Finance question and answers for August 24, 2023
- Q Consider projects A and B:Cash Flows (dollars)ProjectC0C1C2NPV at 10%A?33,00023,40023,400+$7,612B?53,00036,00036,000+9,479a. Calculate IRRs for A and B. (Do notround intermediate calculations. Enter your answers as a percentrounded to 2 decimal places.)
- Q The current spot exchange rate is $1.70/£ and the three-monthforward rate is $1.71/£. You believe that the spot exchange ratewill be $1.69/£ in three months.(1) What actions do you need...
- Q The owners’ equityaccounts for Overby International are shown here: Common stock ($1 par value)$55,000Capitalsurplus218,000Retainedearnings720,000Total owners’equity$993,000 a. Assume the company's stock currently sells for$25 per share and a stock dividend of 8 percent...
- Q To save for a new car, Samuel Smith will invest $8,000 at theend of each year for the next 5 years. The interest rate is 8%.What is the future value?Multiple...
- Q Consider a mutual fund with $209 million in assets at the startof the year and with 10 million shares outstanding. The fundinvests in a portfolio of stocks that provides dividend...
- Q Which of the following statements is (are) correct?(x)If therisk-free rate is 10 percent and the market risk premium is 4percent, then the required return for the market is 6percent.(y)Suppose the...
- Q Frostbite Thermalwear has a zero coupon bond issue outstandingwith a face value of $48,000 that matures in one year. The currentmarket value of the firm’s assets is $51,600. The standarddeviation...
- Q NEW PROJECT ANALYSISYou must evaluate the purchase of a proposed spectrometer forthe R&D department. The base price is $250,000, and it wouldcost another $50,000 to modify the equipment for special...
- Q Mr. Nailor invests $20,000 in a money market account at hislocal bank. He receives annual interest of 6% for 5 years. How muchreturn will his investment earn during this time...
- Q FCOJ, Inc., a prominent consumer products firm, is debatingwhether or not to convert its all-equity capital structure to onethat is 35 percent debt. Currently, there are 6,900 sharesoutstanding and the...
- Q Loaded-Up Fund charges a 12b-1 fee of 1% and maintains anexpense ratio of 0.75%. Economy Fund charges a front-end load of2%, but has no 12b-1 fee and an expense ratio...
- Q Kaelea, Inc., has nodebt outstanding and a total market value of $100,000. Earningsbefore interest and taxes, EBIT, are projected to be $8,400 ifeconomic conditions are normal. If there is strong...
- Q With the growing popularity of casual surf print clothing, tworecent MBA graduates decided to broaden this casual surf concept toencompass a “surf lifestyle for the home.” With limited capital,they decided...
- Q 1. According to a report from WSJ, investors are gobbling upauto loans extended to the riskiest borrowers, looking past marketwarning signs as they reach further for returns. In 2018, investorshave...
- Q Quad Enterprises isconsidering a new three-year expansion project that requires aninitial fixed asset investment of $2.3 million. The fixed assetqualifies for 100 percent bonus depreciation in the first year. Theproject...
- Q QUESTION 1Read the two cases of Barbican Bank and Intermarket ofZimbabwe and answer the questions below:Barbican Bank (BB)Barbican Bank was formed in the late 1990s at the height of arush...
- Q You are holding a 2-year 10% (annualized) coupon bond with facevalue $1,000 now. The interest rate now is 5% (semi-annual).However, the interest rate increases to 5.5% (semiannual) tomorrow.What is the...
- Q AHN is firm manufacturer. The firm is all-equity financed andhas 40 million shares outstanding at a price of $75 per share. AHNcurrent cost of capital is 7.5%. The firm is...
- Q DEPRECIATION METHODSCharlene is evaluating a capital budgeting project that shouldlast for 4 years. The project requires $225,000 of equipment. Sheis unsure what depreciation method to use in her analysis,straight-line or...
- Q You plan to retire in year 20 Your retirement will last 25 yearsstarting in year 21 You want to have $50,000 each year of yourretirement. How much would you have...
- Q Tom buys two July futures contracts on frozen orange juice. Eachcontract is for the delivery of 15,000 pounds. The current futuresprice is 160 cents per pound, the initial margin is...
- Q Wildhorse Incorporated management is considering investing intwo alternative production systems. The systems are mutuallyexclusive, and the cost of the new equipment and the resulting cashflows are shown in the accompanying...
- Q Blossom Corp. management is investigating two computer systems.The Alpha 8300 costs $3,006,625 and will generate cost savings of$1,548,725 in each of the next five years. The Beta 2100 systemcosts $4,627,500...
- Q JPJ Corp has sales of $ 1.14 ?million, accounts receivable of $53 comma 000?, total assets of $ 5.11 million? (of which $ 2.92million are fixed? assets), inventory of $...
- Q A firm is considering an investment in a new machine with aprice of $16.7 million to replace its existing machine. The currentmachine has a book value of $6.4 million and...
- Q Please show full work if possible, would like to be able tounderstand the problem and solution.Lion Inc. recently hire you as a consultant to estimate thecompany’s WACC. You haveobtained the...
- Q You must evaluate a proposal to buy a new milling machine. Thepurchase price of the milling machine, including shipping andinstallation costs, is $128,000, and the equipment will be fullydepreciated at...
- Q Discuss how economic conditions, chosen investment vehicles(FDIC insured investments, mutual funds, stock markets, etc.),diversification (e.g., invest all in Tesla or go with index funds),rates of return, and inflation will affect...
- Q Why do Investors and Companies Care about IntrinsicValue?
- Q find an example of a company that failed to innovate, thatfailed (or is currently failing) to keep up with a changing market(like Blockbuster Video, Sears/Kmart, Yahoo, MySpace, RadioShack,etc.). What did...
- Q What is meant by the terms capital structure? What are theelements of an organization’s capital structure? Briefly describeeach of the elements. How do each affect the capital structure ofthe organization...
- Q You are evaluating a project for The Ultimate recreationaltennis racket, guaranteed to correct that wimpy backhand. Youestimate the sales price of The Ultimate to be $440 per unit andsales volume...
- Q Gold Diggers, Inc. has 350,000 shares of common stock, currentlytrading at $26/share. The common stock of Gold Diggers, Inc. isexpected to generate a dividend of $2.00/share next year, and ithas...
- Q Describe the problems with using the IRR statistic toevaluate capital budgeting projects. What is the solution to theseproblems?
- Q On average, how would you think the typical person inthe following socio-economic groups would view an incomeredistribution scheme, and WHY?A single mother-of-color with two teenage childrenAn unmarried computer engineer in...
- Q Watson consulting, llc is a consultancy to consultants. Theyhave bonds which have a face value of $1,000. The bonds carry a 3.5percent semi-annual coupon, and mature in 10 years. What...
- Q What are the variety of capital budgeting tools including netpresent value (NPV), internal rate of return (IRR), payback period,and profitability index (PI). Only evaluate the incremental changesto cash flows and...
- Q You have been assignedthe task of putting together a statement for the ACME Com- panythat shows its expected inflows and outflows of cash over themonths of July 2016 through December...
- Q Trident is a US company that sells goods to crown, aBritish firm in March for Sterling pounds 1,000,000. Payments aredue in three months that is June. Trident cost of capital...
- Q Light emitting diode (LEDs) light bulbs have become required inrecent years, but do they make financial sense? Suppose a typical60-watt incandescent light bulb costs $.54 and lasts for 1,000hours. A...
- Q A project with a life of 10 years has an initial fixedasset investment of $50000, an initial NWC investment of $10000 andan annual OCF of -$705000. the fixed asset is...
- Q NPV and maximum return: A firm can purchase new equipment for a?$21,000 initial investment. The equipment generates an annual?after-tax cash inflow of $8,000 for 55 years.a. Determine the net present...
- Q A) Mr. Logan expects that British inflation will risesubstantially in the future. In previous years when the Britishinflation was high, the pound depreciated. The prevailing Britishinterest rate is slightly higher...
- Q An investor buys abond with the following characteristics:Maturity - 10 yearsCoupon - 4.5%, paid once per yearNominal Value - £100The yield to maturityat the time of purchase is 8.50%. The...
- Q Why would be good to work in JP Morgan multinationalcompany?
- Q CURRENT ASSETS INVESTMENT POLICYRentz Corporation is investigating the optimal level of currentassets for the coming year. Management expects sales to increase toapproximately $2 million as a result of an asset...
- Q VThe technique for calculating a bid price can be extended tomany other types of problems. Answer the following questions usingthe same technique as setting a bid price; that is, set...
- Q Suppose the government decides to issue a new savings bond thatis guaranteed to double in value if you hold it for 16 years.Assume you purchase a bond that costs $75....
- Q should one invest in stocks or bonds? How would you advisesomeone to make their investment choices? In your discussion,highlight the features of each investment choice and when stocksmay be preferred...
- Q An All-Pro defensive lineman is in contract negotiations. Theteam has offered the following salary structure: Time Salary 0 $7,400,000 1 $ 6,000,000 2 $ 6,500,000 3 $ 7,000,000 4 $...
- Q List and describe some of the more important financialfactors, as opposed to operational factors, that you would takeinto account when considering acquiring another company? 10marks
- Q 2 Assume that a bond will make payments every six months asshown on the following timeline? (using six-month? periods):The timeline starts at Period 0 and ends at Period 50. Thetimeline...
- Q St. Johns River Shipyards' welding machine is 15 years old,fully depreciated, and has no salvage value. However, even thoughit is old, it is still functional as originally designed and can...
- Q The portfolio manager of XYZ bank recently usedreports from its securities analysts to develop the followingefficient portfolios; ExpectedRate of Return Variance1 8% 252 10% 363 15% 644 20% 1695 25% 324a. If the risk free rate of interest is 3%...
- Q To solve the bid price problem presented in the text, we set theproject NPV equal to zero and found the required price using thedefinition of OCF. Thus the bid price...
- Q The CEO of your company is concerned that a natural disastercould make your company's information systems unavailable longenough to significantly impact business. Currently, criticalsystems like file servers, e-mail services, and...
- Q Use Worksheet 9.1. Lexi Thomas, a recent college graduate, hasdecided to accept a job offer from a nonprofit organization. She’llearn $44,000 a year but will receive no employee health benefits.Lexi...
- Q 1. Suppose we have one riskyasset Stock I and a risk-free asset. Stock I has an expected returnof 25% and a beta of 2. The risk-free asset’s return is6%. (15...
- Q You have been asked by the president of your companyto evaluate the proposed acquisition of a new special purpose truckfor $50000. The truck falls into the MACRS 3 year class,and...
- Q Question 2 20 MarksJK Products is evaluating an investment in either of twocompeting projects that will allow the company to eliminate aproduction bottleneck and meet the growing demand for its...
- Q Consider the followingincome statement for the Heir Jordan Corporation:HEIR JORDAN CORPORATIONIncome Statement Sales$47,900 Costs33,900 Taxable income$14,000 Taxes (21%)2,940 Netincome$11,060 Dividends$2,300 Addition to retained earnings8,760The projected salesgrowth rate is 12 percent.Prepare a pro formaincome statement assuming costs vary...
- Q 1. Calculate the average return over the last 3 years.2. Calculate the standard deviation of your company’s returnsover the last 3 years.[I will make sure to give thumbs up to...
- Q Question 6 15 MarksPG has R100,000 to invest. The company is trying to decidebetween two alternative use of funds. The alternatives are:Project A Project BCost of equipment required R100,000 R0Working...
- Q Suppose you have just graduated Harvard and accepted a job witha $100,000 salary. Your 401(K) will be maxed at 5% employeecontribution and 1-1 employer match. You will work for exactly...
- Q Many loans to corporations are quoted today at small riskpremiums and profit margins over the London Interbank Offered rate(LIBOR). Englewood Bank has a $25 million loan request for workingcapital to...
- Q Congratulations, you have won $1,000,000 in Mass Lottery. Ourdispleasure is to announce that after taxes your winning is$500,000 (use 10% annual rate) a. How would you like that? b. Onelump...
- Q Big-Pear Corp. is considering replacing its existing equipmentthat is used to produce smart cell phones. This existing equipmentwas purchase 3 years ago at a base price of $60,000. Installationcosts at...
- Q The Centurion Corp. has 3 million shares of common stock with acurrent market price of $76.00 per share. The most recent dividendpaid (i.e., D0) on these shares was $2.90. The...
- Q 1. The stocks on ABC Companyand XYZ Company have the following returns over the last fouryears. YearABC returnsXYZ returns1-0.20.0520.50.0930.3-0.1240.10.2a. Calculate theaverage return onABC. (1 mark)b. Calculate theaverage return onXYZ. (1 mark)c. ...
- Q Question WorkspaceCheck My Work (1 remaining)eBookProblem Walk-ThroughNew-Project AnalysisThe Campbell Company is considering adding a robotic paintsprayer to its production line. The sprayer's base price is$1,090,000, and it would cost another...
- Q New-Project AnalysisThe president of the company you work for has asked you toevaluate the proposed acquisition of a new chromatograph for thefirm’s R&D department. The equipment's basic price is $74,000,and...
- Q Ricky's Piano Rebuilding Company has been operating for oneyear. On January 1, at the start of its second year, its incomestatement accounts had zero balances and its balance sheet accountbalances...
- Q Zayas, LLC, has identified the following two mutually exclusiveprojects: Year Cash Flow (A) Cash Flow (B) 0 - 78500 -78500 143000 21000 2 29000 28000 3 23000 34000 4 2100041000...
- Q Income statements and balance sheets follow for Snap-OnIncorporated. Refer to these financial statements to answer therequirements.Snap-On IncorporatedConsolidated Statements of Earnings(Amounts in millions)For the fiscal year ended20162015Net sales$ 3,430.4$ 3,352.8Cost of...
- Q 1. What are the relevant cash flows for valuing a stock usingdifferent valuation methods (Free Cash Flow to Equity and DividendDiscount Model)?2. What are the different ways you can find...
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