FIN 534 Week 1 Homework Chapter 2

FIN 534 Week 1 Homework Chapter 2

FIN/534 Week 1 Homework Chapter 2

FIN 534 – Homework Chapter 2

1. Which of the following statements is CORRECT?

a. Typically, a firm’s DPS should exceed its EPS.

b. Typically, a firm’s EBIT should exceed its EBITDA.

c. If a firm is more profitable than average (e.g., Google), we would normally expect to see its stock price exceed its book value per share.

d. If a firm is more profitable than most other firms, we would normally expect to see its book value per share exceed its stock price, especially after several years of high inflation.

e. The more depreciation a firm has in a given year, the higher its EPS, other things held constant.

2. Which of the following statements is CORRECT?

FIN 534 Quiz 1 (15 questions)

FIN 534 Quiz 1 (15 questions) (Instant Download)

Question 1 
Which of the following statements is CORRECT?

Answer

  1. A hostile takeover is the main method of transferring ownership interest in a corporation.
  2. Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization.
  3. A corporation is a legal entity that is generally created by a state, and it has a life and existence that is separate from the lives of its individual owners and managers.
  4. Limited liability of its stockholders is an advantage of the corporate form of organization, but corporations have more trouble raising money in financial markets because of the complexity of this form of organization.
  5. Although its stockholders are insulated by limited legal liability, the legal status of the corporation does not protect the firm’s managers in the same way, i.e., bondholders can sue its managers if the firm defaults on its debt, even if the default is the result of poor economic conditions.

Question 2
Which of the following statements is CORRECT?

FIN 534 Quiz 1 (30 questions)

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Question 1

Which of the following statements is CORRECT?
Answer

One defect of the IRR method is that it does not take account of cash flows over a project’s full life.

One defect of the IRR method is that it does not take account of the time value of money.

One defect of the IRR method is that it does not take account of the cost of capital.

One defect of the IRR method is that it values a dollar received today the same as a dollar that will not be received until sometime in the future.

One defect of the IRR method is that it assumes that the cash flows to be received from a project can be reinvested at the IRR itself, and that assumption is often not valid.
2 points
Question 2

ACC 423 Week 5 WileyPlus Assignment – Exercises

ACC 423 Week 5 WileyPlus Assignment – Exercises in US$ 7 (Instant Download)ACC 423 Week 5 WileyPlus Assignment - Exercises

P13-9 (Premium Entries and Financial Statement Presentation) Sycamore Candy Company offers
a CD single as a premium for every five candy bar wrappers presented by customers together with $2.50. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each CD to the company is $2.25; in addition it costs 50 cents to mail each CD. The results of the premium plan for the years 2010 and 2011 are as follows. (All purchases and sales are for cash.)
 CDs purchased                                                                            2010                      2011
CDs purchased                                                                          250,000                 330,000
Candy bars sold                                                                     2,895,400               2,743,600
Wrappers redeemed                                                              1,200,000              1,500,000
2010 wrappers expected to be redeemed in 2011               290,000
2011 wrappers expected to be redeemed in 2012                350,000

Instructions
(a) Prepare the journal entries that should be made in 2010 and 2011 to record the transactions related to the premium plan of the Sycamore Candy Company.
(b) Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the balance sheet and the income statement at the end of 2010 and 2011.

ACC 423 Week 2 WileyPlus Assignment-Exercises

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E15-13 (a,b) (Stock Split and Stock Dividend)
The common stock of Warner Inc. is currently selling at $110 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is $10; book value is $70 per share. Five million shares are issued and outstanding.

(a) How much is the debit to retained earnings if the board votes a 2-for-1 stock split?
(b) Prepare the necessary journal entries if the board votes a 100% stock dividend.

P15-1 (Equity Transactions and Statement Preparation) 
On January 5, 2010, Phelps Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $10 par value common stock. It then completed these transactions.
Jan. 11 Issued 20,000 shares of common stock at $16 per share.
Feb. 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the following assets: machinery with a fair market value of $50,000; a factory building with a fair market value of $160,000; and land with an appraised value of $270,000.
July 29 Purchased 1,800 shares of common stock at $17 per share. (Use cost method.)
Aug. 10 Sold the 1,800 treasury shares at $14 per share.
Dec. 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend.
Dec. 31 Closed the Income Summary account. There was a $175,700 net income.

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SWOT Analysis of Apple Inc.

SWOT Analysis of Apple Inc.

Strengths, Weaknesses, Opportunities, Threats of Apple Inc.

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You will get SWOT Analysis of Apple Inc.

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FIN 370 Week 5 Problem 3

FIN 370 Week 5 Problem 3

A firm’s current balance sheet is as follows:

Assets $100                        Debt                               $10

Equity                             $90

a. What is the firm’s weighted-average cost of capital at various combinations of debt and equity, given the following information?

Debt/Assets          After-Tax Cost of Debt          Cost of Equity          Cost of Capital

0%                                                      8%                                             12%                                   ?

10                                                       8                                                 12                                     ?

20                                                       8                                                 12                                     ?

30                                                      8                                                 13                                      ?

40                                                      9                                                  14                                    ?

50                                                     10                                                15                                    ?

60                                                     12                                                16                                    ?

 

b. Construct a pro forma balance sheet that indicates the firm’s optimal capital structure. Compare this balance sheet with the firm’s current balance sheet.

What course of action should the firm take?

Assets                                 $100                       Debt                             $?

Equity                          $?

c. As a firm initially substitutes debt for equity financing, what happens to the cost of capital, and why?

d. If a firm uses too much debt financing, why does the cost of capital rise?

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FIN 571 Week 1 Individual Assignment Guillermo Furniture Store Concepts Paper

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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

•  Advance-decline line

•  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?

Capstone Project: Analysis of Annual Report of Exxon Mobil Corporation

Analysis of Annual Report of Exxon Mobil Corporation

Capstone Project: Analysis of Annual Report of Exxon Mobil Corporation in $70 only
Publicly-traded company by searching the Internet. Download the annual report for the most recent year reported for use in this assignment.

Based on your review and analysis of the annual report, prepare a 10-12 page report in which you:

1. Analyze the company’s mission and vision statements against the performance of the organization. Then, evaluate how well the company lives out its mission and vision statement. Provide support from the organization’s performance in your evaluation.

2. Assess how the organization’s strategic goals link to the company’s mission and vision.

3. Analyze the company’s financial performance to determine the link between the company’s strategic goals, strategy, and its financial performance. Detail your findings.

Risk Homework Research Memo 01

Risk Homework Research Memo 01

Research three cases

Focus strictly on the ‘interest rate risk’ aspect of all three cases.  Write a 6 page analysis of your findings in your own words (double spaced, Font: Times New Roman, Size 12).  Be sure to address the source and nature of the risk, and how it played out.  Make sure you reference your analysis: assign a serial number in the text, and list the source  in the bottom of the page. Do not use end-of-document reference list.

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Plant Assets of Jimenez Company

At December 31, 2008, Jimenez Company reported the following as plant assets.

SOMF Asset Patterns

Land              $4,000,000

Buildings       $28,500,000

Less: Accumulated depreciation-buildings        12,100,000    16,400,000

Equipment    48,000,000

Less: Accumulated depreciation-equipment      5,000,000      43,000,000

Total plant assets                       $63,400,000

During 2009, the following selected cash transactions occurred.

April 1 Purchased land for $2,130,000.

May 1 Sold equipment that cost $780,000 when purchased on January 1, 2005. The equipment was sold for $450,000.

WACC Calculation for Filer Manufacturing

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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Springfield Express: Various Break-Even Point Calculation

English: Passenger train for Wisbech

Springfield Express is a luxury passenger carrier in Texas. All seats are first class, and the following data are available:

Number of seats per passenger train car 90
Average load factor (percentage of seats filled)        70%
Average full passenger fare     $160
Average variable cost per passenger     $70
Fixed operating cost per month  $3,150,000
What is the break-even point in passengers and revenues per month?
What is the break-even point in number of passenger train cars per month?
If Springfield Express raises its average passenger fare to $ 190, it is estimated that the average load factor will decrease to 60 percent. What will be the monthly break-even point in number of passenger cars?
(Refer to original data.) Fuel cost is a significant variable cost to any railway. If crude oil increases by $ 20 per barrel, it is estimated that variable cost per passenger will rise to $ 90. What will be the new break-even point in passengers and in number of passenger train cars?
Springfield Express has experienced an increase in variable cost per passenger to $ 85 and an increase in total fixed cost to $ 3,600,000. The company has decided to raise the average fare to $ 205. If the tax rate is 30 percent, how many passengers per month are needed to generate an after-tax profit of $ 750,000?

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