Consider The Following Condensed 2018 Statement Of Financial Position For Tsogo Computers(in Thousands Of
consider the following condensed 2018 statement of Financial position for Tsogo Computers(in thousands of rands) : current assets R2000 Net fixed assets 3000 Total assets 5000 Account payable and accruals R900 Short term debt 100 long-term debt 1,100 Preferred share(10,000 shares) 250 ordinary shares 1300 Retained earnings 1350 Total ordinary share equity R2,650 Total liabilities and equity 5000 Tsogo’s earnings per share last year were R3.20. The ordinary share sells R55.50, last year’s dividend (D0) was R2.10 and a flotation cost of 10% would be required to sell new ordinary shares. Security analysts are projecting that the ordinary share dividend will grow at an annual rate of 9%. Tsogo’s preferred share pays a dividend of R3,30 per share, and its preferred share sells for R30,00 per share. The company’s currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Tsogo’s beta is 1.516. The company’s total debt, which is the sum of the company’s short-term and long- term debt, equals R1.2 million. Required: 3.1 Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred shares, the cost of equity from retained earnings, and the cost of newly issued ordinary shares. use the DCF method to find the cost of ordinary share equity. 3.2 Now calculate the cost of ordinary share equity from retained earnings, using the CAPM method 3.3 What is the cost of new ordinary shares based on the CAPM? 3.4 If Tsogo continues to use the same market-value capital structure, what is the company’s WACC assuming that (1) it uses only retained earnings of equity and (2) if it expands so rapidly that it must issue new ordinary shares?
Burger King Is Planning To Add A Mango Milkshake To Its Menu. The Company
Burger King is planning to add a mango milkshake to its menu. The company tested the product in three major cities last year at a cost of $2 million and determined that there is considerable demand. At present, they only plan to sell the mango shakes for 5 years. Burger king plans to price this new flavor at $2 per shake and they anticipate selling 10 million mango shakes each year. Large quantities of mango trees will need to be purchased immediately at a total cost of $20 million. This will be a capital expense which Burger Kings will depreciate on a straight line basis to a value of zero over the next 5 years. Unfortunately, Burger King learned during the test market that the mango shakes will eat into the sales of their vanilla shakes. They only expect this happen during the first year though, when they expect to lose $4 million in sales of vanilla shakes from what they otherwise would have had. Both the vanilla and mango shakes have variable cost equal to 60% of their purchase price. The additional business from the new product will necessitate an injection of $1 million in net working capital immediately. Burger King expects that level of working capital to remain constant during the 5 years that the mango shakes are sold and then they expect to recover it at the end of the 5th year. Burger King’s stock is selling at $25 per share and it has a beta of 0.9. The risk free rate is 3% and the market risk premium 5.7%. The company has $240 million shares of common stock outstanding and debt (Bonds) with a face value of $800 million. All of its bonds will mature in 13 years are priced at 102, and have a coupon rate of 6.4%. Burger King’s marginal tax rate is 21%. Determine the free cash flows for this project and show them on the time line provided (in millions) below. Then calculate the WACC and the NPV. All cash flows should be discounted at the WACC. ___________________________________________________________________ 0 1 2 3 4 5 Please note above: number of bonds/shares outstanding is 240 million!!
Calculate The Effective Annual Interest Rate For A $100,000 Simple Interest Loan With 10%
Calculate the effective annual interest rate for a $100,000 simple interest loan with 10% interest due at the end of the year and 10% compensating balance. Calculate the effective annual interest rate for a $100,000 discounted loan with 10% interest and 10% compensating balance.
A Major New Client Has Requested Your Company To Present An Investment Seminar To
A major new client has requested your company to present an investment seminar to the municipal mayors of the represented Metros. As an investment specialist, you have been tasked to assist your company in preparing the presentation. To illustrate the common share valuation process, you have been asked to analyze Business Analytics, an employment agency that supplies word processor operators and computer programmers to businesses with temporarily heavy workloads. You are to answer the following: 2.1 Assume that Business Analytics has a beta coefficient of 1.2, that the risk-free rate ( the yield on T-bonds) is 3%, and that the required rate of return on the market is 8%. What is Business Analytic’s required rate of return? 2.2 Assume that Business Analytics is a constant growth company whose last dividend (D0, which was paid yesterday) was R2.00 and whose dividend is expected to grow indefinitely at a 4% rate. i. What is the company’s expected dividend stream over the next 3 years? ii. What is its current share price? iii. What is the share’s expected value 1 year from now? 2.3 now assume that the share is currently selling at R40.00. What is its expected rate of return? 2.4 What would the share price be if its dividends were expected to have zero growth? 2.5 Now assume that Business Analytics’dividend is expected to grow at 30% in the first year, 20% in the second year, 10% in the third year, and return to its long-run constant growth rate of 4%. What is the share’s value under these conditions? 2.6 Suppose Business Analytics’ is expected to experience zero growth during the first 3 years and then resume its steady-state growth of 4% in the fourth year. What would be its value then? 2.7 Finally, assume that Business Analytics’ earnings and dividends are expected to decline at a constant rate of 4% per year, that is, g=-4%. Why would anyone be willing to buy such a share, and at what price should it sell? 2.7 Finally, assume that Business Analytics’ earnings and dividends are expected to decline at a constant rate of 4% per year, that is, g=-4%. Why would anyone be willing to buy such a share, and at what price should it sell? 2.8 suppose Business Analytics’ embarked on an aggressive expansion that requires additional capital. Management decided to finance the expansion by borrowing R40 million and by halting dividend payments to increase retained earnings. Its WACC is now 7% and the projected free cash flows for the next three years are -R5 million, R10 million, and R20 million respectively. After Year 3, free cash flow is projected to grow at a constant 5%. What is Business Analytics’ market value of operations? If it has 10 million shares, R40 million of debt and preferred share combined, and R5 million of non-operating assets, what is the price per share? 2.9 Suppose Business Analytics decided to issue preferred share that would pay an annual dividend of R5.00 and that the issue price was R100.00 per share. What would be the share’s expected return? Would the expected rate f return be the same if the preferred share was a perpetual issue or if it had a 20-year maturity?
Although The Use Of Mobile Communication Devices By Motor Vehicle Drivers Is A Dangerous
Although the use of mobile communication devices by motor vehicle drivers is a dangerous practice, studies have shown that up to 80% of motor vehicle accidents in in Bubble Country are caused by this practice. Surveys have shown that even though drivers recognize that this is a dangerous practice, they cannot resist the temptation of using the devices. The surveys also found that individuals who regularly use their mobile devices while driving do not consider fines to be deterrent. The percentage of accidents attributable to driver distraction caused by the use of mobile communication devices has been increasing by 1% per year. A risk assessment has shown that the risk of having an accident for a driver using their mobile devices is 15%. Public opinion research suggests that the public is more concern about this issue than drinking and driving and would like the government to address it. Last year there were 15,000 motor vehicle accidents attributed to driver distraction in Bubble Country because of mobile communication device use. In order to address the issue, the government of Bubble Country is considering a policy that will force car makers to install remote equipment in all cars to ensure that mobile communication devices cannot be used when driving. Such equipment is already available and it will cost car makers $10 to install such equipment in each car. The policy will also make it illegal to use a mobile communication device while driving and individuals found doing this will be given a fine of $800. With the information above and any additional information you can find and your own reasonable assumptions, undertake a rough cost benefit analysis How will you quantify and monetize all your identified Costs Benefits What time frame will you use and why? With a spreadsheet estimate The Present Value Cost – Economic The present Value Benefits – Economic Discuss any qualitative costs and benefits With the following criteria, determine whether the project is Economically feasible Net Present Value Criteria Benefit Cost Ratio
For The Following Questions The Price Of An S
For the following questions the price of an S
Stock Options Worksheet – Pfizer Identify The Stock And Its Ticker Symbol That
Stock Options Worksheet – Pfizer Identify the stock and its ticker symbol that you are using in this assignment. Provide its last traded price. Company Name Ticker Symbol Last Traded Price Obtain one of each for Call Option quotes and Put Option quotes. The TWO quotes must meet the following two criteria: The strike price is approximately equal to the stock’s last traded price you wrote down earlier on your note paper. The expiry date is in three to six weeks. Call Option Expiry (Month/Year) Strike Symbol Last Open Interest Put Option Expiry (Month/Year) Strike Symbol Last Open Interest Answer the following questions: What are the intrinsic values of each option? What are the option time values of each option? Assume each option’s contract size is 100 hundred shares. Given the holdings of this stock in your individual portfolio, describe an option strategy utilizing calls. Discuss the costs incurred and possible benefits of such a strategy.
For The Following Questions The Price Of An S
For the following questions the price of an S
Identify The Stock And Its Ticker Symbol That You Are Using In This
Identify the stock and its ticker symbol that you are using in this assignment. Provide its last traded price. – Pfizer Company Name Ticker Symbol Last Traded Price Obtain one of each for Call Option quotes and Put Option quotes. The TWO quotes must meet the following two criteria: The strike price is approximately equal to the stock’s last traded price you wrote down earlier on your note paper. The expiry date is in three to six weeks. Call Option Expiry (Month/Year) Strike Symbol Last Open Interest Put Option Expiry (Month/Year) Strike Symbol Last Open Interest Answer the following questions: What are the intrinsic values of each option? What are the option time values of each option? Assume each option’s contract size is 100 hundred shares. Given the holdings of this stock in your individual portfolio, describe an option strategy utilizing calls. Discuss the costs incurred and possible benefits of such a strategy.
You Purchased 100 Shares Of TWR At A Price Of $10.05 Per Share Last
You purchased 100 shares of TWR at a price of $10.05 per share last year. The stock pays an annual dividend of $.10 per share. If you decide to sell all of your shares for its market price at $29.32 per share, what is your holding period return (HPR) on this investment? A) 192.73%. B) -64.81%. C) 9.73%. D) 92.73%. Assume that you purchased 100 shares of TWR last year and then you just sold these stocks today. During this 1-year period, your holding period return (HPR) on these shares is 12.5%. Assume that you purchased the shares one year ago at a price of $28.50 a share and this stock paid $1.40 annual dividend per share in the past year. What is your capital gains yield on this investment? A) 6.02%. B) 4.53%. C) 5.66%. D) 7.59%.
Generally Speaking, Which One Of The Following Is A Correct Ranking Of Securities Based
Generally speaking, which one of the following is a correct ranking of securities based on their volatility over the period of 1926 to 2011? Rank from highest to lowest. A) U.S. Treasury bills, long-term government bonds, common stocks B) Common stocks, long-term government bonds (i.e., treasury bonds), short-term government bonds (e.g., treasury bills) C) Long-term government bonds (i.e., treasury bonds), long-term corporate bonds, small company stocks D) Small company stocks, long-term corporate bonds, large company stocks Risk that affects only a small number of assets is called _____ risk. A) Unsystematic B) Portfolio C) Systematic D) Nondiversifiable The risk premium for an individual security is computed by: ___________ . A) Multiplying the security’s beta by the risk-free rate of return. B) Multiplying the security’s beta by the market risk premium. C) Adding the risk-free rate to the security’s expected return.
Assume That The Risk-free Rate Of Return Is 4% And The Market Risk Premium
Assume that the risk-free rate of return is 4% and the market risk premium (i.e., Rm – Rf ) is 8%. If use the Capital Asset Pricing Model (CAPM) to estimate the expected rate of return on a stock with a beta of 1.28, then this stock’s expected return should be ____. A) 10.53% B) 14.24% C) 23.15% D) 6.59% What is the beta of a stock with an expected return of 10%, if Treasury bills yield 4% and the market return (i.e., Rm) is 10%? A) 3.0 B) 2.0 C) 1.0 D) 0.2 A company has a project with initial investment is $40,000. It will generate $15,000 annually for the next four years. Assume that this company and its project have a beta of 2.0, the risk-free rate of return (i.e., Rm) is 2%, and the market return (i.e., Rm) is 7%?. How much is the NPV of this project? [Hint: As discussed, the CAMP model can be used to estimate discount rate (r) in the NPV analysis equation]. A) 5,555 B) 3,333 C) 4,444 D) 6,666
Door2DoorCo Are A Large Courier Company Who Have Just Received A Shipment Of X
Door2DoorCo are a large courier company who have just received a shipment of X new vans. They wish to lock in a tyre supply contract to keep these vans w ell shod over the Y months that they intend to keep the vans. The vans come with low quality tyres that will need to be replaced in 2 months. Two suppliers, ThriftyTread and WiserWheels have expressed interest at supplying tyres at a fixed price for the duration. The offers are summarised below: Number of Vans, X 120 Corporation Discount Rate 120 Initial tyre life J1=12.68%p.a Keep vans for (Y) 2 months ThriftyTread 50 months Tyre price $100 Tyre life Four months Tyre replaced at 2,6,10,…,46,50 months WiserWheels Tyre price $148 Tyre life Six months Tyre replaced at 2,8,14,…,44,50 months For each of the two potential suppliers, illustrate Door2DoorCO’s tyre expenditure for the new vans as a fully labelled timeline diagram. (Remember that there are X new vans, and assume each van has 4 tyres.) Determine the value in period 2 dollars of the expenditure stream if Door2DoorCo decide to go with ThriftyTreads. [Hint, you will firstly need to find the j3 rate equivalent to the corporate discount rate, you will then need to find the PV of the expenditure stream in period 2 dollars] Thus determine the present value of the expenditure stream if Door2DoorCo decide to go with ThriftyTreads. [NB this is a bit tricky and is aimed at stronger students] d)Determine the value in period 2 dollars of the expenditure stream if Door2DoorCo decide to go with WiserWheels. e)Thus determine the present value of the expenditure stream if Door2DoorCo decide to go with WiserWheels f) Comparing your answers for part (b) with part (d), OR part (c) with part (e), explain which tyre supplier Door2DoorCo should choose. g)Suggest three legitimate business considerations which a manager may take into account that might influence or even change the recommendation from part of (f). NB “These tyres are prettier”, “This company will bribe me with a kickback”, or “My wife works for that company” are NOT legitimate business reasons. (Write around20~30 words explaining/justifying each consideration.)
ABC Company Wants To Buy Diesel Generator At A Price Of $1,600,000,000 . The
ABC Company wants to buy diesel generator at a price of $1,600,000,000 . The alternatives are as follows: -Buy cash at a price of $1,600,000,000 OR -Rent at a price of $30,000,000 per month. Assumption of a deposit interest of 7% a year. In your opinion, which one to choose ?
George Seby Is Thinking About Doing Some Speculating In Interest Rates. He Thinks Rates
George Seby is thinking about doing some speculating in interest rates. He thinks rates will fall and, in response, the price of Treasury bond futures should move from 97 -27.6, their present quote, to a level of about 107 . Given a required margin deposit of $ 1 comma 030 per contract, what would George’s return on invested capital be if prices behave as he expects?
Suppose You Have Been Hired As A Financial Consultant To Defense Electronics, Inc. (DEI),
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $5.4 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. The land was appraised last week for $6.2 million. In five years, the aftertax value of the land will be $6.6 million, but the company expects to keep the land for a future project. The company wants to build its new manufacturing plant on this land; the plant and equipment will cost $32.72 million to build. The following market data on DEI’s securities is current: Debt: 239,000 7.2 percent coupon bonds outstanding, 25 years to maturity, selling for 108 percent of par; the bonds have a $1,000 par value each and make semiannual payments. Common stock: 9,700,000 shares outstanding, selling for $71.90 per share; the beta is 1.1. Preferred stock: 459,000 shares of 5 percent preferred stock outstanding, selling for $81.90 per share and and having a par value of $100. Market: 7 percent expected market risk premium; 5 percent risk-free rate. DEI uses G.M. Wharton as its lead underwriter. Wharton charges DEI spreads of 8 percent on new common stock issues, 6 percent on new preferred stock issues, and 4 percent on new debt issues. Wharton has included all direct and indirect issuance costs (along with its profit) in setting these spreads. Wharton has recommended to DEI that it raise the funds needed to build the plant by issuing new shares of common stock. DEI’s tax rate is 35 percent. The project requires $1,525,000 in initial net working capital investment to get operational. Assume Wharton raises all equity for new projects externally. Cash flow = -$42864226 Discount rate = 12.26% Aftertax salvage value = $7804500 OCF = $15991500 Break-even quantity = 8421 units f. Finally, DEI’s president wants you to throw all your calculations, assumptions, and everything else into the report for the chief financial officer; all he wants to know is what the RDS project’s internal rate of return (IRR) and net present value (NPV) are. Assume that the net working capital will not require flotation costs. (Enter your NPV answer in dollars, not millions of dollars, e.g., 1,234,567. Enter your IRR answer as a percent. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
The Foreign Exchange Market Is A Market In Which Foreign Exchange Transactions Take Place.
The foreign exchange market is a market in which foreign exchange transactions take place. The Primary function of a foreign exchange market is the transfer of purchasing power from one country to another and from one currency to another. The international clearing function performed by foreign exchange markets plays a very important role in facilitating international trade and capital movement. Certain important types of transactions conducted in the foreign exchange market occurs via the Spot and Forward markets. Describe the spot market Describe the forward market
The Following Returns Have Been Estimated For Security T And Security S: Scenario Security
The following returns have been estimated for Security T and Security S: Scenario Security T Security S 1 20% 10% 2 13% -6% 3 15% 20% Each scenario is equally likely to occur, and you plan to invest 70% in Security T and 30% in Security S. What is the standard deviation of the rate of return of the portfolio? Round your answer to the nearest tenth of a percent. A) 0.0% B) 4.5% C) 19.9% D) 59.7%
The Possible Outcomes For The Returns On Stock X And The Returns On The
The possible outcomes for the returns on Stock X and the returns on the market portfolio have been estimated as follows: Scenario Stock X Market portfolio 1 -3% 6% 2 14% 12% 3 22% 18% Calculate the market beta for Stock X. Round your answer to the nearest tenth. A) 2.1 B) 0.7 C) 1.0 D) none of the above
Current Tax: $118.37/$100 Total Budget=76,152,459 State Amount=15646032 1. What Is The Total Market Value
Current Tax: $118.37/$100 total budget=76,152,459 state amount=15646032 1. what is the total market value 2. what is local percent and state percent? 3. what is local amount?
You Have Analyzed The Following Four Securities And Have Estimated Each Securityʹs Beta
You have analyzed the following four securities and have estimated each securityʹs beta and what you expect each security to return next year. The expected return on the market portfolio is 13%, and the relevant risk-free rate is 5.5%. Security Beta Expected return (based on your analysis) A 1.30 14.0% B 0.85 12.5% C 0.20 7.0% D 2.10 28.0% Based on your analysis, which of the securities is overpriced? A) Security A B) Security B C) Security C D) Security D
Gronseth Drywall Systems, Inc., Is In Discussions With Its Investment Bankers Regarding The Issuance
Gronseth Drywall Systems, Inc., is in discussions with its investment bankers regarding the issuance of new bonds. The investment banker has informed the firm that different maturities will carry different coupon rates and sell at different prices. The firm must choose among several alternatives. In each case, the bonds will have a $1 comma 0001,000 par value and flotation costs will be $3030 per bond. The company is taxed at 2121%. Use the approximation formula to calculate the after-tax cost of financing with the following alternative. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Coupon rate Time to maturity Premium or discount Copy to Clipboard Open in Excel 99% 1616 years $ 250$250 The after-tax cost of financing using the approximation formula is ____ (Round to two decimal places.)
A $1,000 Par Value Bond With A 8.25 % Coupon Rate (semianual Interest) Matures
A $1,000 par value bond with a 8.25 % coupon rate (semianual interest) matures in 5 years and currently sells for $ 991.44 . What is the bond’s yield to maturity and bond equivalent yield?
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