hand for 2008.

7) Increase (decrease) in cash and cash equivalents from 2007 to 2008.

8 ) Asset turnover ratio for 2008.