Get college assignment help at uniessay writers The sale of common stock of small private companies and private placement transactions are good examples of brokered markets. True False
Which of the following does NOT always increase a company’s market value? A) Increasing the expected growth rate of sales. B) Increasing the expected operating profitability (NOPAT/Sales). C) Decreasing the capital requirements (Capital/Sales). D) Decreasing the weighted average cost of capital. E) Increasing the expected rate of return on invested capital.
Show your work/calculations: 10. What is the approximate yield to maturity for a seven-year bond that pays 11% interest on a $1000 face value annually if the bond sells for $952? 11. An issue of common stock is expected to pay a dividend of $4.80 at the end of the year. Its growth rate is equal to 8%. If the required rate of return is 13%, what is its current price? 12. An issue of common stock is expected to pay a dividend of $4 at the end of the year. Its growth rate is equal to 3%, and the current share price is $40. What is the required rate of return on the stock?
A firm offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, the firm promised to repay the owner of one of these securities $100,000 on March 28, 2038, but investors would receive nothing until then. Investors paid the firm $24,160 for each of these securities; so they gave up $24,160 on March 28, 2008, for the promise of a $100,000 payment 30 years later. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16)
You recently launched your own financial advisory firm. Your first client has asked you to provide a detailed analysis of a company and provide a recommendation on whether to buy stock in the company. • Company Overview. Conduct research and describe the company, its operations, locations, markets, and lines of business. Collect financial statements for the past three years, fiscal or calendar. • Ratio analysis. Perform trend and ratio analysis on current and fixed assets, current and long term liabilities, owner’s equity, sales revenues, EBIT, net income, and earnings per share. Project these trends for three years. Locate a peer company and compare these ratios to the peer (e.g. Ford and General Motors) o Net Working Capital (2007-09, 2009 peer co.) o Mkt Value of Equity (2009 only for both companies) o Debt/Equity Ratio (2007-09, 2009 peer co.) o Enterprise Value (2009 only for both companies) o Current Ratio (2007-09, 2009 peer co.) o Operating Margin (2007-09, 2009 peer co.) o Net Profit Margin (2007-09, 2009 peer co.) o Operating Inc. / Interest Exp (2007-09, 2009 peer co.) o Return on Assets (2007-09, 2009 peer co.) o Return on Equity (2007-09, 2009 peer co.) o P/E Ratio (2009 only for both companies) o Comment on operating, financing, and investing cash flows for 2009 only (not peer co.) • Stock price analysis. Research the company’s common stock price for the past five years. Research the Standard
4. An American firm is evaluating an investment in the Philippines. The project costs 500 million pesos and it is expected to produce an income of 250 million pesos a year in real terms for each of the next 3 years. The expected inflation rate in the Philippines is 7 percent a year and the firm estimates that an appropriate discount rate for the project would be about 8 percent above the risk-free rate of interest. Calculate the net present value of the project in U.S. dollars. The interest rate is about 8.3 percent in the Philippines and 3 percent in the United States. Exchange rates are
Firm currently pays a dividend of 4 EURO per share. That dividend is expected to grow at a 5 % rate indefinitely. Stocks with similar risk provide a 10 % expected return. Estimate the intrinsic value of the firm’s stock based on the assumption that the stock will be sold after 2 years from now at its expected intrinsic value.
Suppose you know a company’s stock currently sells for $75 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, the current dividend is ____ per share
Your company requires a new truck to expand its delivery range. The cost of this truck is $38,000. The life of this asset should be 6 years with a $5,500 salvage value. Inquiries to a few banks have shown that a loan for the full amount is available with a yearly interest payment of 14%. Another option is to add this asset to the lease you already have. The leasing company has told you it will purchase the truck and lease it to you for an initial payment of $8,300 and an annual payment of $8,300 payment at the end of each of the next 6 years (a total of 7 payments). The company’s tax rate is 38%, and the CCA rate of the asset pool of the truck is 20%.
. The net present value always provides the correct decision provided that ____________ (Points : 1) Cash flow are constant over the asset’s life The required rate of return is greater than the internal rate of return Capital rationing is not imposed The internal rate of return is positive 2. The capital budgeting manager for XYZ Corporation, a very profitable high technology company, completed her analysis of Project A assuming 5 year depreciation. He accountant reviews the analysis and change the depreciation method to 3 year depreciation. This change will, ________ (Points : 1) Increase the present value of the net cash flow Decrease the present value of the net cash flow Have no effect on the net cash flow because depreciation is a non cash expense Only change the net cash flows if the useful life of the depreciable asset is greater than five years. 3. Your company is considering a replacement of an old delivery van with a new one that is more efficient. The old van cost $30,000 when it was purchased 5 years ago. The old van is being depreciated using the simplified straight line method over a useful life of 10 years. The old van could be sold today for $5,000. The new van has an invoice price of $75,000, and it will cost $5,000 to modify the van to carry the company’s products. Cost savings from use of the new van are expected to be $ 22,000 per year for 5 years. At which time the van will be sold for its estimated salvage value of $15,000. The new van will be depreciated using the simplified straight line method over its 5 year useful life. The company’s statutory rate is 35%. Working capital is expected to increase by $3,000 at the inception of the project, but this amount will be recaptured at the end of year five. What is the tax effect of selling the old machine? (Points : 1) A savings of $1,750 A savings of $3,500 Additional taxes paid of $1,750 A tax savings of $1,200 4. Zellar’s, Inc. Is considering two mutually exclusive projects, A and B. Project A costs $ 75,000 and is expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is expected to generate $34,000 on year one, $37,000 in year two, $26,000 in year three, and $25,000 in year four. Zellar, Inc.’s required rate of return for these projects is 10%. The internal rate of return for Project B is ________ (Points : 1) 26.74% 20.79% 18.64% 16.77% 5. Zellar’s, Inc. Is considering two mutually exclusive projects, A and B. Project A costs $ 75,000 and is expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is expected to generate $34,000 on year one, $37,000 in year two, $26,000 in year three, and $25,000 in year four. Zellar, Inc.’s required rate of return for these projects is 10%. The profitability index for Project B is ________ (Points : 1) 1.56 1.41 1.29 1.23 6. A capital budgeting project has a net present value of $10,000 and a modified internal rate of return of 13%. The project’s required rate of return is 11 %. The internal rate of return is ______ (Points : 1) Greater than 13 % Less than 11 % Between 11% and 13% Less than $10,000 7. Nickel Industries is considering the purchase of a new machine that will cost $178,000, plus an additional $12,000 to ship and install. The new machine will have a 5 year useful life and will be depreciated using the straight line method. The machine is expected to generate new sales of $85,000 per year and is expected to increase operating costs by $ 10,000 annually. Nickel’s income tax rate is 40%. What is the projected incremental cash flow of the machine or year 1? (Points : 1) $54,800 $60,200 $66,350 $68,200 8. Jones Company has a target capital structure of 40% debt, 10% preferred stock, and 50% common equity. The company’s after tax cost of debt is 8%, its cost of preferred debt is 10%, its cost of retained earnings is 14%, and its cost of new common stock is 16%. The company stock has a beta of 1.2 and the company’s marginal tax rate is 35%. What is the company’s weighted average cost of capital if retained earnings are used to fund the common equity portion? (Points : 1) 11.20% 6.72% 16.80% 8.00% 9. Your company is considering a replacement of an old delivery van with a new one that is more efficient. The old van cost $30,000 when it was purchased 5 years ago. The old van is being depreciated using the simplified straight line method over a useful life of 10 years. The old van could be sold today for $5,000. The new van has an invoice price of $75,000, and it will cost $5,000 to modify the van to carry the company’s products. Cost savings from use of the new van are expected to be $ 22,000 per year for 5 years. At which time the van will be sold for its estimated salvage value of $15,000. The new van will be depreciated using the simplified straight line method over its 5 year useful life. The company’s statutory rate is 35%. Working capital is expected to increase by $3,000 at the inception of the project, but this amount will be recaptured at the end of year five. What is the incremental free cash flow for year one? (Points : 1) $18,850 $19,900 $21,305 $22,250 10. Clinton Company is financed 40 percent by equity and 60 percent by debt. If the firm expects to earn $20 million in net income and retain 40% of it, how large can the capital budget be before common stock must be sold? (Points : 1) $8.0 million $12.0 million $20.0 million $50.0 million
Get college assignment help at uniessay writers You have found three investments choices for a one-year deposit: 10% APR compounded monthly, 10% APR compounded annually, and 9% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.)
Hello I need some help with the following problem set: 1. The BLT Corporation expects to pay a dividend next year of $3.33. It expects its cash dividends to grow 4% per year forever. BLT has a debt ratio of L = 35%. Its borrowing rate is rd = 8%. BLT pays corporate taxes at the rate of 20%, rf = 5%, rM = 11%, and BLT’s common stock is currently selling for $30 per share. Answer the below questions. (1) What is the current (leveraged) required return, re, on BLT’s common stock? (2) What is BLT’s WACC? (3) What is BLT’s unleveraged required return, r? (4) Very briefly, explain why BLT’s leveraged return is greater than its unleveraged return? 2. A few years ago, Platinum Company of America, the world’s largest platinum producer, declared regular cash dividends of $0.20 in each quarter for two consecutive years. Platinum earned $5.34 per share in the first year and then declared an extra dividend of $0.70 per share on January 19, 2003 of the second year. In the second year, Platinum earned $3.30 per share. Again, it declared an extra dividend, this time of $0.09 per share on January 18, 2004. In the following six years, Platinum’s earnings per share varied between $0.40 and $1.64, and Platinum did not declare any extra dividends during these six years but it did continue to pay $0.20 per quarter in regular cash dividends for these six years. (1) What is the dividend payout for the 2003? (2) What is the implied payout for the 2004? (3) Based on its payout for 2003 and 2004, what would you guess is Platinum’s target payout? (4) What is the range of it payouts for years 2005 through 2010? Are these numbers consistent with your guess in (3)? (5) Do you think Platinum quarterly dividend payment of $0.20 is too high? Explain.
Write a paper of no more than 1,050 words that explains the financial position of Omega Health Foundation and your recommendations to strengthen its financial situation. Be sure to include the following: o Explain principles of finance and how they relate to Omega Health Foundation’s financial position. o Compare and contrast net income and cash flows. o Compare and contrast market value and book value of the assets. o Address the weaknesses and strengths, if any, of Omega’s financial position. o State recommendations that you would make to strengthen Omega’s financial position. o State any additional information you would need to further evaluate Omega
Which of the following assumptions is embodied in the AFN equation? A) None of the firm’s ratios will change. B) Accounts payable and accruals are tied directly to sales. C) Common stock and long-term debt are tied directly to sales. D) Fixed assets, but not current assets, are tied directly to sales. E) Last year’s total assets were not optimal for last year’s sales.
Merideth Harper has invested $25,000 in Southwest Development Company. The firm has recently declared bankruptcy and has $60,000 in unpaid debts. Explain the nature of payments, if any, by Ms. Harper in each of the following situations. A. Southwest Development Company is a sole proprietorship owned by Ms. Harper. B. Southwest Development Company is a 50â��50 partnership of Ms. Harper and Christopher Black. C. Southwest Development Company is a corporation.
1. 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 Select all items that will be included in Sports Baseballs, Inc. Income Statement. For this exercise you will be choosing more than one option for your answer: Accounts receivable Cost of goods sold Net working capital Interest expense Taxes Current assets Short-term loans Cash on hand Inventory 2. Which one of the following activities best exemplify capital budgeting. For this exercise you will be choosing more than one option for your answer: -Identify three good investment opportunities for the firm. -Obtain a short-term loan to purchase materials. -Evaluate the level of risk of a project. -Sale long-term bonds to raise funds. -Determine the return of a potential project. 3. Can you provide some examples of situations in which business ethics play a role in the financial management process?
Portfolio Beta Jerry’s portfolio is invested in five stocks (that is, each stock in the portfolio has a weight of 0.20) and has a required return of 9.4%. The risk-free rate is 5% and the market risk premium is 4%. What is the portfolio’s beta? Assume that Jerry’s is on the SML. A. 0.800 B. 1.100 C. 1.250 D. 1.400 E. 1.550 The last stock added to this portfolio is Lauren Clothing Co., which has a betta of 0.90. What was the portfolio’s beta before Lauren’s stock was added? (hint: Remember that it was a four-stock portfolio before the last stock was added). A. 1.050 B. 1.150 C.1.225 D. 1.275 E. 1.250 7. a financiakll planenr is examinign the portfolios held by several clients. the protfolios described below. Which one is likely to have the smallest standard deviation: 1. a portfolio containing only microsoft stock 2. portfolio containing microsoft,apple computer, and google 3. portfolio consisting of about 3 randomly selecred stocks 4. a portfolio consisting of about 30 randomly selected stocks 5. portfolio consisting of about 30 technology stocks the tradeoff between risk and return is a cornerstone concept in finance. if a security offers a higher expected returnit must have higher risk. looking at the two stocks described. they have the same rik but one stock has a higher expected return. does this example contradict the tradeoff between risk and return? 1. yes 2. no suppose the market risk premium is currently 6%. if investors were to become more risk-avers, the market risk premium might increase to 8%. if investors become more risk-averse what effect would you expect this to have on the prices of most financial assets? 1. prices decrease 2. prices increas 3. prices would be unaffected
1. Find the current value per share for Suarez’ common stock. 2. Find the value of Suarez’ common stock in the event that it undertakes the proposed risky investment and assuming that the dividend growth rate stays at 13% forever. Compare this value to the one found in part 1. what effect would the proposed investment have on the firm’s stockholders? Explain. 3. On the basis of your findings in part 2, do the stockholders win or lose as a result of undertaking the proposed risky investment? Should the firm do it? Why? 4. Rework part 2 and 3 assuming that at the beggining of 2013 the annual dividend growth rate returns to the rate experienced between 2005 and 2009.
A government bond pays half yearly interest of 6% pa, and has 4 years to maturity. Find its price(per $100 face value) to yield 18% pa convertible half-yearly. Give your answer in dollars and cents to 2 decimal places
A bond has 14 years left to maturity. It pays $40 semi-annual coupon and a par value of $1,000. The bond is callable in 5 years at a call price of $1050. The price of the bond is $1,075 as of today. What is the Yield to maturity on this bond
Preferred stock owners are given priority treatment over common stock with respect to dividend payments and the claims against the firm’s assets in the event of bankruptcy or liquidation. True False
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