Answer for Sidewinder, Inc., has Sales… for $5 Only(Instant Download)
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 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 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:
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:
(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
Year
0
1
2
3
4
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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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 4900What 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 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 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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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…$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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Answer of FESTO Manufactures Question for $2 Only (Instant Download)
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 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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Answer for Relevant Cash Flows Winnebagel Corp for $3 Only(Instant Download)
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 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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Answer of Wolf & Co. is planning for $3 Only(Instant Download)
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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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 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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Answer for a Question on Drewery Pty Ltd for $2 Only (Instant Download)
Drewery Pty Ltd has fixed costs of $50000 and operating profit of $17000. If sales increase by 18%, by how much will operating profit increase? What would happen to operating profit if sales decreased by 20%?
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Potomac Company bonds: The Potomac Company’s bonds have a face value of $1,000, will mature in 20 years, and carry a coupon rate of 16 percent. Assume interest payments are made semiannually. Determine the present value of the bond’s cash flows if the required rate of return is 15 percent.
Find the real return on the following investments:
Stock Nominal Return Inflation
B 15% 8%
A 10% 3%
C -5% 2%
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