The Corporation, a Firm in the 31 percent Marginal Tax Bracket

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Marginal Tax Bracket

The Corporation, a firm in the 31 percent marginal tax bracket with a required rate of return or discount rate of 12 percent, is considering a new project. This project involves the introduction of a new product. This project is expected to last 5 years and then, because this is somewhat of a fad product, it will be terminated. Given the following information, determine the net cash flows associated with the project, the project’s net present value, the profitability index, and the internal rate of return. Apply the appropriate decision criteria.

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The Minot Kit Aircraft Company of Minot

Answer for The Minot Kit Aircraft Company of Minot for $5 Only (Instant Download)

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(Replacement project cash flows): The Minot Kit Aircraft Company of Minot, North Dakota, uses a plasma cutter to fabricate metal aircraft parts for its plane kits. The company currently is using a cutter that it purchased four years ago that has a book value of $70,000 and is being depreciated $17,500 per year over the next 4 years. If the old cutter were to be sold today, the company estimates that it would bring in an amount equal to the book value of the equipment.

The company is considering the purchase of a new automated plasma cutter that would cost $420,000

The Bar-None Manufacturing Co. Manufactures Fence Panels

Answer for The Bar-None Manufacturing Co. Manufactures Fence Panels for $5 only (Instant Download)

Fence Panels

(Payback and discounted payback period calculations)  

The Bar-None Manufacturing Co. manufactures fence panels used in cattle feed lots throughout the Midwest. Bar-None’s management is considering three investment projects for next year but doesn’t want to make any investment that requires more than three years to recover the firm’s initial investment. The cash flows for the three projects (Project A, Project B, and Project C) are as follows:  

a.  Given Bar-None’s three-year payback period, which of the projects will qualify for acceptance?

b.  Rank the three projects using their payback period. Which project looks the best using this criterion? Do you agree with this ranking? Why or why not?

c.  If Bar-None uses a discount rate of 9.6 percent to analyze projects, what is the discounted payback period for each of the three projects? If the firm still maintains its three-year payback policy for the discounted payback, which projects should the firm undertake?

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Fijisawa, Inc. is Considering a Major Expansion

Fijisawa, Inc. is Considering a Major Expansion for $5 Only (Instant Download)

Fijisawa

(Related to Checkpoint 11.1 and Checkpoint 11.4) (Calculating NPV, PI, and IRR) Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $10,800,000, and the project would generate cash flows of $1,250,000 per year for 20 years. The appropriate discount rate is 9.0 percent.
a. Calculate the NPV.
b. Calculate the PI.
c. Calculate the IRR.
d. Should this project be accepted? Why or why not?

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GB Timbers, Based in Germany, Supplies

GB Timbers, Based in Germany, Supplies for $5 (Instant Download)

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GB Timbers, based in Germany, supplies timber products to construction and manufacturing industries. The company reported after-tax earnings available to common stocks of RM3,200,000. From these eamings, the management decided to pay a dividend of RM0.80 on each of its 4,000,000 common shares outstanding. The capital structurë of the company includes 30% debt, 40% common stock, end 30% preferred stock. The tax rate applicable to GB Timbers is 30%.

i) If the market price of the common stock is RM3.60,) and dividend is expected to grow at a rate of 8% per year for the foreseeable future, Ahat is the required rate of return on the company’s common stock? (2 marks)

ii) The company can issue a RM1.00 dividend preferred stock for a market price of RM10.00 per share. The floatation costs would amount to RMO.60 per share. What is the cost of preferred stock financing? (2 marks)

iii) In addition, the company can issue RM100 per value, 8% coupon, 10 year bonds that can be sold for RM110 each. Floatation costs would amount to RM2 per bond. Use the estimation formula to figure the approximate cost of debt financing. (2 marks)

iv) What is the Weighted Average Cost of Capital (WACC)? (2 marks)

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Would a Call Option be Exercised

Would a Call Option be Exercised for $5 Only (Instant Download)

1)Would a call option be exercised at expiry if S < X where S is the spot price of the underlying asset and X is the strike price of the option?

2) Would a put option be exercised at expiry if S > X

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John Wanted to Invest in Segambut Bonds

John Wanted to Invest in Segambut Bonds for $5 Only (Instant Download)

Segambut Bonds

John wanted to invest in Segambut bonds, however, he is still new in the industry. Currently, Segambut bond is selling ak RM874 with the current par value of RM1,000 bond, with the coupon rate at 5% semi-annualy with year to go before maturity He was also thinking to buy a new issle Kiara bonds currently selling at par value of RM1,000 with coupon payment of 12% a year with 7-year maturity Recommend to John which bond is the better option for him to buy, given both of them carry the same risk profile. (5 marks)

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Answer of Two Objective Type Questions

Answer of Two Objective Type Questions for $2 Only (Instant Download)

Objective Type Questions

Which type of health insurance policy typically consists of coverage of 80%, or similar, of expenses after meeting an annual deductible?

a.a Preferred Provider Organization (PPO) plan

b.a Health Maintenance Organization (HMO) plan

c.an indemnity plan

d.a whole life plan

e.a floater plan

A perspective of investment tends to work under a _ time horizon, with relatively _ trades.

a.long-term; many

b.long-term; few

c.short-term; many

d.short-term; few

e.immediate-term; many

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Answer for Sidewinder, Inc., has Sales

Answer for Sidewinder, Inc., has Sales… for $5 Only (Instant Download)

Sidewinder

Sidewinder, Inc., has sales of $638,000, costs of $329,000, depreciation expense of $74.000, interest expense of $39,000, and a tax rate of 21 percent. The firm paid out $69,000 in cash dividends and has 35,200 shares of common stock outstanding, a. What is the earnings per share, or EPS, figure? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the dividends per share figure? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Earnings per share b. Dividends per share

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You Hired by Falcon Motors, Inc. (FMI) Located in Denver USA

You Hired by Falcon Motors, Inc. (FMI) Located in Denver USA for $19 Only (Instant Download)

You have recently been hired by Falcon Motors, Inc. (FMI) located in Denver USA, in its relatively new treasury management department. FMI was founded eight years ago by Joe Falcon. Joe found a method to manufacture a cheaper battery that will hold a larger charge, giving a car powered by the battery a range of 700 miles before requiring a charge. The cars manufactured by FMI are midsized and carry a price that allows the company to compete with other mainstream auto manufacturers. The company is privately owned by Joe and his family, and it had sales of $97 million last year.

FMI primarily sells to customers who buy the cars online, although it does have a limited number of company-owned dealerships. The customer selects any customization and makes a deposit of 20 percent of the purchase price. After the order is taken, the car is made to order, typically within 45 days. FMI’s growth to date has come from its profits. When the company had sufficient capital, it would expand production. Relatively little formal analysis has been used in its capital budgeting process. Joe has just read about capital budgeting techniques and has come to you for help. For starters, the company has never attempted to determine its cost of capital, and Joe would like you to perform the analysis. Because the company is privately owned, it is difficult to determine the cost of equity for the company. Joe wants you to use the pure play approach to estimate the cost of capital for FMI, and he has chosen Tesla Motors as a representative company. The following questions will lead you through the steps to calculate this estimate.

QUESTIONS:

1. Most publicly traded corporations are required to submit quarterly (10-Q) and annual (10-K) reports to the SEC detailing the financial operations of the company over the past quarter or year, respectively. These corporate filings are available on the SEC website at www.sec.gov. Go to the SEC website, follow the “Search for Company Filings” link, and search for SEC filings made by Tesla Motors (TSLA). Find the most recent 10-Q or 10-K, and download the form. Look on the balance sheet to find the book value of debt and the book value of equity. (10 points) (5 points for finding the data, 2.5 points for book value of debt and 2.5 points for book value of equity)

2. To estimate the cost of equity for TSLA, go to finance.yahoo.com and enter the ticker symbol TSLA. Follow the links to answer the following questions: What is the most recent stock price listed for TSLA? What is the market value of equity, or market capitalization? How many shares of stock does TSLA have outstanding? What is the most recent annual dividend? Can you use the dividend discount model in this case? What is the beta for TSLA? Now go back to finance.yahoo.com and follow the “Bonds” link. What is the yield on three-month Treasury bills? Using the historical market risk premium, what is the cost of equity for TSLA using CAPM? (10 points) (1 point per each of the first 8 questions and 2 points for cost of Equity using CAPM)

3. You now need to calculate the cost of debt for TSLA. Go to finra-markets.morningstar.com, enter TSLA as the company, and find the yield to maturity for each of TSLA’s bonds. What is the weighted average cost of debt for TSLA using the book value weights and using the market value weights? Does it make a difference in this case if you use book value weights or market value weights? (10 points) (3 points for Book Value weighted cost of Debt, 3 points for weighted average market value 4 points for the argument)

4. You now have all the necessary information to calculate the weighted average cost of capital for TSLA. Calculate this using book value weights and market value weights, assuming TSLA has a 21 percent tax rate. Which number is more relevant? (10 points) (3 points for WACC calculation at book value, 3 points for WACC using market value weights, 4 points for the argument)

5. You used TSLA as a pure play company to estimate the cost of capital for FMI. Are there any potential problems with this approach in this situation? (10 points)

Rubrics

  Descriptor
9-10 The student demonstrates an excellent understanding of the concepts.
8-8.9 The student demonstrates a good understanding of the concepts.
7-7.9 The student demonstrates a fair understanding of the concepts.
6-6.9 The student demonstrates some, but insufficient understanding of the concepts.
3-5.9 The student demonstrates insufficient understanding of the concepts. They may mention some relevant ideas or concepts, although it is clear that the relationship between them is not understood by the student.
1-2.9 The student demonstrates insufficient understanding of the concepts and does not mention any relevant ideas or concepts.
0 The student leaves the question blank or cheats.

Points are at the end of each question.

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Consultant for Medicals Inc., Manufacturer

Medicals Inc.

Consultant for Medicals Inc., Manufacturer for $14 Only (Instant Download)

CASE 1

You have been hired as a consultant for Medicals Inc., manufacturer of medical devices. The company projects unit sales for a new dental implant as follows:

Year                       Unit Sales

1                             73,000

2                              86,000

3                              97,000

4                              68,000       

  • Production of the implants will require $1,500,000 in net working capital immediately, all of which will be recovered at the end of the project.
  • Total fixed costs are $4,200,000 per year, variable production costs are $255 per unit, and the units are priced at $375 each.
  • The equipment needed to begin production has an installed cost of $8,500,000. This equipment qualifies as three-year MACRS property (depreciation rates are 33.33% for Year 1, 44.45% for Year 2, 14.81% for Year 3, and 7.41% for Year 4).
  • In four years, this equipment can be sold for about 20 percent of its acquisition cost.
  • The tax rate is 21 percent and the required return is 24 percent.
  • The company imposes a payback cutoff of three years for its investment projects.

QUESTIONS:

  1. Complete the pro forma and determine total cash flows for each year of project’s life.

Understanding the case and the process 10 points, finding the right cash flow 10 points (2 per year)

  • Calculate the following investment criteria for the project:

(a) Payback period (5 points) (2.5 for the right formula/approach and 2.5 for the right result)

(b) Profitability Index (PI) (5 points) (2.5 for the right formula/approach and 2.5 for the right result)

(c) Internal rate of return (IRR) (5 points) (2.5 for the right formula/approach and 2.5 for the right result)

(d) Net Present Value (NPV) (5 points) (2.5 for the right formula/approach and 2.5 for the right result)

  • Explain your decision whether you recommend accepting or rejecting the project. (10 points) (3 points for the right answer and 7 points for the explanation)
Year 0 1 2 3 4
Sales revenues          
Variable Costs          
Fixed Costs          
Depreciation          
EBIT          
Taxes          
Net income          
Operating Cash Flow          
Capital spending          
Net Working Capital          
After-tax salvage value          
Total Cash Flow          

Sample Answer:

Unit Sales                73,000                  86,000                 97,000                 68,000
Year01234
Sales revenues (@375 per unit)             (1,500,000)       27,375,000        32,250,000         36,375,000         25,500,000
Variable Costs (@ $255 per unit)                               –         18,615,000        21,930,000         24,735,000         17,340,000
Fixed Costs                               –           4,200,000           4,200,000           4,200,000           4,200,000
Depreciation (from row no. 15)                               –           2,833,050           2,518,959               466,217               198,719
EBIT (1-2-3-4)                               –           1,726,950           3,601,041           6,973,783           3,761,281
Taxes (value of row 5 × 21%)                               –               362,660              756,219           1,464,494               789,869
Net income (5-6)                               –           1,364,291           2,844,822           5,509,288           2,971,412

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FIN 650 O501 Topic 1 DQ 2

FIN 650 O501 Topic 1 DQ 2

FIN 650 O501 Topic 1 DQ 2 for $7 Only

Select a publicly traded firm of your choice that enjoys a large shareholder base. What challenges may this firm have encountered (or is likely to encounter) in terms of (a) incorporating ethics into financial management practices, and (b) maintaining/sustaining ethical practices in the face of internal or external (market) pressures? Frame your response relative to the financial manager’s fiduciary duty to maximize shareholder’s wealth.

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Filter Corp. has a Project Available

Answer of Filter Corp. has a Project Available.. for $3 Only

Filter Corp. has a project available with the following cash flows: Year Cash Flow 0 −$16,000 1 5800​ 2 7100​ 3 6100​ 4 4900​What is the project’s IRR? Group of answer choices 18.84% 20.93% 21.98% 19.62% 20.41%

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Effects of Default Risk

Default Risk

Effects of Default Risk for $3 Only (Instant Download)

Question 12 (1 pts) This question illustrates the effects of default risk on a bond’s yield to maturity. BBB Corp has a risky bond with face value of 1,000, annual coupon rate of 10%, maturity of 5 years, and an opportunity cost of capital of 11%. If bondholders exepect that there is only a 50% chance that they will receive each of the last 3 payments, what is this bonds yield-to-maturity? Enter your answer as a perecent without the “%”; round your final answer to two decimals.

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Corporate Bond Issued by Johnson Company

Corporate Bond

Corporate Bond Issued by Johnson Company for $3 Only (Instant Download)

(10 points) You just bought a corporate bond issued by Johnson Company with $1,000 par value, 8 percent annual coupon interest rate paid semi-annually, and 15 years to maturity. The current market interest rate is 12%. You plan to sell this bond at the end of four years when market interest rate falls to 6%. What will be the market value of this bond when you sell in four years? You must show work to get full credit.

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Bond Issued by Kraft Heinz Foods Co

Kraft Heinz Foods Co

Answer of Question on Kraft Bond Issued by Heinz Foods Co…for $5 Only (Instant Download)

Below is the listing of a bond issued by KRAFT HEINZ FOODS CO (KHC). Below the detail of the bond is the information on a recent sale of part of the bond issue. • Explain what the price of $110.534 on a $100 par value bond means in this purchase. Explain how the yield to maturity of 3.270% is calculated • Contrast that with the calculation of the current yield of 4.184%. • Explain why it matters to know if the bond pays interest monthly, semi-annually or annually. This bond does not mature for almost 9 years. Explain the concept of interest rate risk in context with this bond for both the issuer and the investor. Rating Issuer -CUSIP Baa3 – Moody’s KRAFT HEINZ BBB FOODS CÓ (KHC) Coupon 4.625% Maturity 01/30/2029 ofesorice $110534 Price $110.534 Yield to Maturity 3.270% Current Yield Dated 06/15/2018 Minimun Size 10K Coupon Pd Semi-Annual Callable No 4.184%

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The Standard Deviation of the Market-Index

The Standard Deviation of the Market-Index

The standard deviation of the market-index…$3 Only (Instant Download)

The standard deviation of the market-index portfolio is 15%. Stock A has a beta of 2.20 and a residual standard deviation of 25%. a. Calculate the total variance for an increase of 0.20 in its beta. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Answer is complete but not entirely correct. Total variance 18 b. Calculate the total variance for an increase of 3.84% in its residual standard deviation (Do not round Intermediate calculations. Round your answer to the nearest whole number.) Answer is complete but not entirely correct. Total variance 26

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Wolf & Co. is planning

Wolf

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Wolf & Co. is planning to save some money to buy new equipment. The company is opening an account today with a deposit of $15,000 and expects to earn 4% interest. After 3 years, it wants to add an additional $50,000 to the account If the account continues to earn 4% interest, how much money will the company have in its account five years from now?

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