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Get college assignment help at uniessay writers Using the data provided, answer the following five questions. You are helping your friend with her taxes and you need to know how much interest she paid in 2008. Your friend purchased the home for $210,000 with a 15% down payment in 2001. She took a fully amortizing, 30 year loan, with monthly payments. Her interest rate is 5.5% with monthly compounding. Using full year data, monthly compounding, and the end of period method, calculate the following: How much is her monthly debt service (principal and interest) payment?

The higher a firm’s plowback ratio, the higher the firm’s sustainable growth ratio. I believe this answer is true. Is that correct?

A stock price is currently $30. During each two–month period for the next four months it will increase by 8% or decrease by 10%. The risk-free interest rate is 5%. Use a two-step tree to calculate the value of a derivative that pays off〖[max (30 – S_T ,0)]〗^2, where S_T is the stock price in four months. If the derivative is American style, should it be exercised early?

Consider a mutual fund with $300 million in assets at the start of the year, and 12 million shares outstanding. If the gross return on assets is 18% and the total expense ratio is 0.75% of the year end value, what is the rate of return on the fund?

Question: 4-6A. (Cash budget) The Sharpe Corporation’s projected sales for the first eight months of 2004 are as follows: January $ 90,000 February 120,000 March 135,000 April 240,000 May 300,000 June 270,000 July 225,000 August 150,000 Of Sharpe’s sales, 10 percent is for cash, another 60 percent is collected in the month following sale, and 30 percent is collected in the second month following sale. November and December sales for 2003 were $220,000 and $175,000, respectively. Sharpe purchases its raw materials two months in advance of its sales equal to 60 percent of their final sales price. The supplier is paid one month after it makes delivery. For example, purchases for April sales are made in February and payment is made in March. In addition, Sharpe pays $10,000 per month for rent and $20,000 each month for other expenditures. Tax prepayments of $22,500 are made each quarter, beginning in March. The company’s cash balance at December 31, 2003, was $22,000; a minimum balance of $15,000 must be maintained at all times. Assume that any short-term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds are available. Interest on short-term loans (12 percent) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month. Thus, if in the month of April the firm expects to have a need for an additional $60,500, these funds would be borrowed at the beginning of April with interest of $605 (.12 × 1/12 × $60,500) owed for April and paid at the beginning of May. (a) Prepare a cash budget for Sharpe covering the first seven months of 2004. (b) Sharpe has $200,000 in notes payable due in July that must be repaid or renegotiated for an extension. Will the firm have ample cash to repay the notes?

What set of assumptions regarding Home Depot’s future growth rate, NOPAT margin, are consistent with its observed stock price of $48.20 on February 1, 2001? Assume that all the other assumptions remain the same as in question 2, except for the market risk premium, which is now assumed to be only 4%.

The less frequently the interest payments are compounded, the larger the future value of $1 for a given time period. True False

The sooner in the future you receive a dollar, the less it is worth today. True False

In computing the present and future value of multiple cash flows, each cash flow is discounted or compounded at the same rate. True False

short term financing analysis malone feed and supply company buys on terms of 1/10, net 30, but it was not been taking discounts and has actually been paying in 60 rather than 30 days.Assume that the account payable are recorded at full cost, not net discount. Malone’s balance sheet follows(thousand of dollars): cash $50 account receivable 450 account payable 500 current assets $1,250 notes payable 50 fixed assets 750 accruals 50 current liabilities $600 long term debt 150 common equity 1,250 total liabilities and equity $2,000 total assets $2,000 Now, Malone’s suppliers are threatening to stop shipments unless the company begins making prompt payment(thatis, paying in 30 days or less).The firm can borrow on 1-year note(call this a current liability)from its bank at a rate of 15%,discount interest,with a 20% compensating balance required.(Malone’s $50,000 of cash is needed for transactions; it cannot be used as part of the compensating balance) a.how large would the accounts payable be if Malone takes discount? If does not take discounts and pays in 30 days? b.how large must the bank loan be if malone takes discounts? if malone doesn’t take discounts? c.what are the nominal and effective costs of nonfree trade credit?what is the effective cost of the bank loan?based on these costs,what should malone do? d.assume malone forgoes the discount and borrows the amount needed to become current on its payable.construct a pro forma balance sheet based on this decision.(hint:you wil need to include an account called “prepaid interest” under current assets.) e.Now assume that the $500,000 shown on the balance sheet is recorded net of discounts. how much would malones have to pay its suppliers to reduce its account payables to $250,000?If malone’s tax rate is 40%,what is the effect on its net income due to to the lost discount when it reduces its accounts payable to $250,000?how much would malone have to borrow?(Hint: Malone will receive a tax deduction due to the lost discount, which will affect the amount it must borrow).Construct a pro forma balance sheet based on this scenario.(Hint:tou will need to include an account called “prepaid interest” under current assets and adjust retained earnings by the after-tax amount of the lost discount.)

Get college assignment help at uniessay writers Mrs. Crawford will receive $6,500 a year for the next 14 years from her trust. If an 8 percent interest rate is applied, what is the current value of the future payments?

Euroland Foods Questions Rank the 11 proposals. Prepare the strengths and weaknesses of the various measures of investment decisions as used by Euroland Foods. Will all of the measures rank the projects identically? Why or why not? Which set of projects should Wilhelmina Verdin recommend to the board of Euroland Foods for the capital budget for 2001?

If one Swiss franc can purchase $0.71 U.S. dollars, how many Swiss francs can one U.S. dollar buy? A) 0.50 B) 0.71 C) 1.00 D) 1.41 E) 2.81

Which of the following is NOT a reason why companies move into international operations? A) To take advantage of lower production costs in regions where labor costs are relatively low. B) To develop new markets for the firm’s products. C) To better serve their primary customers. D) Because important raw materials are located abroad. E) To increase their inventory levels.

Which of the following statements is most consistent with efficient inventory management? The firm has a A) below average inventory turnover ratio. B) low incidence of production schedule disruptions. C) below average total assets turnover ratio. D) relatively high current ratio. E) relatively low DSO.

Interest is paid annually on January 1. If the corporation uses the ….. The Talley Corporatiopn had a taxable income of $365000 from operations after all … of $50000, (2) dividends received of $15000, (3) dividends paid of $25000, … What are the company’s marginal and average tax rates on taxable income? …

Chapter 7: Fundamentals of Capital Budgeting Data Case You have just been hired by Dell Computers in their capital budgeting division. Your first assignment is to determine the net cash flows and NPV of a proposed new type of portable computer system similar in size to a Blackberry, a popular gadget with many MBA students, which has the operating power of a high-end desktop system. Development of the new system will initially require an initial investment equal to 10% of net Property, Plant, and Equipment (PPE) for the fiscal year ended Feb. 3, 2006. The project will then require an additional investment equal to 10% of initial investment after the first year of the project, a 5% increase after the second year, and a 1% increase after the third, fourth, and fifth years. The product is expected to have a life of five years. First-year revenues for the new product are expected to be 3% of total revenue for Dell’s fiscal year ended Feb. 3, 2006. The new product’s revenues are expected to grow at 15% for the second year then 10%for the third and 5% annually for the final two years of the expected life of the project. Your job is to determine the rest of the cash flows associated with this project. Your boss has indicated that the operating costs and net working capital requirements are similar to the rest of the company and that depreciation is straight-line for capital budgeting purposes. Welcome to the “real world.” Since your boss hasn’t been much help, here are some tips to guide your analysis: 1. Obtain Dell’s financial statements. (If you “really” worked for Dell you would already have this data, but at least you won’t get fired if your analysis is off target.) Download the annual income statements, balance sheets, and cash flow statements for the last four fiscal years from Market Watch http://www.marketwatch.com. Enter Dell’s ticker symbol and then go to “financials.” Export the statements to Excel by right-clicking while the cursor is inside each statement. 2. You are now ready to determine the Free Cash Flow. Compute the Free Cash Flow for each year using Eq. 7.5 from this chapter: Set up the timeline and computation of free cash flow in separate, contiguous columns for each year of the project life. Be sure to make outflows negative and inflows positive. a. Assume that the project’s profitability will be similar to Dell’s existing projects in 2005and estimate (revenues2costs) each year by using the 2005 EBITDA/Sales profit margin. b. Determine the annual depreciation by assuming Dell depreciates these assets by the straight-line method over a 10-year life. c. Determine Dell’s tax rate by using the income tax rate in 2005. d. Calculate the networking capital required each year by assuming that the level of NWC will be a constant percentage of the project’s sales. Use Dell’s 2005 NWC/Sales to estimate the required percentage. (Use only accounts receivable, accounts payable, and inventory to measure working capital. Other components of current assets and liabilities are harder to interpret and not necessarily reflective of the project’s required NWC—e.g., Dell’s cash holdings.) e. To determine the free cash flow, calculate the additional capital investment and the change in net working capital each year. 3. Determine the IRR of the project and the NPV of the project at a cost of capital of 12% using the Excel functions. For the calculation of NPV, include cash flows 1 through 5 in the NPV function and then subtract the initial cost For IRR, include cash flows zero through five in the cash flow range.

1. You write one IBM July 120 call contract for a premium of $4. You hold the option until the expiration date when IBM stock sells for $121 per share. You will realize a ______ on the investment. 2. A bond currently has a price of $1,050. The yield on the bond is 6.00 percent. If the yield increases 25 basis points, the price of the bond will go down to $1,030. The duration of this bond is ____ years. 3. A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero coupon bonds and four percent yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero coupon bonds to immunize, if there are no other assets funding the plan? 4. You buy a TIPS at issue at par for $1,000. The bond has a three percent coupon. Inflation turns out to be two percent, three percent and four percent over the next three years. The total annual coupon income you will receive in year three is _________.

Where appropriate, show all computations 1. Joe Nautilus has $120,000 and wants to retire. What return must his money earn so he may receive annual benefits of $20,000 for the next 14 years? 2. A retirement plan guarantees to pay to you or your estate a fixed amount for 20 years. At the time of retirement you will have $73,425 to your credit in the plan. The plan anticipates earning 9% interest. Given the following information, how much will your annual benefits be? 3. Jeff believes he will need $60,000 annual income during retirement. If he can achieve a 5% return during retirement and believes he will live 30 years after retirement, how much does he need to save by the time he retires? A. $1,029,540 B. $3,986,340 C. $922,320 D. $259,320

Read Problems 35 and 36 and Prepare a report (3-4 pages) with your conclusions. 35. You are saving for retirement. To live comfortably, you decide you will need to save $2 million by the time you are 65. Today is your 30th birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 5%, how much must you set aside each year to make sure that you will have $2 million in the account on your 65th birthday?. 36. You realize that the plan in problem 35 has a flow. Because your income will increase over your lifetime, it would be more realistic to save less now and more later. Instead of putting the same amount aside each year, you decide to let the amount that you set aside grow by 3% per year. Under this plan, how much will you put into the account today? (Recall that you are planning to make the first contribution to the account today.)

A stock price is currently $30. During each two-month period for the next four months it will increase by 8% or decrease by 10%. The risk-free interest rate is 5%. Use a two-step tree to calculate the value of a derivative that pays off [max(30-ST, 0)]2, where ST is the stock price in four months. If the derivative is American style, should it be exercised early?

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November 3, 2019