Finance question and answers for September 28, 2023
- Q Discuss the pros and cons of the following:a) Company has current ratio of 2.5 and the industry average is3.2;b) Company has current ratio of 4.5 and the industry average is3.2
- Q Question 4 [20 marks]Going concern assumption is an important fundamental principle inthe preparation of financial statements. Therefore the auditor musttake particular attention of this assumption as he carries out hisaudit.Required:a....
- Q 1. Net present value (NPV)Evaluating cash flows with the NPV methodThe net present value (NPV) rule is considered one of the mostcommon and preferred criteria that generally lead to goodinvestment...
- Q 4. Analysis of a replacement projectAt times firms will need to decide if they want to continue touse their current equipment or replace the equipment with newerequipment. The company will...
- Q 7. The NPV and payback periodWhat information does the payback period provide?Suppose Omni Consumer Products’s CFO is evaluating a projectwith the following cash inflows. She does not know the project’sinitial...
- Q Investment Timing Option: Option AnalysisKim Hotels is interested in developing a new hotel in Seoul. Thecompany estimates that the hotel would require an initialinvestment of $20 million. Kim expects the...
- Q You are working for the CFO of AT&T. You collect stockreturn data from 1995 to 2016 (23 years of data): average return:9.9%; standard deviation: 23.1%; market average excess return:8.5%; market...
- Q 3. Analysis of an expansion projectCompanies invest in expansion projects with the expectation ofincreasing the earnings of its business.Consider the case of Yeatman Co.:Yeatman Co. is considering an investment that...
- Q The Clinic has been asked to provide healthcare services for theupcoming Boston Calling concert event and next year’s event. Theyare the sole provider for both years. The clinic’s managers willconduct...
- Q 3. Understanding the IRR and NPVThe net present value (NPV) and internal rate of return (IRR)methods of investment analysis are interrelated and are sometimesused together to make capital budgeting decisions.Consider...
- Q A mutual fund charges 6% front-end load and 3% operating and12b-1 expenses. At the beginning of the year, the fund has $200million assets under management and 10 million shares outstanding.During...
- Q Ying Import hasseveral bond issues outstanding, each making semiannual interestpayments. The bonds are listed in the table below.BondCoupon RatePriceQuoteMaturityFace Value18.60%106.16years$20,000,00026.6094.39years38,000,00038.30104.916.5years43,000,00048.8094.726years58,000,000If the corporate tax rate is 30 percent, what is the...
- Q The McDonald Group purchased a piece of property for $1.5million. It paid a down payment of 20% in cash and financed thebalance. The loan terms require monthly payments for 15...
- Q What are the redeeming qualities and shortcomings of theinternal rate of return (IRR) method in capital budgetinganalysis?Explain conceptually in detail what the weighted average cost ofcapital (WACC) is and the...
- Q Kinston Industries has come up with a new mountain bikeprototype and is ready to go ahead with pilot production and testmarketing. The pilot production and test marketing phase will lastfor...
- Q Dog Up! Franks is looking at a new sausage system with aninstalled cost of $733,200. This cost will be depreciatedstraight-line to zero over the project's 7-year life, at the end...
- Q 1. Jackson Corporation's bonds have 5 years remaining tomaturity. Interest is paid annually, the bonds have a $1,000 parvalue, and the coupon interest rate is 11%. The bonds have a...
- Q Part 1: Consider the Gordon model of constant growthrate assumption. State briefly what this model says about the valueof stocks. In 2018, Walmart paid $2.08 in dividends per share. Thestock...
- Q CASH CONVERSION CYCLEParramore Corp has $11 million of sales, $3 million ofinventories, $2 million of receivables, and $1 million of payables.Its cost of goods sold is 85% of sales, and...
- Q A borrower has the following two financing options: 80% LTVfully amortizing CPM for 25 years at 8% or 90% LTV CPM loan at 9%with similar terms. The borrower is not...
- Q REH? Corporation's most recent dividend was $ 2.56 per? share,its expected annual rate of dividend growth is 5?%, and therequired return is now 15?%. A variety of proposals are beingconsidered...
- Q Collette, Inc., is considering issuing an Canadian dollardenominated bond at its present coupon rate of 10 percent, eventhough it has no incoming cash flows to cover the bond payments. U.S....
- 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 25% debt.There are currently 4,500 shares...
- Q OPTIMAL CAPITAL BUDGETHampton Manufacturing estimates that its WACC is 12.5%. Thecompany is considering the following seven investment projects:ProjectSizeIRRA$750,00014.0%B1,250,00013.5C1,250,00013.2D1,250,00013.0E750,00012.7F750,00012.3G750,00012.2Assume that each of these projects is independent and that eachis just as...
- Q The U.S. interest rate is7 percent and the Canadian dollar’sinterest rate is 6 percent. The Canadian dollar's forward rate hasa premium of 2 percent. (1) Calculate the effective financing rate for...
- Q Consider the following situation:State of EconomyProbability of State of EconomyReturns if State OccursStock AStock BStock CBoom20%25%10%5%Recession80%-30%5%10%The expected return on the marketportfolio is 7% and the US Treasury bill yields 3%....
- Q Use the Black-Scholes model to find the value for a European putoption that has an exercise price of $77.00 and 0.2500 years toexpiration. The underlying stock is selling for $87.00...
- Q What are flotation costs and why they must be included in theinitial cost of a project? Explain in detail.The differences between the standard deviation and beta in themeasurement of risk...
- Q Bauer industries is an automobile manufacturer. management iscurrently evaluating a proposal ... Question: Bauer Industries isan automobile manufacturer. Management is currently evaluating aproposal to ... Bauer Industries is an automobile...
- Q define and describe the most significant risks of bondinvesting
- Q In preparing for the upcoming holiday season, Fresh Toy Company(FTC) designed a new doll called The Dougie that teaches childrenhow to dance. The fixed cost to produce the doll is...
- Q Consider the following two mutually exclusive projects: YearCash Flow (A)Cash Flow (B)0–$331,622 –$16,409 128,900 5,372 252,000 8,645 355,000 13,957 4387,000 9,670 Whichever project you choose, if any, you require a 6...
- Q XYZ Company has two good businesses. Each has an initialinvestment of $ 25,000 with each cash flow as follows:YearBusiness 1 Cash FlowBusiness 2 Cash Flow17,5007,50027,0007,50036,0007,50045,0007,50053,5007,500If the cost of capital is...
- Q Bondrelationship?)?Mason, Inc. has two bond issues? outstanding, called Series Aand Series? B, both paying the same annual interest of?$110110.Series A has a maturity of1212?years, whereas Series B has a maturity...
- Q A company will invest with an initial investment of $1,000,000.Assuming a market interest rate of 5% and cash flow for 5 years isexpected in the table below:YearCash Flow1425,0002384,0003321,5004282,5005200,000Calculate the PAYBACK...
- Q Dax Systems is considering a project that has the following cashflows for Project X and Y. What is the PI of X, using the newmethod? Cost of Capital = 10%...
- Q Angel 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 Explain and calculate the costs of differentcapital components—debt, preferred stock, retained earnings, andcommon stock.
- Q Purchasing Power Parity A computer costs $460 in the UnitedStates. The same model costs 725 euros in France. If purchasingpower parity holds, what is the spot exchange rate between the...
- Q You have just taken a job at a manufacturing company and havediscovered that they use absorption costing to analyze productcosts and subsequent cost-volume-profit decisions. You would liketo introduce them to...
- Q You have just taken a job at a manufacturing company and havediscovered that they use one predetermined overhead rate to applymanufacturing overhead costs. You would like to introduce them toactivity...
- Q A project is expected to generate cash flow from assets equal to$250,000 at the end of the year. The cash flows are expected togrow at 4% for the next 20...
- Q The bonds issued by Jensen & Son have a 6.4% coupon rate,payable quarterly. The bonds, which mature in 18 years, have a$10,000 par value and they currently sell for $13,242.55...
- Q Use the following information to develop a spreadsheet modelthat will calculate the free cash flows and the value of the equityfor the company. Cost of capital 12% Most recent year’s...
- Q Exactly, eight years ago, Milfred, Inc. issued some $15,000 parvalue bonds. When issued, the bonds had a life of 30 years, paidcoupon interest semiannually, and sold at par value. Today,...
- Q Shai Co. is considering a four-year project that will require aninitial investment of $12,000. The base-case cash flows for thisproject are projected to be $12,000 per year. The best-case cashflows...
- Q Present a short summary of Henry Hub pricing mechanism and itsrole in natural gas pricing.
- Q Economy Probability Return Stock A. Return Stock BGood. 20% 20%. 30%Normal. 50%. 15%. 10%bad. 30%. 10%. 5%What are the expected return and standard deviation of stock Aand B?Whats the correlation...
- Q A pension fund manager is considering three mutual funds. Thefirst is a stock fund, the second is a long-term government andcorporate bond fund, and the third is a T-bill money...
- Q Please answer it correctly. Here is a short problems.Please solve all problems correctly. Make sure the answers arecorrect. I would really appreciate your effort.Thanks.1). The Oriole Products Co. currently has...
- Q An analyst determines that three stocks have the followingcharacteristics: Stock Beta, Forecast return X 1.0 10% Y 1.6 16 % Z2.0 14 % If the risk-free rate is 4% and...
- Q A pension fund manager is considering three mutual funds. Thefirst is a stock fund, the second is a long-term government andcorporate bond fund, and the third is a T-bill money...
- Q After completing its capital spending for the year, CarlsonManufacturing has $2,300 extra cash. Carlson’s managers must choosebetween investing the cash in Treasury bonds that yield 3 percentor paying the cash...
- Q Mass Waste Disposal Inc. is considering the construction of afacility at a cost of $20 million. The project will producepositive cash flows of $7 million per year for the next...
- Q Retlaw Corporation (RC) manufactures time series photographicequipment. It is currently at its target debt/equity ratio of 0.74.It’s considering building a new $48 million manufacturing facility.This new plant is expected to...
- Q Distinguish between the spot and forward markets, for foreigncurrencies. Why is it necessary to have two markets rather thanone?-What are the principal factors affecting the value of anyparticular foreign currency...
- Q Parramore Corp has $17 million of sales, $2 million ofinventories, $2 million of receivables, and $1 million of payables.Its cost of goods sold is 85% of sales, and it finances...
- Q Describe the Put/Call ratio technical indicatorand explain the primary reason why investors should pay attentionto it.
- Q Please match the terms relating to the basic terminology andconcepts.Seasonal Dating _____ A. If the borrower cannotrepay the loan, the lender can liquidate certain assetsCollection Policy _____ B....
- Q You own 1,100 shares of stock in Avondale Corporation. You willreceive a $2.00 per share dividend in one year. In two years, thecompany will pay a liquidating dividend of $48...
- Q Discuss how the capital budgeting concept is used to determinehow a new project (hiring a management employee or investing in anew product/service) is worthwhile. Explain in detailed withexamples and explanation...
- Q An investor borrows $22,000 on margin to buy 1,000 shares inTamarind, Inc. at $55 per share. The initial margin requirement is50% while the maintenance margin is 35%.a.) What is the...
- Q You sell short 1,000 shares in Omega Corporation at $20 pershare and give your broker $12,000 to establish a marginaccount.a.) What is the margin (%) in the account at the...
- Q Strategic PlanDiscussionBudgeting is very important to any business as the budget servesas the financial “roadmap” to help guide you towards your goals.Just as it is important for you to adhere...
- Q You need a 20-year, fixed-rate mortgage to buy a new home for$220,000. Your mortgage bank will lend you the money at a 7 percentAPR for this 240-month loan. However, you...
- Q Show work (excel if possible but show formulas you used inexcel):If I buy a new car and pay $399 a month for 5 years and themaintenance costs are $50 the...
- Q Show work (excel if possible but show formulas you used inexcel):If I buy a new car and pay $399 a month for 5 years and themaintenance costs are $50 the...
- Q Use excel and please show bothformulas and numbers.Answer this: Now if I were investing my $1200 ayear at 12% with no children and I win the lottery at year 30...
- Q Suppose that you are contemplating an investment in an apartmentbuilding. Use the information provided below to answer thequestions that follow:Type of Property: Apartment BuildingNumber of Units: 30Average Rent: $1,500 per...
- Q Essex Biochemical Co. has a $1,000 par value bond outstandingthat pays 13 percent annual interest. The current yield to maturityon such bonds in the market is 13 percent. Use Appendix...
- Q Guthrie Enterprises needs someone to supply it with 135,000cartons of machine screws per year to support its manufacturingneeds over the next five years, and you’ve decided to bid on thecontract....
- Q BOND RISKBonds are often considered safer investments than stock.As a bondholder, what risks would you face, and how are these riskfactors lower for bonds than they are forstock?
- Q You plan on starting a retirement fund at the end of the year.The fund earns 11% per year. You will invest X dollars into thefund. You plan to retire at...
- Q Bridgton Golf Academy is evaluating new golf practice equipment.The "Dimple-Max" equipment costs $146,000, has a 4-year life, andcosts $10,300 per year to operate. The relevant discount rate is 12percent. Assume...
- Q Use excel and show both the numbers and theformulas so I can learn how to do itIf I want to invest $1200 a year for 20 years and then stopinvesting...
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