You believe Dr. Washington is now ready to begin risk analysis and is ready to understand the risk differences among various investments. The most basic fact you want to convey to him is risk and return?the greater the risk, the greater the expected return. From there, you want to explain how expected returns can be calculated g
When Maria was considering buying the peanut butter cookie plant, one of her options was to convert it to make more lemon crème cookies, since near-term demand for the lemon crème cookies exceeded current capacity by 600,000 packs. What should Maria have done if the breakeven volume of lemon crème cookies in this new plant we
Case study #1: The NY Fashion Company: What is the financial/economic explanation for the difference between the unit profits found in parts (d) and (e).
Case Study#1 The NY Fashion Company From the tenth floor of her office building, Diana Ricks watches her swarms of New Yorkers watching stores along streets. On this hot July day, she pays particular attention to the fashions worn by the various women and wonders what they will choose to wear in the fall. Her thoughts are
Which of the following statements is most correct? a. In a private placement, securities are sold to private (individual) investors rather than to institutions. b. Private placements occur most frequently in stock issues, but bonds can also be sold by private placement. c. Private placements are convenient for issuer
(See attached files for full problem description) --- Xtreme Toys is a small manufacturing company in Southern California. Management is concerned because as their sales have grown, their cash flow has shrunk. Management doesn't understand how this could happen and has approached your team to find a solution for th
Discussing changes in the financial services sector. Put particular focus on major changes in banking laws, how the Internet is impacting the industry, industry consolidation, and international banking.
I specialize in solving business problems based on research and evaluation. I have just been hired by the new president of Playword Greeting Cards, an established company that sells greeting cards and collectibles to its own line of company-owned and franchise stores. The president wants my firm to research the causes of a downt
Please help with the following problem. The dividend per share in one year is $2. In year two it is $4 a share. Then the dividend will grow at 5% per year after that. The expected rate of return is 12%. a What is the current stock price? b. What is the expected price of the stock in one year? c. The expected r
Company A is equity financed with 10000 shares of equity outstanding selling for $100 a share. It is restructuring. Low debt plan is to issue debt of $200,000 with proceeds to buy the stock. The high debt lan would exchange $400,000 of debt for equity. The debt will pay an interest rate of 10%. Company A pays no taxes. a
I saw on the news that the Dow Jones Industrial Average was down 100 points and that the NASDAQ was up 10 points." What exactly are the Dow Jones Industrial Average and the NASDAQ, and how can one be up and the other be down?
1. Net income is $55,000, dividends paid are $8,000; what is the dividend pay-out ratio? 2. You own 200 shares of Easy stock that has a current market price of $25/share. What is the value of your holdings after a 15% stock dividend if the stock price per share remains unchanged? 3. If the value of one currency goes d
Throughout the course of the year, my various projects will require a total amount of cash of $4,000,000. The interest cost for this requirement is 9.75%, while each transaction costs $100 to complete. What is my EOQ? How often should I order? What is my average cash balance? What is my total cost through the course of the year?
Pulp Paper Company and Holt Paper Company are able to generate earnings before interest and taxes of $150,000. The separate capital structures for Pulp and Holt are shown below: Pulp Holt Debt @ 10% $ 800,000 Debt @ 10% $ 400,000 Common stock, $5 par 700,000 Common stock, $5 par 1,100,000 Total $1,500,
2. Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $100,000 if credit is extended to these new customers. Of the new accounts receivable generated, 10 percent will prove to be uncollectible. Additional collection costs will be 3 percent of sale
You walk into a new job and find that there are hundreds of accounts payable checks sitting in drawers. At this point you have no idea how much cash is available and you must meet a payroll of $100,000 in 2 days. Where would you start? What would you do?
Vineet you posted a response on March 5 2006 pertaining to short Term Financial Management (see below). One of the questions asked was: will the company need any outside financing? and the response was as follows: There is a cash shortfall and a need for outside financing Could you please expound on this response as I tr
Investment, mortgage, distribution of property and the need to raise finances. These are the topics covered in the five questions presented. Please see the questions in the long description.
Detailed guidance to answer these questions is given in the solution: 6. ISP Corporation is an Internet service provider. How can ISP obtain capital to finance its operations? Discuss the different options. 7. With a couple of new ideas regarding software design, Carol and Ray start a partnership that, with business su
A firm sells two products, one call cogs and the other called sprocket. The firm has a fixed cost of $100,000.00 per year. Each cog costs $8 to produce but can be sold in the market for $18. Each sprocket costs $22 to product, and has a market price of $40. 5 cogs are sold for every 7 sprockets. The production facility of t
Scenario: The largest retail brokerage firm in the US, America's Best Investment Company, has hired you to advise clients on investments and to meet their individual financial objectives. Your first client, Dr. Tyrone Washington, is a wealthy, young doctor with little experience in financial decision making and investments.
A company has an equal number of low-risk projects, average-risk projects, and high-risk projects. The company estimates that the overall company's WACC is 12%. This is also the correct cost of capital for the company's average-risk projects. The company's CFO argues that, even though the company's projects have different risks,
As your first week at Henley Manufacturing Inc. draws to a close, you find a memorandum on your desk from the company's CEO. The memo outlines sales and earnings goals for next year: sales are expected to increase 15% with net income growing by 20%. The memo says that these goals are ambitious in light of the company's performa
Your Company has a portfolio made up of 2 assets, One from the USA and the other from Swaziland. Their information is as follows: USA Swaziland Return 12.2% 18.4% Deviation 10.5%
What are the additional costs of choosing the new process? Worrix Corporation manufactures and sells 3,000 premium quality multimedia projectors at $12,000 per unit e ach year. At the current production level, the firm's manufacturing costs include variable costs of $2,500 per unit and annual fixed costs of $6,000,000. Add
I am trying to figure out how to calculate beta (sensitivity) of the monthly return compared to the liquidity factor. thanks!
Please help with the given problem: Lexicon Inc. bought a patent for $600,000 on January 2, 2001, at which time the patent had an estimated useful life of ten years. On February 2, 2004, it was determined that the patent's useful life would expire at the end of 2007. How much would Lexicon record as amortization expense for t
E3-4 On January 1, 2002, the stockholders' equity section of Ted Parge Corporation shows: common stock ($5 par value) $1,500,000; paid-in capital in excess of par value $1,000,000; and retained earnings $1,200,000. During the year, the following treasury stock transactions occurred. Mar. 1 Purchased 50,000 shares for cash at
Following are ten quarters of return data for Barboo Associates Stock, as well as return data during the same period for a broad stock market index. Using this information, calculate the following statistics for Barboo Associates stock. I.) Beta II.) Alpha III.) Coefficient of determination Quarter Bara
The company is comparing two different capital structures. Plan 1 would result in 2,000 shares of stock and $40,000 in debt and plan 2 would result in 4,000 shares of stock and $20,000 in debt. The interest rate is 10%. So if i ignored taxes and compare both of these plans to an all equity plan assuming EBIT is $5,000 and the
Buffet enterprises is considering a change from its current capital structure. Buffet currently has an all equity capital structure and is considering a capital structure with 40% debt. There are 2,000 shares outstanding at a price per share of $100. EBIT is expected to remain constant at $29,000. the interest rate on the new de
Our intrepid investment advisor, Uncle Sal, is recommending that Granny invest in his latest hot stock pick. Granny has asked Sal to provide her with a ratio analysis of his pick, Fluffy's Cat Farms (ticker: FCF) traded on the Cat and Dog Exchange. Granny is considering buying a $50,000 stake in FCF at a buy-in price of $2 per