Finance question and answers for July 04, 2023
- Q Flower unlimited is considering purchasing an additionaldelivery truck that will have seven-year useful life. The new truckwill cost $42,000. Cost savings with this truck are expected to be$12,800 for the...
- Q (i) How do you understand volatility? (ii) How do we forecastvolatility?
- Q Zemma Corp: is all equity financed with 20 million sharesoutstanding. Their shares trade at $15 per share. Now Zemma Corpwill change its capital structure by issuing 100 million in debt.The...
- Q What are the pros and cons of the issuer that issues stocks andbonds?
- Q Do some research on bond rating companies such as Moody's andStandard and Poor.
- Q New-Project AnalysisThe Campbell Company is considering adding a robotic paintsprayer to its production line. The sprayer's base price is$1,030,000, and it would cost another $16,500 to install it. Themachine falls...
- Q What are you currently doing or could possibly do forschool that demonstrates good personal financeskills?
- Q In? mid-2009, Rite Aid had? CCC-rated, 6?-year bonds outstandingwith a yield to maturity of 17.3 %. At the? time, similar maturityTreasuries had a yield of 3 %. Suppose the market...
- Q Explain the reasons for bond ratings and how prices of bonds maybe affected. Are bonds good investments?
- Q An oil-drilling company must choose between two mutuallyexclusive extraction projects, and each costs $12.2 million. UnderPlan A, all the oil would be extracted in 1 year, producing a cashflow at...
- Q Free Cash FlowsRhodes Corporation: Income Statements for Year EndingDecember 31 (Millions of Dollars)20182017Sales$3,750.0$3,000.0Operating costs excluding depreciation2,813.02,550.0Depreciation and amortization94.078.0 Earnings before interest and taxes$843.0$372.0Less Interest81.065.0 Pre-tax income$762.0$307.0Taxes (40%)304.8122.8Net income available to common stockholders$457.2$184.2Common...
- Q Harry borrows $3,500 from Mary. He agrees to repay the loan withannual payments, made at the end of each year, of $500, $1,000,$1,500, etc. with a smaller final payment one...
- Q A project has annual cash flows of $8,000 for the next 10 yearsand then $8,500 each year for the following 10 years. The IRR ofthis 20-year project is 11.74%. If...
- Q 7,Outdoor Sports is considering adding a putt putt golf courseto its facility. The course would cost $171,000, would bedepreciated on a straight-line basis over its 4-year life, andwould have a...
- Q Robbins Petroleum Company is six years in arrears on cumulativepreferred stock dividends. There are 770,000 preferred sharesoutstanding, and the annual dividend is $9.50 per share. TheVice-President of Finance sees no...
- Q Retirement and Estate PlanningWhy should anyone be concerned with retirement and estateplanning, even while one may be young?
- Q "CAPM" Please respond to the following: Suppose investorsbelieve that the standard deviation of the market-index portfoliohas increased by 50%. Speculate on two potential implications ofthe Security Market Line (SML) and...
- Q Whirlpool's corporate governance about the selection, compensationand removal to board of directors. Which type of director they areeg. active CEOs, international experience special expertise,diverse directors, professional directors. and how is...
- Q You just won the TVM Lottery. You will receive $1 million todayplus another 10 annual payments that increase by $375,000 per year.Thus, in one year, you receive $1.375 million. In...
- Q Natsam Corporation has $250 million of excess cash. The firm hasno debt and 500 million shares outstanding, with a current marketprice of $15 per share. Natsam’s board has decided to...
- Q A store has 5 years remaining on its lease in a mall. Rent is$1,900 per month, 60 payments remain, and the next payment is duein 1 month. The mall's owner...
- Q Simmons, Inc., is considering a new 4-year project that requiresan initial fixed asset investment of $2.65 million. The fixed assetis eligible for 100 percent bonus depreciation in the first year.At...
- Q A bond has a 10-year maturity, an 4% annual coupon rate, withquarterly coupons paid, and a par value of $1,000. The annualdiscount rate is 8%. What should be the bond’s...
- Q Find the present value of the following cash flows. A perpetualstream of consecutive annual payments (made at year-end) of $800,which starts at the end of year 5 and grows by...
- Q Castle, Inc., has no debt outstanding and a total market valueof $240,000. Earnings before interest and taxes, EBIT, areprojected to be $28,000 if economic conditions are normal. If thereis strong...
- Q The Rivoli Company has no debt outstanding, and its financialposition is given by the following data:Assets (Market value = book value)$3,000,000EBIT$500,000Cost of equity, rs10%Stock price, Po$15Shares outstanding, no200,000Tax rate, T...
- Q Capital Structure AnalysisThe Rivoli Company has no debt outstanding, and its financialposition is given by the following data:Assets (Market value = book value)$3,000,000EBIT$500,000Cost of equity, rs10%Stock price, Po$15Shares outstanding, no200,000Tax...
- Q ** When analyzing the collateral and analyzing the business riskand ability to pay for corporate bonds, market participants oftenseparate issuers into these four sectors:(1) Utilities, (2) Transportation, (3)Industrials and (4)...
- Q Book value versus market value components.Compare? Trout, Inc. with Salmon? Enterprises, using the balancesheet of Trout and the market data of Salmon for the weights in theweighted average cost of?...
- Q Suppose a company has two mutually exclusive projects, both ofwhich are three years in length. Project A has an initial outlay of$8,000 and has expected cash flows of $3,000 in...
- Q CORPORATE VALUATION Dantzler Corporation is a fast-growingsupplier of office products. Analysts project the following freecash flows (FCFs) during the next 3 years, after which FCF isexpected to grow at a...
- Q You own a lot in Key West, Florida, that is currently unused.Similar lots have recently sold for $1,280,000. Over the past fiveyears, the price of land in the area has...
- Q Discuss the finding of Modigliani and Miller in a world withtaxes in regards to the value of levered and unlevered firms. Whatdo these finding imply about the effects of capital...
- Q When considering a loan, what is the lender lookingfor as it relates to the sponsorship?Experience in ownership/management of commercialpropertiesConservative levels of DSCR and LTV throughout the existingportfolio of properties owned...
- Q Dunder Mifflin will pay its first dividend of $4.35 per share ineight years. They expect to grow the dividend at 10% per yearafterward. If you require a return of 18%,...
- Q Problem 9-12Valuation of a constant growth stockInvestors require a 18% rate of return on Levine Company's stock(i.e., rs = 18%).What is its value if the previous dividend was D0 =$3.00...
- Q Trump Office Supplies paid a $6 dividend last year. The dividendis expected to grow at a constant rate of 8 percent over the nextfour years. The required rate of return...
- Q Simpson Glove Company has made the following sales projectionsfor the next six months. All sales are credit sales. March$52,000June$58,000April61,000July69,000May43,000August73,000 Sales in January and February were $41,000 and $39,000,respectively. Experience has shown that...
- Q Werton Corporation has developed a new processor that would beused by many specialty companies. It would cost $19 million at Year0 to buy the equipment necessary to manufacture the facility....
- Q Badger Corp. has an issue of 6% bonds outstanding with 6 monthsleft to maturity. The bonds are currently priced at $998.89, andpay interest semiannually. The firm's marginal tax rate is...
- Q Parramore Corp has $13 million of sales, $3 million ofinventories, $2 million of receivables, and $2 million of payables.Its cost of goods sold is 85% of sales, and it finances...
- Q Saché, Inc., expects to sell 1,120 of its designer suits everyweek. The store is open seven days a week and expects to sell thesame number of suits every day. The...
- Q Financing alternatives The Howe Computer Company has growthrapidly during the past 5 years. Recently, its commercial bankurged the company to consider increasing its permanent financing.Its bank loan under a line...
- Q Use the cash flows and competitive spreads shown in the tablebelow.($ millions)Year 0Year 1Year 2Years 3–10Investment180Production (millions of pounds per year)004888Spread ($ per pound)1.031.031.031.03Net revenues0049.4490.64Production costs0038.0038.00Transport0000Other costs0282828Cash flow–18028–16.56–24.64NPV (at r...
- Q What's the future value of a 10%, 5-year ordinary annuity thatpays $500 each year? If this was an annuity due, what would itsfuture value be? Do not round intermediate calculations....
- Q How do you know if a currency is overvalued or undervaluedI have 2 questions with answers that don't seem to bematching:If real exchange rate qUS/qforeign is more than 1, then...
- Q Asecurity team for a local high school contemplates replacing theircurrent contract security system with a new and improved version.It will cost $450,000 to get the new system and the cost...
- Q alpha is expected to provide a dividend of sh 20 pershare per year forever starting one year from now.beta is expectedto pay a dividend of sh 10 per share in...
- Q Whyare shareholders wanting Ebay to divest itself of StubHub?Who wouldwant to buy StubHub?
- Q The manipulation of the LIBOR can be broken down into threephases. What were these and how did they differ in terms ofmotivation and moral justification?
- Q Consider a series of end-of-period CFs spanning 2042-2059, whichincrease by a fixed amount each period. The amount of the first CFin the series is $126 and the increment is $53....
- Q 11Compute Ke and Kn under the following circumstances:a. D1 = $4.60, P0 = $92, g = 6%, F = $5.00. (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.)b....
- Q Telstar Communications is going to purchase an asset for$420,000 that will produce $200,000 per year for the next fouryears in earnings before depreciation and taxes. The asset will bedepreciated using...
- Q Daves Inc. recently hired you as a consultant to estimate thecompany’s WACC. You have obtained the following information. (1)The firm's noncallable bonds mature in 20 years, have an 8.00%annual coupon,...
- Q The project has a useful life of 10 years. Land costs $5m and isestimated to have a resale value of $7m at the completion of theproject. Buildings cost $4m, with...
- Q The following matrix, illustrates each support department’s costand how it spends its time:Support DepartmentUser of SupportServicePersonnelAccounting &AdministrationMarketingFleetOperationsPersonnel5%Accounting & Administration5%8%Marketing10%10%Fleet Operations5%10%Gardening Center15%25%40%7%Landscaping25%30%30%40%Lawn Care40%20%30%45%TOTAL COST$50,000$80,000$240,000$200,000Using the step-down method of support department costallocation,...
- Q An oil-drilling company must choose between two mutuallyexclusive extraction projects, and each costs $12.8 million. UnderPlan A, all the oil would be extracted in 1 year, producing a cashflow at...
- Q financial analysis including Income statement, Balance sheet andstateent of cash flows for an app business planIhave no data. it is a simulation on a business that doesn’t existyet and needs...
- Q Instructions: Solve the following problem. To receivecredit, readers must be able to follow your logic and you mustexplain each step in detail. Please label each step, identify eachequation and variable,...
- Q A firm has a capital budget of $100 which must be spent on 1 pf2 projects, each requiring a present outlay of $100. Project Ayields a return of $120 after...
- Q Use the following information for problems 1 to 5. Assume thatthe projects are mutually exclusive.YearCash Flow (A)Cash Flow (B)0-$37,500-$37,5001$17,300$5,7002$16,200$12,9003$13,800$16,3004$7,600$27,5001. What is the IRRfor each of these projects? Using the...
- Q Consider a project to supply 100 million postage stampsper year to the USPS for the next five years. To pursue theproject, you will need to install $4.1 million in new...
- Q The currentriskfree rate is 4% and the expected rate of return on the marketportfolio is 10%. The Brandywine Corporation has two divisions ofequal market value. The debt to equity ratio...
- Q Suppose you are given the following end of year returns forLarge stocks, Long-term Bonds, Treasury Bills, and Inflation.Calculate the average real rate of return earned on Large stocks.(Enter percentages as...
- Q Describe a serial bond issue.Why are serial bond issues preferred by the issuer?Why are serial bond issues preferred by the bond holders?
- Q (25 pts) Your corporation is considering the purchase of landfor the cost of $60,000 and you estimate that 6 years from nowthere is a 100% probability to sell the land...
- Q 3.A Assume that today is 21 March 2019. Today, you observe thatthe exchange rate between AU$ and the US$ is 1.319, EAU$/US$=1.319,the 90-day interest rate in Australia is 0.50%, the...
- Q A company is considering a 3-year project that requires aninitial installed equipment cost of $15,000. The project engineerhas estimated that the operating cash flows will be $5,000 in year1, $7,000...
- Q Do you believe that persons owning property in the city in whichyou live should purchase the Earthquake Assumption Endorsement totheir homeowners Policies? Why or why not? Also, please respond toanother...
- Q Suppose a company has two mutually exclusive projects, both ofwhich are three years in length. Project A has an initial outlay of$7,000 and has expected cash flows of $3,000 in...
- Q Pearl Corp. is expected to have an EBIT of $3,500,000 next year.Depreciation, the increase in net working capital, and capitalspending are expected to be $160,000, $160,000, and $200,000,respectively. All are...
- Q [The following information applies to the questionsdisplayed below.]Widmer Watercraft’s predetermined overhead rate for the year 2017is 200% of direct labor. Information on the company’s productionactivities during May 2017 follows.Purchased raw...
- Q You are currently borrowing $12,000 and will repay it in 6 yearsby making equal payments of $620.00, at the end of every threemonths form the date of borrowing. What nominal...
- Q A firm with a WACC of 10% is considering the following mutuallyexclusive projects:012345Project 1-$250$55$55$55$190$190Project 2-$650$300$300$40$40$40Which project would you recommend?Select the correct answer.a. Neither Project 1 nor 2, since each project's...
- Q A Company is considering adding a robotic paint sprayer to itsproduction line. The sprayer’sbase price is $1,080,000, and itwould cost another $22,500 to install it. The machine falls intothe MACRS...
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