Get college assignment help at uniessay writers Staind, Inc., has 8 percent coupon bonds on the market that have 7 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 11 percent, the current bond price is
Show Computations: 13. Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company? The Dammon Corp. has the following investment opportunities: Machine A ($15,000) Inflows: Yr 1 = 6,000 Yr 2 = 9,000 Yr 3 = 3,000 Yr 4 = 0 Yr 5 = 0 Machine B ($22,500) Inflows: Yr 1 = 12,000 Yr 2 = 12,000 Yr 3 = 10,500 Yr 4 = 10,500 Yr 5 = 0 Machine C ($37,500) Inflows: Yr 1 = 0 Yr 2 = 30,000 Yr 3 = 30,000 Yr 4 = 15,000 Yr 5 = 15,000
9. E. Thompson Utilities has issued a bond with 50 warrants attached. The bonds have a 20-year maturity and an annual coupon of 12%, and they were issued at their $1,000 par value. The current yield on similar straight bonds is 15%. What is the implied value of each warrant? 10. A firm’s credit policy consists of which of the following items? 11. Seligstine, Inc.’s DSO was 31 days in March, and 45 days in April. Possible outcomes. 12. Aspects of banks that are considered most relevant to businesses when choosing a bank
Page 1 ——————————————————————————– 1. (TCO 1) Why is maximization of the current value per share a more appropriate financial management goal than profit maximization? (Points: 3) Because by maximizing the current stock value you also maximize the company’s profit for the year. Because this criterion is non-ambiguous. Because financial managers always act in the best interest of shareholders. B and C 2. (TCO 1) Market values reflect which of the following: (Points: 3) The amount someone is willing to pay today for an asset. The value of the asset based on generally-accepted accounting principles. The asset’s historical cost. A and B only 3. For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows: Cost of goods sold…………………………. $1.2 million Administrative expenses…………………… $250,000 Marketing and selling expenses…………… $175,000 Depreciation…………………………………. $500,000 Interest expense……………………………. $200,000 Dividends paid………………………………. $150,000 (TCO 1) Suppose that Sports Baseball has 30,000 shares of stock. What is the dividends per share figure? (Points: 3) 5.0 8.75 5.25 8.50 4. For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows: Cost of goods sold…………………………. $1.2 million Administrative expenses…………………… $250,000 Marketing and selling expenses…………… $175,000 Depreciation…………………………………. $500,000 Interest expense……………………………. $200,000 Dividends paid………………………………. $150,000 (TCO 1) Assuming a tax rate of 30%, what is the EBIT and taxable income for the year? (Points: 3) $1,000,000 and $800,000 respectively $575,000 and $375,000 respectively $565,000 and $365,000 respectively $425,000 and $225,000 respectively None of the above 5. For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows: Cost of goods sold…………………………. $1.2 million Administrative expenses…………………… $250,000 Marketing and selling expenses…………… $175,000 Depreciation…………………………………. $500,000 Interest expense……………………………. $200,000 Dividends paid………………………………. $150,000 (TCO 1) Select all items that will be included in Sports Baseballs, Inc. Balance Sheet. For this exercise you will be choosing more than one option for your answer: (Points: 3) Accounts receivable Cost of goods sold Net working capital Interest expense Taxes Current assets Notes payable Cash on hand Consulting revenues 6. (TCO 1) Which one of the following activities best exemplify working capital management. For this exercise you will be choosing more than one option for your answer: (Points: 6) Identify three good investment opportunities for the firm. Obtain a short-term loan to purchase materials. Assess the level of inventory to be kept on hand. Sale long-term bonds to raise funds for a new machine. Determine the return of a potential project. Calculate the cash flows for a project. Manage payments to suppliers. 7. (TCO 1) Match the following terms with the examples as appropriate: (Points: 4) Matching: Answer Potential Matches: : Insider trading 1: McDonald’s work to redesign packaging items with recyclable materials. 2: Microsoft’s monopolistic behavior. 3: Martha Stewart’s sale of ImClone stock as result of information provided by the company’s CEO before an announcement was made public that significantly decrease ImClone’s stock price. 4: Parmalat’s deliberate fraudulent accounting practices. 5: established an oversight board responsible for improving auditing standards within companies. : Social responsibility : Sarbanes-Oxley Act : Fraud : Antitrust case 8. (TCO 1) Which incentives do managers have to act in the stockholder’s interest? Name two and explain each in one or two sentences. (Points: 5)
How much additional money will be in the account if the saver discontinues the contributions at age 62, but lets it build up until retirement at age 66?
When valuing the proposed investment, should value be included for possible cash flows that occur beyond 2007? Why or why not?What does this value depend on?
Wk10 Q1 Calculating Cost of Equity The Up and Coming Corporation’s common stock has a beta of 1.05. If the risk-free rate is 5.3 percent and the expected return on the market is 12 percent, Up and Coming’s cost of equity is ____percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))
Wk 10. Q2 Calculating Cost of Equity Stock in Country Road Industries has a beta of .85. The market risk premium is 8 percent, and T-bills are currently yielding 5 percent. The company’s most recent dividend was $1.60 per share, and dividends are expected to grow at a 6 percent annual rate indefinitely. If the stock sells for $37 per share, your best estimate of Country Road’s cost of equity is ___ percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))
Wk10 Q3 Estimating the DCF Growth Rate Suppose In a Found Ltd. just issued a dividend of $1.43 per share on its common stock. The company paid dividends of $1.05, $1.12, $1.19, and $1.30 per share in the last four years. If the stock currently sells for $45, your best estimate of the company’s cost of equity capital using the arithmetic average growth rate in dividends is ___percent. If you use the geometric average growth rate, your best estimate is ___percent. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))
Wk10 Q4 Calculating Cost of Preferred Stock Holdup Bank has an issue of preferred stock with a $6 stated dividend that just sold for $96 per share. The bank’s cost of preferred stock is ___ percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))
Get college assignment help at uniessay writers Wk10 Q5 Calculating Cost of Debt [LO2] Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 15 years to maturity that is quoted at 107 percent of face value. The issue makes semiannual payments and has an embedded cost of 7 percent annually. The company’s pretax cost of debt is ___ percent. If the tax rate is 35 percent, the aftertax cost of debt is ___percent. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))
Wk10 Q6 Calculating Cost of Debt Jiminy’s Cricket Farm issued a 30-year, 8 percent semiannual bond 7 years ago. The bond currently sells for 95 percent of its face value. The book value of the debt issue is $80 million. The company’s tax rate is 35 percent. In addition, the company has a second debt issue on the market, a zero coupon bond with seven years left to maturity; the book value of this issue is $35 million, and the bonds sell for 61 percent of par. The company’s total book value of debt is $___. Its total market value of debt is $___. (Enter your answers in dollars, not millions of dollars, e.g, $1,234,567.) Your best estimate of the aftertax cost of debt is ___ percent. (Do not include the percent sign (%). Round your answer to 2 decimal places.(e.g., 32.16))
(1) elaborate on the concept of compounding. Discuss how to calculate the net present value,and the significance of the indication for decision making. (2) what is market debt-equity ratio and what is the formula to calculate market debt-equity ratio?
Flavortech Inc. expects EBIT of $2,000,000 for the coming year. The firm’s capital structure consists of 40% debt and 60% equity, and its marginal tax rate is 40%. The company pays a 10% rate on its $5,000,000 of long-term debt. One million shares of common stock are outstanding. In its next capital budgeting cycle, the firm expects to fund one large positive NPV project costing $1,200,000, and it will fund this project in accordance with its target capital structure. If the firm follows a residual dividend policy and has no other projects, what is its expected dividend payout ratio?
Hi, Here’s 5 questions for Finance. According to Intermediate Financial Management, 9th Edition book.. I need the answers with an explanation. Problem#1: Your company is considering the adoption of an investment project that lasts for 6 years. The initial cost of this project is $15,000 today, and it generates a net cash flow of $5,000 a year for the following 6 years. This project requires a final clean-up cost of 7,500 six years from now (all figures are in nominal terms). 1) Write down the complete expression for the net present value (NPV) of this project, given that the nominal discount rate is 10%. Compute the NPV for this project. 2) What is the definition of the payback period of a project? Determine the discounted payback period of the above project. 3) In this example, what will be the problem of using IRR as the investment rule? Briefly discuss the advantages and disadvantages of the NPV and IRR as the basic investment rules for capital budgeting decisions. Problem# 2: . A bond, with $2,000 par value and a coupon rate of 7.5% (paid annually), has a residual life of 6 years. 1) Calculate the price (PV) of this asset, given that the nominal interest rate is constant and equal to 10%; 2) Suppose the bond issuer pays the interests semi-annually with the same coupon rate, calculate the price of this asset with the nominal interest rate of 10%. Chapter2: Problem#5: Calculating OCF Ranney, Inc., has sales of $14,900, costs of $5,800,depreciation expense of $1,300, and interest expense of $780. If the tax rate is 40 percent, what is the operation cash flow, or OCF? Problem#6: Calculating Net Capital Spending Gordon Driving School’s 2009 balance sheet showed net fixed assets of $1.65 million, and the 2010 balance sheet showed net fixed assets of $1.73 million. The company’s 2010 income statement showed a depreciation expense of $284,000. What was Gordon’s net capital spending for 2010? Chapter6:Problem#7: Equivalent Annual Cost When is EAC analysis appropriate for comparing two or more projects? Why is this method used? Are there any implicit assumptions required by this method that you find troubling? Explain.
The earnings, dividends and stock price of Ehsaan technologies Inc. are expected to grow at 7% per year in the future. Ehsaan’s common stock sells for Rs.23 per share, its last dividend was Rs.2.00, and the company will pay a dividend of Rs.2.14 at the end of the current year.
(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%
Jack Korner is looking into buying a 15-year bond issued by Jurgen Corp. The bond pays a coupon of 7.5 percent annually. Similar bonds will yield 7 percent in the market now. How much should he pay for the bond? $1,046 $1,112 $910 $878
Gemstone, Inc., paid a dividend of $2.00 last year. It expects to increase its dividend by $0.40 in each of their next four years. If its required rate of return is 15 percent, what is the present value of its dividends over the next four years? $12.00 $8.37 $12.50 $10.40
You are going to invest 10 percent of your portfolio in the risk-free asset and 90 percent of the portfolio in a stock mutual fund with a beta of 1.5. What will be the beta of your new portfolio? 0.750 0.900 0.135 0.150
10. Suppose that the price of a non-dividend paying stock is $32, its volatility is 30%, and the risk-free rate for all maturities is 5% per annum. Use DerivaGem to calculate the cost of setting up the following positions. In each case, provide a table showing the relationship between profit and final stock price. Ignore the impact of discounting
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