Finance question and answers for September 01, 2023
- Q Suppose you want to establish a bullish spreadstrategy. The are two call options. The first one has X1=$50 andC1=$5. The second one has X2=$40 and C2=$6.When the underlying asset price...
- Q DEPRECIATION METHODSCharlene is evaluating a capital budgeting project that shouldlast for 4 years. The project requires $875,000 of equipment. Sheis unsure what depreciation method to use in her analysis,straight-line or...
- Q A company is analyzing two mutually exclusive projects, S and L,with the following cash flows:01234Project S-$1,000$887.39$260$10$5Project L-$1,000$5$250$400$833.00The company's WACC is 9.0%. What is the IRR of the betterproject? (Hint: The...
- Q NEW PROJECT ANALYSISYou must evaluate the purchase of a proposed spectrometer forthe R&D department. The base price is $190,000, and it wouldcost another $47,500 to modify the equipment for special...
- Q Given the soaring price of gasoline, Ford is consideringintroducing a new production line of gas-electric hybrid sedans.The expected annual unit sales of the hybrid cars is 22,000; theprice is $26,000...
- Q Currently, Meyers Manufacturing Enterprises (MME) has a capitalstructure consisting of 35% debt and 65% equity. MME's debtcurrently has a 7.1% yield to maturity. The risk-free rate(rRF) is 5.1%, and the...
- Q You are hoping to buy a house in the future and recentlyreceived an inheritance of $16,000. You intend to use yourinheritance as a down payment on your house.a. If you...
- Q Superior Company provided the following data for the year endedDecember 31 (all raw materials are used in production as directmaterials):Selling expenses$211,000Purchases of raw materials$265,000Direct labor?Administrative expenses$152,000Manufacturing overhead applied to work...
- Q You are considering a new product launch. The project will cost$2,275,000, have a four-year life, and have no salvage value;depreciation is straight-line to zero. Sales are projected at 300units per...
- Q CAPITAL BUDGETING CRITERIA: ETHICALCONSIDERATIONSA mining company is considering a new project. Because the minehas received a permit, the project would be legal; but it wouldcause significant harm to a nearby...
- Q An asset costs $950,000 and will be depreciated in astraight-line manner over its four-year life. It will have nosalvage value. The corporate tax rate is 22 percent and theappropriate interest...
- Q Problem 11-12New-Project AnalysisMadison Manufacturing is considering a new machine that costs$350,000 and would reduce pre-tax manufacturing costs by $110,000annually. Madison would use the 3-year MACRS method to depreciatethe machine, and...
- Q Leslie? Mosallam, who recently sold her? Porsche, placed $10,400in a savings account paying annual compound interest of 6percent.a. Calculate the amount of money that will accumulate if Leslieleaves the money...
- Q Assume that the average firm in your company's industry isexpected to grow at a constant rate of 5% and that its dividendyield is 8%. Your company is about as risky...
- Q Renfro Rentals has issued bonds that have a 8% coupon rate,payable semiannually. The bonds mature in 9 years, have a facevalue of $1,000, and a yield to maturity of 7.5%....
- Q Heath Food Corporation’s bonds have 6 years remaining tomaturity. The bonds have a face value of $1,000 and a yield tomaturity of 11%. They pay interest annually and have a...
- Q Yield to Maturity and Call with Semiannual Payments ThatcherCorporation's bonds will mature in 12 years. The bonds have a facevalue of $1,000 and an 11.5% coupon rate, paid semiannually. Theprice...
- Q Consider the following information on Huntington Power Co.Debt: 4,000, 7% semiannual coupon bonds outstanding, $1,000 parvalue, 18 years to maturity, selling for 102 percent of par; thebonds make semiannual payments....
- Q Jackson Corporation's bonds have 5 years remaining to maturity.Interest is paid annually, the bonds have a $1,000 par value, andthe coupon interest rate is 10.5%. The bonds have a yield...
- Q A small accounting firm is considering the purchase of acomputer software package that would greatly reduce the amount oftime needed to prepare tax forms. The software costs $2400 and thisexpense...
- Q Byrd Corporation is comparing two different capital structures,an all-equity plan (Plan I) and a levered plan (Plan II). UnderPlan I, the company would have 195,000 shares of stock outstanding.Under Plan...
- Q Byers, Inc., is considering a new three-year expansion projectthat requires an initial fixed asset investment of $1,680,000. Thefixed asset will be depreciated straight-line to zero over itsthree-year tax life, after...
- Q Ivana has just moved to Edmonton to take up a position in theprovincial government, earning $72,000 a year. Edmonton is a bigcity, so she has decided to lease a car,...
- Q What is the term structure of interest rates? What are some ofthe theories about the term structure and what do they imply aboutthe shape of the term structure. What other...
- Q A cookie company wants to expand its retail operations. Based ona preliminary study, 10 stores are feasible in various parts of thecountry. The cash flow at each store is expected...
- Q you own 1000 shares of stock in avondale corporation. you willreceive a $3.15 per sahre dividend in one year. in two years, thecompany will pay a liquidating dividend of $57...
- Q A magazine publisher wants to launch a new magazine geared tocollege students. The project's initial investment is $65. Theproject's cash flows that come in at the end of each year...
- Q Hi all,Can someone please answer this question with all steps! Thankyou!As a result ofimprovements in product engineering, United Automation is able tosell one of its two milling machines. Both machines...
- Q The following facts apply to a convertible bond makingsemiannual payments: Conversion price $ 37 /share Coupon rate 2.6 %Par value $ 1,000 Yield on nonconvertible debentures of samequality 5 %...
- Q Currency per U.S. $ U.K. Pound0.5135 6-months forward (£)0.5204 Japan Yen108.21 6-months forward (¥)106.96 Switzerland Franc1.0492 6-months forward (SF)1.0478 Suppose interest rate parity holds, and the current six-monthrisk-free rate in the United States is 6 percent.What must...
- Q The Darlington Equipment Company purchased a machine 5 years agoat a cost of $100,000. The machine had an expected life of 10 yearsat the time of purchase, and it is...
- Q You are considering a new product launch. The project will cost$857,000, have a four-year life, and have no salvage value;depreciation is straight-line to zero. Sales are projected at 180units per...
- Q What do financial markets do? Why are financial marketsimportant to a society? How do financial markets accomplish whatthey do? What are asymmetric information problems and why wouldthis problem in financial...
- Q Hi all,Can someone please answer this question. Please, list all steps.Thanks!Mr. Art Deco will bepaid $150,000 one year hence. This is a nominal flow, which hediscounts at a nominal discount...
- Q Hi all, Can someone please answer this question. Please liststeps! Thanks!You have the chance to participate in a project that producesthe following cash flows: Cash Flows ($) C0 C1 C2...
- Q Hi all,Can someone pleaseanswer this question. Please list all steps! Thanks!Consider the followingprojects:Cash Flows ($)ProjectC0C1D–10,30020,600E–20,30035,525Assume that theprojects are mutually exclusive and that the opportunity cost ofcapital is 9%.a.Calculate the profitability...
- Q Hi all,Please list all steps!!Hayden Inc. has anumber of copiers that were bought four years ago for $26,000.Currently maintenance costs $2,600 a year, but the maintenanceagreement expires at the end...
- Q A couple is purchasing a home for $300,000 and are shopping fora loan. They have a total of $27,000 to put down, including thecost of $1,000 and any loan fee...
- Q Be very detailed. Show formulas that is used for yourconclusions.Give more than one examples. Show working step by step.Explanation must excess 150 words.Part A:You have calculated the NPV and IRR...
- Q Air conditioning for acollege dormitory will cost $2.4 million to install and $155,000per year to operate. The system should last 16 years. The real costof capital is 6%, and the...
- Q Hi all,Can someone pleaseanswer this question. Please list steps! Thanks!Consider the followingcash flows:Cash Flows ($)C0C1C2?8,4506,20021,400a.Calculate the net present value of the above project for discountrates of 0, 50, and 100%....
- Q Hi all,Can someone please answer this question. Please, list all steps!thanks!Machines A and B aremutually exclusive and are expected to produce the following realcash flows: Cash Flows ($ thousands)MachineC0C1C2C3A–102+112+123B–122+112+123+135 The real opportunitycost...
- Q Minion, Inc., has no debt outstanding and a total market valueof $356,900. Earnings before interest and taxes, EBIT, areprojected to be $50,000 if economic conditions are normal. If thereis strong...
- Q Consider the following cash flows: Cash Flows ($) C0 C1 C2?8,450 6,200 21,400 a. Calculate the net present value of the aboveproject for discount rates of 0, 50, and 100%....
- Q The Cullumber Products Co. currently has debt with a marketvalue of $300 million outstanding. The debt consists of 9 percentcoupon bonds (semiannual coupon payments) which have a maturity of15 years...
- Q Hi all,Can someone pleaseanswer this CASH FLOW question. Thank you.Consider the followinginformation:Cash Flows ($)ProjectC0C1C2C3C4A–5,5001,5001,5003,5000B–50004002,5003,500C3,8005003,1001,000500a.What is the payback period on each of the above projects?(Round your answers to 2 decimal places.)ProjectPaybackPeriodAyear(s)Byear(s)Cyear(s)b.Given...
- Q A real estate investor likes to “flip” houses. That is, he likesto buy a house at a low price and then “flip” or sell the house fora higher price. The...
- Q NPV AND IRRA 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...
- Q Describe the purposes of deductibles.
- Q A firm has issued $45 million in long-term bonds that now have12 years remaining until maturity. The bonds carry an 9% annualcoupon and are selling in the market for $1220.74....
- Q (20Marks)Homantin, Inc. is considering a project for opening a newsporting goods store in a suburban mall. Homantin will lease theneeded space in the mall. Equipment and fixtures for the store...
- Q Question 2(40 Marks)“Maximizing shareholder wealth is the main goal of financialmanagement!” was cited by one classmate. Do you agree? Discuss yourviewpoints within 500 words. Use examples to illustrate yourarguments and...
- Q CAPITAL BUDGETING CRITERIA: ETHICALCONSIDERATIONSAn electric utility is considering a new power plant in northernArizona. Power from the plant would be sold in the Phoenix area,where it is badly needed. Because...
- Q Pagemaster Enterprises is considering a change from its currentcapital structure. The company currently has an all-equity capitalstructure and is considering a capital structure with 45 percentdebt. There are currently 2,000...
- Q A company currently pays a dividend of $3.25 per share (D0 =$3.25). It is estimated that the company's dividend will grow at arate of 25% per year for the next...
- Q Minion, Inc., has no debt outstanding and a total market valueof $308,100. Earnings before interest and taxes, EBIT, areprojected to be $46,000 if economic conditions are normal. If thereis strong...
- Q Consider the following two? projects: Project Year 0 ?C/F Year 1?C/F Year 2 ?C/F Year 3 ?C/F Year 4 ?C/F Year 5 ?C/F Year 6 ?C/FYear 7 ?C/F Discount Rate...
- Q Your company is looking at setting up a manufacturing plantoverseas to manufacture driverless flying cars. The company boughtsome land in that that was just appraised for $3.8 million aftertax. The...
- Q A.Ying Import has several bond issues outstanding, each makingsemiannual interest payments. The bonds are listed in the followingtable.BondCoupon RatePrice QuoteMaturity Face Value16.5%106.465years$45,000,00028.0115.028years40,000,00037.7113.5715.5years60,000,00047.3102.8125years67,000,000If the corporate tax rate is 25 percent, what is...
- Q A.Ying Import has several bond issues outstanding, each makingsemiannual interest payments. The bonds are listed in the followingtable. If the corporate tax rate is 33 percent, what is theaftertax cost...
- Q You are considering saving $10,000 in a bank certificate ofdeposit. Stated interest rate is 9%. Find:1. The future value in 20 years with quarterly compounding.2. What is effective rate with...
- Q XYZ stock price and dividend history are as follows: YearBeginning-of-Year PriceDividend Paid at Year-End 2010$ 110 $ 3 2011$ 113 $ 3 2012$ 100 $ 3 2013$ 105 $ 3 An investor buys four shares of XYZ at the beginning...
- Q A firm is considering the purchase of a new machine at a priceof $120,000. The machine falls into the three-year MACRSclass. If the new machine is acquired, the firm's investment in...
- Q Fully explain how firms should return cash to shareholders? Howare these decisions made, and what factors are considered in thefirm's payout decisions?
- Q Considering two mutually exclusive projects. The crossover ratebetween these two projects is ___ percent and Project ___ should beaccepted if the required return is less than the crossoverrate.YearProject AProject B0?$27,000?$27,000110,00018,100210,0008,000318,00010,12011.75%;...
- Q Suppose Potter Ltd. just issued a dividend of $2.50 per share onits common stock. The company paid dividends of $2.00, $2.07,$2.24, and $2.34 per share in the last four years....
- Q ABC is a young start-up company. No dividends will be paid onthe stock over the next 3 years because the firm needs to plow backits earnings to fuel growth. The...
- Q explain at least 3 factors that pertain to your decision toeither buy or lease your next vehicle.0
- Q Show Excel functions =NPV and =IRR9. Calculating Project OCF [LO1] Quad Enerpriese isconsidering a new three-year expansionproject that rerrquires an initial fixed asset investmentof $2.9 mllion. The fized asset will...
- Q A project that costs $2,800 to install will provide annual cashflows of $630 for the next 6 years. The firm accepts projects withpayback periods of less than 4 years.a-1.What is...
- Q Assume that you manage a risky portfolio with an expected rateof return of 20% and a standard deviation of 42%. The T-bill rateis 4%.Your risky portfolio includes the following investments...
- Q Josh recognizes that not only will he have the costs ofattending school, but he will also be giving up a salary while heattends school. He figures the average salary for...
- Q A bond with a face value of $1000 and maturity of exactly 20years pays 10% annual coupon. This bond is currently selling at anannual yield-to-maturity (YTM) of 12%. Answer the...
- Q Advance, Inc., is trying to determine its cost of debt. The firmhas a debt issue outstanding with 10 years to maturity that isquoted at 95 percent of face value. The...
- Q Use the data provided for Gotbucks Bank, Inc., to answer thisquestion.Gotbucks Bank, Inc. (in $ millions)AssetsLiabilities and Equity Cash$50 Core deposits$50 Federal funds40 Federal funds70 Loans (floating)125 Euro CDs150 Loans (fixed)85 Equity30 Total assets$300 Total liabilities and equity$300Notes to the...
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