The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $500,000 per year for the next five years and then $300,000 per year for 3 years after that (the chase returns occur at the end of each year). At 9% interest rate, what is
Expected value of company in one year, with and without expansion 2. expected value of debt in one year, with and without expansion 3. in one year how much value creation from expansion? how much for stockholder? Bondholder? 4. if company does not expand, what happens to price of bonds? what happens to price if they do expand? 5. if no expansion, what are implications for future borrowing needs? what are implications if it does expand? 6. How would answer be affected if expansion were financed with cash on hand instead of new equity?
From Corporate Finance 9/e (Ross, Westerfield, Jaffe) pg 552 Company plans to expand in one year. Has outstanding bond with face value of $34 million due in one year. Bond covenants prohibit issuance of additional debt. Expansion will be equity financed at cost of $8.4 million. State of comapny in three states if econ
From the lessee viewpoint, the riskiness of the cash flows, with the possible exception of the residual value, is about the same as the riskiness of the lessee's Answer a. equity cash flows b. capital budgeting project cash flows c. debt cash flows d. pension fund cash flows e. sales
You have just won the Golden Basket lottery which gives you the choice of your prize being either a house and land package with a current market value of $500,000 or receiving cash totalling $600,000 paid in three instalments of $200,000, $150,000, $250,000 respectively. If you choose the cash alternative the first of amount wil
The difference between a firm's future cash flows if it accepts a project and the firm's future cash flows if it does not accept the project is referred to as the project's_________? incremental cash flow internal cash flows external cash flows erosion effects financing cash flows
A firm purchases goods on credit worth $150. The same firm pays off $100 in old credit purchases. An investment is made via the purchase of a new facility and equity is issued in the amount of $300 to pay for the purchase. What is the change in net cash provided by operations?
Lawrence Kohlberg theorized that there are 6 stages of moral development through which a person may pass as he or she develops from infancy to adulthood. Kohlberg was interested in the way that people arrived at their moral judgment when faced with social dilemmas. In this question, you will assume that a small catering comp
Certainty Equivalent Cash Flow Question A project has an expected risky cash flow of $250.00 in year one. The risk free rate is 7%, the market rate of return is 15%, and the project's beta is 1.6. Calculate the certainty equivalent cash flow for year one. Please show step-by-step computations.
Please see the attached PDF diagram for these questions: 1.) Contrast Amazon's cash cycle to that of its competitor Barnes & Noble. Why does Amazon have such an advantage over Barnes & Noble ? What does this suggest as a sales model to other retailers ? 2a.) How can Boeing have such a long payables period of 208 days ?
I am having a tough time getting this set up correctly. Please help... Fort Collins, Inc., has $1 million in cash available for 30 days. It can earn 1 percent on a 30-day investment in the United States. Alternatively, if it converts the dollars to Mexican pesos, it can earn 1.5 percent on a Mexican deposit. The spot rate
"Use the following information to determine cash from investing activities." Accounts Receivable ($5,000) Cash $357,000 Inventory $213,000 Prepaid Expenses $25,000 Fixed Assets $463,000 Accumulated Depreciation ($213,000) Accounts Payable $112,000
Calculate overall change in cash Please review the steps I used in preparing the attached problem. "Use the following information to determine your client's overal change in cash." Accounts Receivable ($5,000) Supplies $1,000 Inventory $3,000 Prepaid Rent ($2,000) Fixed Assets $18,000
Cash inflows and risk: Pueblo Enterprises is considering investing in either of two mutually exclusive projects
Pueblo Enterprises is considering investing in either of two mutually exclusive projects, X and Y. Project X requires an initial investment of $30,000; project Y requires $40,000. Each project's cash inflows are 5-year annuities: Project X's inflows are $10,000 per year; project Y's are $15,000. The firm has unlimited funds and,
Every company has capital projects. The company you have selected must need something! Be it a new wing to the building, a new product line to be funded, a new piece of equipment, find one new acquisition your company needs. Once you have identified the new possible investment item, what problems are you going to have in es
After you finish your discussion with the managers and finance personnel, the head of strategic planning stops by your office to discuss the IPO. He says that recently the investment bankers started to encourage the firm to begin to use more financial leverage as a sign to Wall Street that the company would be more aggressive wh
Your company's goal is to have an ending cash balance each month of $100,000. For the current month you have the following: net cash flow = −$76,000 and beginning cash balance of $100,000. What should be your monthly borrowing given your company's goal?
The Rogers Corporation has a gross profit of $880,000 and $360,000 in depreciation expense. The Evans Corporation also has $880,000 in gross profit, with $60,000 in depreciation expense. Selling and admin expense is $120,000 for both companies. Given the tax rate of 40%, compute the cash flow for both companies.
PDF Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs $100,000. It will cost the company $10,000 to ge
The King Solomon Mining Company is contemplating a cash tender offer for the outstanding shares of Roanoke Coal Corporation. Roanoke Coal is expected to provide $162,500 in after-tax cash flow each year for the next 20 years. In addition, Roanoke has a $630,000 tax loss carryforward which King Solomon Mining can use in equal a
What are the two definitions of cash, and why do corporate treasurers often use the second definition?
Other things held constant, which of the following alternatives would increase a company's cash flow for the current year? a. Increase the number of years over which fixed assets are depreciated for tax purposes. b. Pay down the accounts payables. c. Reduce the days' sales outstanding (DSO) without affecting sales or op
What amount would a person with actual cash value (ACV)coverage receive for 2-year-old furniture destroyed by a fire? The furniture would cost $1,000 to replace today and had an estimated life of 5 years.
A firm anticipates sales of $200K in January, growing by 15% per month throughout the year. It purchases 50% of its sales 60 days in advance of the actual sale, and pays for them 30 days in advance of the sale. Credit sales equate to 90% of all sales. Expenses for each month are 25% of total sales; taxes are paid at the rate
It is important to identify and use only incremental cash flows in capital investment decisions: a. Because ultimately it is the change in a firm's overall future cash flows that matter. b. Because they are the simplest to calculate. c. To accommodate unforeseen changes that might occur. d. Only when the stand-al
Midland Chemical Co. is negotiating a loan from Manhattan Bank and Trust. The small chemical company needs to borrow $500,000. The bank offers a rate of 8¼ percent with a 20 percent compensating balance requirement, or as an alternative, 9 3.4 percent with additional fees of $5,500 to cover services the bank is providing. In ei
All of the following are common cash flow items to be considered at TIME ZERO, except a. initial purchase costs of assets b. net cashflow from sale of any old equipment being replaced c. installation costs d. working capital investment (such as inventory) e. depreciation tax shield from new assets being purchased
The Timberline firm expects a total need of $12,500 over the next 3 months. They have a beginning cash balance of $1,500, and cash is replenished when it hits zero. The fixed cost of selling securities to replenish cash balances is $3.50. The interest rate on marketable securities is 8% per annum. There is a constant rate of cas
Tangston Mining was extended credit terms ov 3/15 net 30 EOM. The cost of giving up the cash discount, assuming payment would be made on the last day of the credit period is: a)75.26%, b) 16.56%, c)72.99%, d) 37.12%.
Use the following information to answer the following question: Quick Corp. makes its purchases under terms of 2/10 net 30. If Quick Corp. foregoes the discount and pays for its purchases according to the terms of its trade credit, what is Quick's effective cost of using this source of credit? a.) 26.67% b.) 31.48% c.)
Please help with the following problem. Provide step by step calculations in an Excel spreadsheet. The stock of Payout Corp. will go ex-dividend tomorrow. The dividend will be $0.50 per share, and there are 20,000 shares of stock outstanding. The market-value balance sheet for Payout is shown on the following table. a. What