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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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

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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

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(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

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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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FESTO Manufactures Questions

FESTO Manufactures Questions

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FESTO manufactures solenoids widely used in automation equipment. In order to set up the manufacturing plant, the company estimated the monthly fixed costs due to capital recovery and machinery to be RM 75,000 and variable costs estimated at RM75 per unit. The selling price per unit is dependent on demand and estimated to be reduced when more units are being produced as given by p= 200 – 0.05D, where D is the demand/production rate. a) If the production rate (assumed to be equal to demand D) is 2,500 units per month, determine the company’s profits. b) Determine the optimal production rate (assumed to be equal to demand D) to maximize profit. c) Determine the range of production within which the operation is still profitable. (30 marks)

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Netflix Co. Floating Rate Notes

Netflix Co. Floating Rate Notes

Netflix Co. Floating Rate Notes for $3 Only (Instant Download)

Netflix Co. that has been floating rate notes now believes that interest rise It decides to protect itself against this possibility by entering into an in rate swap with a dealer. In this swap, the notional principal is $80 million and the company will pay a fixed rate of 5.5 percent and receive LIBOR. The current LIROU is 5 percent. Calculate the first payment and indicate which party (Netflix or the dealer) pays which. Assume that payments will be made on the basis of 90/360 days.

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Relevant Cash Flows Winnebagel Corp

Relevant Cash Flows Winnebagel Corp

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Relevant Cash Flows Winnebagel Corp. currently sells 28,000 motor homes per year at $73.000 each and 7,000 luxury motor coaches per year at $115,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 29,000 of these campers per vear at $18.500 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales.of its existing motor homes by 2.500 units per year and reduce the sales of its motor coaches by 750 units per year. What is the amount to use as the annual sales figure when evaluating this project? Why?


Calculating AAR You’re trying to determine whether or not to expand your business by building a new manufacturing plant. The plant has an installation cost of S14 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,253,000, $1.935.000,$1,738,000, and $1,310.000 over these four years, what is the project’s average accounting return (AAR)?

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Question on Zero Coupon Bond

Question on Zero Coupon Bond for $3 Only (Instant Download)

A $1,000, 30 year zero coupon bond sells for $100. What is the effect on the rate of return if the selling price of the bond increases by 10 percent?
A increase of 34%
B decrease of 34%
C increase of 3.33%
D decrease of 10%

Can someone explain and show me the math to this problem?

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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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Jen Bought 100 shares of ABC Stock

A)her AGI will increase by $2000 and this $2000 will be taxed at her reqular marginal tax rate 22%

B)her AGI will increase by $500 and this $500 will be taxed at her reqular marginal tax rate 22%

C)her AGI will increase by $2000 and this $2000 will be taxed at A capital gain rate of 20%

D)her AGI will increase by $500 and this $500 will be taxed at A Capital gain rate of 15%

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Jack Borrows and Other Questions

1. Jack borrows $19,000 to be repaid in 2 equal year-end amounts over 2 years. If the interest rate is 4.7% per annum compounded quarterly, Jack’s annual repayment is (rounded to nearest dollar; don’t include the $ sign or commas):  

2. You deposit 5,000 into your bank account every month starting in one month. You earn an interest rate of 6.4% p.a. compounded quarterly. How much will in your account after 5 years? (Correct your answer to the nearest cent without any unit (Do not put $ in front of your answer.). Do not use “,” in your answer. e.g. 123456.78)

3. Calculate the nominal interest p.a. compounded half-yearly that is equivalent to 7.2% p.a. compounded quarterly. (Correct your answer to the nearest 0.01%, e.g. 2.12%)

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Anteres and UBS are Two Equity Managed Funds

Anteres and UBS are Two Equity Managed Funds for $2 Only (Instant Download)

Anteres and UBS are two equity managed funds with identical betas. However, the shares held in UBS have higher level of specific risks than those held in Anteres. According to Capital Asset Pricing Model (CAPM) which fund is expected to generate a higher return? Based on CAPM explain which fund you should invest in?

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Question on SkyTech Ltd.

Question on SkyTech Ltd.

Question on SkyTech Ltd. for $3 Only (Instant Download)

SkyTech Ltd. is expected to pay a per-share dividend next year of $30. The market’s consensus is that the firm’s dividend growth rate of 2% per year will be maintained in the foreseeable future. SkyTech’s cost of equity is 10% per year.

(a) What is the price of a share of SkyTech?                                 (3 marks)

(b) Suppose SkyTech’s internal view is that it has an expected average yearly dividend growth of 2% because its return on equity is 8% and management retains 25% of earnings. What is the earnings per share of SkyTech next year? What is the present value of growth opportunities per share of SkyTech?                                                         (10 marks)

(c)    Suppose SkyTech is about to announce that it will increase its retention ratio to 50%,  effective immediately. If the market is still unaware of SkyTech’s decision, what will be the new value of the stock after the change in policy? How would you invest to profit from this fact?                                                                (10 marks)

(d)    If the dividend policy of SkyTech Ltd. has not shown a clear relationship to its earnings growth, what other absolute valuation model can you use to value the company? What cash flows should be used in the valuation?                                    (3 marks)

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EMM442 Module 8 DQ 2

EMM442 Module 8 DQ 2 for $7 Only


How do emergency managers strike a balance between efforts aimed at prevention and efforts directed at consequence management?

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Calculate EPS for Frantic Fast Foods

Frantic Fast Foods

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Frantic Fast Foods had earnings after taxes of $1,200,000 in 20X1 with 322,000 shares outstanding. On January 1, 20X2, the firm issued 30,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 24 percent.

a. Compute earnings per share for the year 20X1. (Round your answer to 2 decimal places.)
Earnings per share _

b. Compute earnings per share for the year 20X2. (Round your answer to 2 decimal places.)

Earnings per share __

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