Get college assignment help at uniessay writers Descrfibe what will happen to interest rates, deposites, and total bank reserves as a result of the transactions below: a.The Federal Reserve sells $50 million in sercurities outright to a bank, buys $85 million in sercurities outright from a bank, sells $93 million in sercurities outright to nonbank, buys $42 million in sercurities outright from a nonbank security dealer.
* BE 18:1: Discuss need for comparative analysis * E17-2: Classify transactions by type and activity * E17-4: Prepare operating activities – Indirect method * E17-7: Prepare statement of cash flows – Indirect method (a) Prepare statement of cash flows – Indirect method and (b) Compute free cash flow. * E18-3: Prepare horizontal and vertical analysis * E18-7: Compute selected ratios * P18-2: Compute ratios from balance sheet and income statement
Moonshine Drinks has discovered that the extent of the demand for its high octane drink is 4 million bottles per year. If the fixed costs for the new product are $8 million and the sales price per bottle is $25, then what is the maximum variable cost per bottle that the firm needs to break even on a pretax operating cash flow basis? $2 $22 $23 None of the above.
Marigold Products is expected to pay a dividend of $1.98 one year from today. If the firm’s growth in dividends is expected to remain at a flat 4 percent forever, what is the cost of equity capital for Marigold if the price of its common shares is currently $33.00? 6.00% 6.24% 10.00% 10.24%
Use the information below to estimate the expected return on the stock of W.M. Hung Corporation. Long-run average stock return = 10% Long-run average T-bill return = 4% Current T-bill return = 2%
The market risk premium can be accurately calculated if we know the expected rate of return on the market. True False
Consider the following limit-order book of a specialist. The last trade in the stock occurred at a price of $50. a. If a market buy order for 100 shares comes in, at what price will it be filled? b. At what price would the next market buy order be filled? c. If you were the specialist, would you want to increase or decrease your inventory of this stock? (BODIE, Zvi. Investments, 8th Edition. Irwin/McGraw-Hill, 062008. 11.9.3).
Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per share. She borrows $4,000 from her broker to help pay for the purchase. The interest rate on the loan is 8%. a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account? If the maintenance margin requirement is 30%, will she receive a margin call? c. What is the rate of return on her investment? (BODIE, Zvi. Investments, 8th Edition. Irwin/McGraw-Hill, 062008. 11.9.3).
Sunk costs and opportunity costs Covol Industries is developing the relevant cash flows associated with the proposed replacement of an existing machine tool with a new, technologically advanced one. Given the following costs related to the proposed project, explain whether each would be treated as a sunk cost or an opportunity cost in developing the relevant cash flows associated with the proposed replacement decision. a. Covol would be able to use the same tooling, which had a book value of $40,000, on the new machine tool as it had used on the old one. b. Covol would be able to use its existing computer system to develop programs for operating the new machine tool. The old machine tool did not require these programs. Although the firm’s computer has excess capacity available, the capacity could be leased to another firm for an annual fee of $17,000. c. Covol would have to obtain additional floor space to accommodate the larger new machine tool. The space that would be used is currently being leased to another company for $10,000 per year. d. Covol would use a small storage facility to store the increased output of the new machine tool. The storage facility was built by Covol 3 years earlier at a cost of $120,000. Because of its unique configuration and location, it is currently of no use to either Covol or any other firm. e. Covol would retain an existing overhead crane, which it had planned to sell for its $180,000 market value. Although the crane was not needed with the old machine tool, it would be used to position raw materials on the new machine tool. LG 3 LG 3 Project A Project B Initial investment $40,000 $12,000a Year Operating cash inflows 1 $10,000 $ 6,000 2 12,000 6,000 3 14,000 6,000 4 16,000 6,000 5 10,000 6,000 aAfter-tax cash inflow expected from liquidation. 408 PART THREE Long-Term Investment Decisions Principles
Initial investment—Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 3 years ago at an installed cost of $20,000; it was being depreciated under MACRS using a 5-year recovery period. (See Table 3.2 on page 108 for the applicable depreciation percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,000 and requires $5,000 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for $25,000 without incurring any removal or cleanup costs. The firm is subject to a 40% tax rate. Calculate the initial investment associated with the proposed purchase of a new grading machine.
Get college assignment help at uniessay writers Please Help!! need help with this problem. COMPREHENSIVE PROBLEM Midland Chemical Co. is negotiating a loan from Manhattan Bank and Trust. The small chemical company needs to borrow $650,000 The bank offers a rate of 7.75% with a 12% compensating balance requirement, or as an alternative, 8.25% with additional fees of $6,500 to cover services the bank is providing. In either case the rate on the loan is floating (changes as the prime interest rate changes). The loan would be for one year. a. Which loan carries the lower effective rate? Consider fees to be the equivalent of other interest. b. If the loan with a 12% compensating balance requirement were to be paid off in 12 monthly payments, what would the effective rate be? (Principal equals amount borrowed minus the compensating balance.) c. Assume the proceeds from the loan with the compensating balance requirement will be used to take cash discounts. Disregard part b about installment payments and use the loan cost from part a. If the terms of the cash discount are 2/10, net 50 should the firm borrow the funds to take the discount? d. Assume the firm actually takes 75 days to pay its bills and would continue to do so in the future if it did not take the cash discount. Should the company take the cash discount? e. Because the interest rate on the loans is floating, it can go up as interest rates go up. Assume that the prime rate goes up by 2 percent and the quoted rate on the loan goes up the same amount. What would then be the effective rate on the loan with compensating balances? Convert the interest to dollars as the first step in your calculation. f. In order to hedge against the possible rate increase described in part e, the Midland Chemical Co. decides to hedge its position in the futures market. Assume it sells $650,000 worth of 12-month futures contracts on Treasury bonds. One year later, interest rates go up 2 percent across the board and the Treasury bond futures have gone down to $630,000 Has the firm effectively hedged the 2 percent increase in interest rates on the bank loan as described in part e? Determine the answer in dollar amounts. ”
Hello. I am trying to find the cash flow for year 1 for the attached project. Can you help me find this please. Thanks!
How do you find cash flow for year 1 if you decide to produce the new product (exogrid)? Also how do you find operating cash flow of year 2? thanks
How do you go about finding cash flow for years 1 and 2 if you do decided to produce the new product (exogrid)?
Suppose your company needs $12 million to build a new assembly line. Your target debt-equity ratio is 0.92. The flotation cost for new equity is 10 percent, but the flotation cost for debt is only 6 percent. Your boss has decided to fund the project by borrowing money, because the flotation costs are lower and the needed funds are relatively small. Required: (a) Your company’s weighted average flotation cost is_________ percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)) (b) The true cost of building the new assembly line after taking flotation costs into account is $_____________ . (Do not include the dollar sign ($). Round your answer to the nearest whole dollar amount. (e.g., 32))
Goodbye, Inc., recently issued new securities to finance a new TV show. The project cost $1.8 million and the company paid $111,000 in flotation costs. In addition, the equity issued had a flotation cost of 7 percent of the amount raised, whereas the debt issued had a flotation cost of 4 percent of the amount raised. If Goodbye issued new securities in the same proportion as its target capital structure, the company’s target debt-equity ratio is _______ . (Round your answer to 3 decimal places, e.g. 32.161.)
Describe the investment objectives of a likely investor in the IPO of GM that is scheduled later this month, as described below. Include assessments of risk and return that are components of stock valuation models discussed in class,i.e., (1) the CAPM’s SML where E(Ri ) = Rrf (Rm- Rrf) (βi) (2) the DDM where Po = D1/(ri – g) with (ri – g) in decimal form and where ri = (D1/P0)*100% g% or Required Return = Dividend Yield % Cap Gains Yield % GM’s common stock expected to sell for $26 to $29 per share when IPO takes place around Nov 18, 2010. GM IPO expected to raise $10 billion for the company. US taxpayers to reduce stake in automaker.
Because the weighted average given in Equation is always a correct measure of a required return, each project and offer them in the capital market in order to accurately determine the required return for project?
A zero-coupon bond has a par value of $1,000 and matures in 20 years. Investors require a 10% annual return on these bonds. For what price should the bond sell?
Consider the following two, completely separate, economies. The expected return and colatility of all stock in both economies is the same. In the first economy, all stocks moce together-in good times all prices rise together an din bad times they all fall together. in the second economy, stock return are independent-one stock increasing in price has no effect on the prices of other stocks. Assuming you are risk-acerse and you could choose one of the two economies in which to invest, which one would you choose? Explain.
All of these questions need to be done in Excel PROBLEM # 1: You have just turned 22, and you intend to start saving for your retirement. You plan to retire in 40 years when you turn 62. During your retirement you would like to have an annual income of $140,000 per year for the next 30 years (until age 92). Calculate how much you would have to save annually between now and age 62 in order to finance your retirement income. Make the following assumptions: • Assume that the relevant compounded interest rate is 9 percent per year. • You make the first payment today and the last payment on the day of your turn 62. • You make the first withdrawal when you turn 62 and the last withdrawal when you turn 92. PROBLEM # 2: You are offered an asset that costs $8,000 and has cash flows of $500 every three month (end of period) of the next 10 years. a) If your cost of capital is 8 percent, should you purchase it? b) What is the IRR of the asset? c) What is the NPV of the asset? (Setup cash flows in Excel spreadsheets and use the following Excel Financial functions, IRR and NPV, to derive your answers. PROBLEM # 3: You just took a $50,000, eight-year loan. Payments at the end of each year are flat (equal in every year) at an interest rate of 8 percent. Calculate the appropriate loan table, showing the breakdown in each year between principal and interest. PROBLEM # 4: Use Excel to construct an amortization table for the following mortgage. In the amortization table, provide all the information listed below. (Assuming interest is compounded monthly and payments are due at the end of the month). For a 10-year variable-rate-level-payment mortgage (VRM) of $480,000 with the following mortgage rates: Years 1-2: 4.20%, Years 3-5: 5.45%, Years 6-10: 6.75% Compute and illustrate the following in an amortization table: • Monthly Payment of the mortgage. • Mortgage Balance Remaining at the end of each month (Total 120 months) • Principal Repayment for each month. • Interest Expenses for each month and the life of the loan.”
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