The Picture-Perfect Company Is Considering Whether It Should Introduce A New Product, A Camera
The Picture-Perfect Company is considering whether it should introduce a new product, a camera lens. However, they are unsure of the demand for the product and have hired a consultant to do some market research for them before moving forward. The consultant fee is $10,000. If the company produces the lens, it will have to invest $400,000 in new equipment, and $25,000 in working capital. The equipment will last for the duration of the project, which is 3 years, and will be depreciated to zero using straight-line depreciation. In 3 years, the equipment is expected to have a scrap value of 5,000. The lens is expected to produce $300,000 per year in revenues and create operating costs of $100,000 per year. If the lens is produced, Picture-Perfect expects to lose $25,000 per year from the decline in demand for a lens the company is currently selling. If the company has a tax rate of .21 and the project has a required return of .08, should Picture-Perfect move ahead with the new product?
13) The Redford Investment Company Bought 120 Cinema Corp. Warrants One Year Ago And
13) The Redford Investment Company bought 120 Cinema Corp. warrants one year ago and would like to exercise them today. The warrants were purchased at $29 each, and they expire when trading ends today (assume there is no speculative premium left). Cinema Corp. common stock is selling today for $60 per share. The exercise price is $39 and each warrant entitles the holder to purchase two shares of stock, each at the exercise price. a. If the warrants are exercised today, what would the Redford Investment Company’s dollar profit or loss be? (Do not round intermediate calculations. Input your dollar answer as a positive value rounded to the nearest whole dollar.) b. What is the Redford Investment Company’s percentage rate of return? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
This Week We’ll Take A Look At The Impact Of Mutual Fund Expenses (fees).
This week we’ll take a look at the impact of mutual fund expenses (fees). We will compare two funds that have IDENTICAL holdings (the largest 500 US corporations) but differ in the amount of fees they charge their investors (you, in this case). Suppose you can chose to invest in either one of them. Compare the expenses on two mutual funds that follow the same index: S
24) Dixie Dynamite Company Is Evaluating Two Methods Of Blowing Up Old Buildings For
24) Dixie Dynamite Company is evaluating two methods of blowing up old buildings for commercial purposes over the next five years. Method one (implosion) is relatively low in risk for this business and will carry a 12 percent discount rate. Method two (explosion) is less expensive to perform but more dangerous and will call for a higher discount rate of 14 percent. Either method will require an initial capital outlay of $85,000. The inflows from projected business over the next five years are shown next. Years Method 1 Method 2 1 $ 30,200 $ 16,900 2 36,900 23,400 3 45,400 38,400 4 32,500 32,600 5 28,600 72,000 Use Appendix B for an approximate answer but calculate your final answers using the formula and financial calculator methods. a. Calculate net present value for Method 1 and Method 2. (Do not round intermediate calculations and round your answers to 2 decimal places.)
25) Mr. Sam Golff Desires To Invest A Portion Of His Assets In Rental
25) Mr. Sam Golff desires to invest a portion of his assets in rental property. He has narrowed his choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mr. Golff has developed the following estimates of the cash flows for these properties. Palmer Heights Yearly Aftertax Cash Inflow (in thousands) Probability $ 120 0.2 125 0.2 140 0.2 155 0.2 160 0.2 Crenshaw Village Yearly Aftertax Cash Inflow (in thousands) Probability $ 125 0.2 130 0.3 140 0.4 150 0.1 a. Find the expected cash flow from each apartment complex. (Enter your answers in thousands (e.g, $10,000 should be enter as “10”).) b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round your answers to 3 decimal places.)
20) Pittsburgh Steel Company Has A Convertible Bond Outstanding, Trading In The Marketplace At
20) Pittsburgh Steel Company has a convertible bond outstanding, trading in the marketplace at $910. The par value is $1,000, the coupon rate is 6 percent, and the bond matures in 15 years. The conversion price is $45 and the company’s common stock is selling for $40 per share. Interest is paid semiannually. If the interest rate on similar bonds that are not convertible are currently yielding 12 percent, what will be the pure bond value of the Pittsburgh Steel Company bonds? (Use semiannual analysis.) Use Appendix B and Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Let S = $70, R = 4% (continuously Compounded), D = 3%, S =
Let S = $70, r = 4% (continuously compounded), d = 3%, s = 40%, T = 1.5. In this situation, the appropriate values of u and d are 1.42463 and 0.71255, respectively. Using a 2-step binomial tree, calculate the value of a $60-strike European call option. Option D is correct, but how? Can you provide solution for Excel? formulas and steps or actual excel work sheet? Answers: a. $18.875 b. $18.496 c. $19.450 d. $18.317 e. $15.930
29) Highland Mining And Minerals Co. Is Considering The Purchase Of Two Gold Mines.
29) Highland Mining and Minerals Co. is considering the purchase of two gold mines. Only one investment will be made. The Australian gold mine will cost $1,630,000 and will produce $361,000 per year in years 5 through 15 and $555,000 per year in years 16 through 25. The U.S. gold mine will cost $2,020,000 and will produce $258,000 per year for the next 25 years. The cost of capital is 10 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annuity for the Australian mine. The returns in years 5 through 15 actually represent 11 years; the returns in years 16 through 25 represent 10 years.) a-1. Calculate the net present value for each project. (Do not round intermediate calculations and round your answers to 2 decimal places.) a-2. Which investment should be made? Australian mine U.S. mine b-1. Assume the Australian mine justifies an extra 3 percent premium over the normal cost of capital because of its riskiness and relative uncertainty of cash flows. Calculate the new net present value given this assumption. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) b-2. Does the new assumption change the investment decision?
31) Allison’s Dresswear Manufacturers Is Preparing A Strategy For The Fall Season. One Alternative
31) Allison’s Dresswear Manufacturers is preparing a strategy for the fall season. One alternative is to expand its traditional ensemble of wool sweaters. A second option would be to enter the cashmere sweater market with a new line of high-quality designer label products. The marketing department has determined that the wool and cashmere sweater lines offer the following probability of outcomes and related cash flows. Expand Wool Sweaters Line Enter Cashmere Sweaters Line Expected Sales Probability Present Value of Cash Flows from Sales Probability Present Value of Cash Flows from Sales Fantastic 0.3 $ 262,000 0.3 $ 378,000 Moderate 0.3 194,000 0.3 239,000 Low 0.4 88,100 0.4 0 The initial cost to expand the wool sweater line is $161,000. To enter the cashmere sweater line, the initial cost in designs, inventory, and equipment is $136,000. a. Calculate net present value if, Allison’s Dresswear Manufacturers decides to: (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole dollar.)
34) The Oklahoma Pipeline Company Projects The Following Pattern Of Inflows From An Investment.
34) The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows are spread over time to reflect delayed benefits. Each year is independent of the others. Year 1 Year 5 Year 10 Cash Inflow Probability Cash Inflow Probability Cash Inflow Probability $ 65 0.40 $ 50 0.35 $ 40 0.30 80 0.20 80 0.30 80 0.40 95 0.40 110 0.35 120 0.30 The expected value for all three years is $80. Compute the standard deviation for each of the three years. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
15) Online Network Inc. Has A Net Income Of $480,000 In The Current Fiscal
15) Online Network Inc. has a net income of $480,000 in the current fiscal year. There are 100,000 shares of common stock outstanding, along with convertible bonds, which have a total face value of $1.3 million. The $1.3 million is represented by 1,300 different $1,000 bonds. Each $1,000 bond pays 4 percent interest. The conversion ratio is 30. The firm is in a 40 percent tax bracket. a. Compute basic earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.) b. Compute diluted earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.)
It Is January 2nd And Senior Management Of Chester Meets To Determine Their Investment
It is January 2nd and senior management of Chester meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing $10,000,000 in bonds. Assume the bonds are issued at face value and leverage changes to 2.7. Which of the following statements are true? Select all that apply. Select: 3 The total investment for Chester will be $13,794,904 Total liabilities will be $138,481,143 Working capital will remain the same at $13,910,399 Total Assets will rise to $222,173,096 Chester’s long-term debt will rise by $10,000,000
Chester’s Turnover Rate For This Year Is 6.26%. This Rate Is Projected To Remain
Chester’s turnover rate for this year is 6.26%. This rate is projected to remain the same next year and no further downsizing will occur from automating. What would the total recruiting cost be for Chester, assuming it spends the same amount extra above the $1,000 recruiting base as they did this year? Chester currently has 544 employees with 122 new employees. Select: 1 $2,719,859 $170,190 $313 $204,228
Your First Assignment In Your New Position As Assistant Financial Analyst At Caledonia Products
Your first assignment in your new position as assistant financial analyst at Caledonia Products is to evaluate two newcapital-budgeting proposals. Because this is your first assignment, you have been asked not only to provide a recommendation but also to respond to a number of questions aimed at assessing your understanding of thecapital-budgeting process. This is a standard procedure for all new financial analysts at Caledonia, and it will serve to determine whether you are moved directly into the capital-budgeting analysis department or are provided with remedial training. The memorandum you received outlining your assignment follows: To: New Financial Analysts From: Mr. V. Morrison, CEO, Caledonia Products Re: Capital-Budgeting Analysis Provide an evaluation of two proposed projects, both with 5-year expected lives and identical initial outlays of $150,000.Both of these projects involve additions to Caledonia’s highly successful Avalon product line, and as a result, the required rate of return on both projects has been established at 12 percent. The expected free cash flows from each project are shown in the popup window: . In evaluating these projects, please respond to the following questions: a. Why is the capital-budgeting process so important? b. Why is it difficult to find exceptionally profitable projects? c. What is the payback period on each project? If Caledonia imposes a 33-year maximum acceptable payback period, which of these projects should be accepted? d. What are the criticisms of the payback period? e. Determine the NPV for each of these projects. Should either project be accepted? f. Describe the logic behind the NPV. g. Determine the PI for each of these projects. Should either project be accepted? h. Would you expect the NPV and PI methods to give consistent accept/reject decisions? Why or why not? i. What would happen to the NPV and PI for each project if the required rate of return increased? If the required rate of returndecreased? j. Determine the IRR for each project. Should either project be accepted? k. How does a change in the required rate of return affect the project’s internal rate of return? l. What reinvestment rate assumptions are implicitly made by the NPV and IRR methods? Which one is better?
The Process By Which Property Becomes Transferable, And A Taxpayer No Longer Has A
The process by which property becomes transferable, and a taxpayer no longer has a substantial risk of forfeiting, or losing the property is referred to as What? A: A cash exercise. B: A cashless exercise. C: Vesting. D: Granting privileges.
Aproposed Corporate Bond Issue Is Usually Subjected To A Credit Risk Assessement By Credit
Aproposed corporate bond issue is usually subjected to a credit risk assessement by credit rating agencies. The results of such an assessement provide a basis for potential investors to make decisions regarding the proposal. Some investors consider duration to be useful factor when deciding whether to invest in corporate bonds. however ,other investors do not consider duration to be that useful and as such,they rely solely on the work work of credit rating agencies. Such investors consider the information provided by the credit rating agencies to be more useful than duration when choosing the bonds to invest in. Required Prepare a report that covers the following a) A discussion of the factors that contribute to the credit risk and an explaination of the relationship between credit risk and interest rate risk b) Identification and explanation of any two(2) approches that may be used to assess the degree of credit risk of a proposed bond issue c) A critical discussion of the usefulness of duration as a measure of interest rate risk relating to the corpoate bonds d) An evaluation whether there is a relationship between using duration and credit ratings when choosing bonds that an investor should invest in.
You Are Looking At An Investment That Requires You To Invest $51 Today. You’ll
You are looking at an investment that requires you to invest $51 today. You’ll get $100 in one year, but you must pay out $50 in two years. What is the IRR on this investment?
For This Assignment, You Will Use Product, Promotion, And Place Assumptions (listed Below) Which
For this assignment, you will use Product, Promotion, and Place assumptions (listed below) which are similar to the Module 3 Simulation. However, you will assume your MSRP is always $50.00. Assumptions: Product: Construct a backpack with these product characteristics – square shape, wide chest straps, no additional features, and eco-friendly material. Your color is not important. Your production cost should always be $27.00 Promotion: Cost is $6,400 University Students as the Target Segment If we only sell through the Online Discount Retail channel, what is the Break-even volume, in units? Customer Reach: 5256 Retail Price: 37.50 Cut: 39% Profit Per Bag: 3.00
Describe The Range Of Options That Would Be Available To A Small Beef Producer
Describe the range of options that would be available to a small beef producer needing to raise export working capital to market to overseas distributors ?
Please Show All Work And Formulas Please Use The Following Information To Answer This
Please show all work and formulas Please use the following information to answer this question. State Probability A B C Boom .3 -10% 5% 0% Normal .4 5 3 2 Bust .3 10 -5 2 Find the expected return and variance of the portfolio if an investor spent $5000 on A, $8000 on B and $7000 on C.
The Sweet Dreams Candy Company Has Hired You To Estimate Its Weighted Average Cost
The Sweet Dreams Candy Company has hired you to estimate its Weighted Average Cost of Capital. Management has provided you with the following information: Current Debt: The company has 180,000 bonds, par value $1000, selling at 95% of par. The bonds have a coupon rate of 3% and 15 years to maturity. Common Stock: The company has 3,750,000 shares of common selling for $62 per share. The book value per share is $23. The stock has a beta of 1.2 Additional information: The company has a tax rate of .35, the market risk premium is 7.5%, and the risk-free interest rate is 2%.
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