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Evaluating Alternatives for Raising Funds

ORNE Corporation plans to raise $2 million to pay off its existing short-term bank loan of $600,000 and to increase total assets by $1,400,000. The bank loan bears an interest rate of 10 percent. The company's president owns 57.5% percent of the 1,000,000 shares of common stock and wishes to maintain control of the company. Th

Stock efficiently priced

See attached file. First carefully study the financial data and info which is entitled 'Selected Apple Inc.' (AAPL) Financial Data and Info and is provided as an attachmentat. Next, answer the two questions that follow. A. Strictly based on the given information, can you tell me if Apple's stock was efficiently priced at t

Finance Problem

The controller of Dugan Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. MONTH- MAINTENANCE COST MACHINE HOURS January $2,400 300 February

Control growth in health care spending: limits to reimbursement to providers

One method commonly used by both governments and private health insurers to control the growth in health care spending are limits to reimbursement to providers. How can these limits to reimbursement be viewed as the exercise of monopsony power? To prevent health care providers from prescribing more services it is often common to

Investment Banking Process

Which of the following statements concerning common stock and the investment banking process is NOT CORRECT? A. The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue. B. If a firm sells 1,000,000 new shares of Class B stock, the transacti

Dunbar Hardware: Maximum Price Per Share

Dunbar Hardware, a national hardware chain, is considering purchasing a smaller chain, Eastern Hardware. Dunbar's analysts project that the merger will result in incremental free flows and interest tax savings with a combined present value of $72.52 million, and they have determined that the appropriate discount rate for valuing

Market Value / Total Value

Firm L has debt with a market value of $200,000 and a yield of 9%. The firm's equity has a market value of $300,000, its earnings are growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth, what would Firm L's total value be if it had no debt?

Finance practice exam problems

1) A company's stock sells at a P/E ratio of 21 times earnings. It is expected to pay dividends of $2 per share in each of the next five years and to generate an EPS of $5 in year 5. Using the "dividends-and-earnings model" and a 12% discount rate, compute the stock's justified price. 2) A particular company currently has

Sample Financial Information for Variable and Fixed Costs

Define Variable and Fixed Cots - For the variable cost, if the Unit price for service is $175 yen per hour justify variable cost associated with price which would include in this case probably only labor cost (for example, maybe 2 persons at 25 yen per person per hour? up to you!) For fixed costs, make it simple, show an annual

Discuss Annual Percent Change and rate of inflation for CPI index

Please see the attached file. Provide the correct short summaries to the following questions on annual percent change or rate of inflation figures. The following link will provides the applicable chart. The price level starts at 50 in 1800.

For each of the loan programs under the Small Business Administration, discuss the advantages and disadvantages of each in terms of the complexity of application and protection in the event of a default.

Discuss what are the advantages and disadvantages of each of the following programs in terms of complexity of application and protection in the event of a default: a) Basic micro loan program. b) Basic 7(a) loan program. c) Patriot loan program. Note that, these programs are all a part of the Small Business Administratio

Healthcare finance, cost-volume-profit, management accounting

Consider the CVP graphs below for two providers operating in a fee-for-service environment: see attached file a. Assuming the graphs are drawn to the same scale, which provider has the greater fixed costs? The greater variable cost rate? The greater per unit revenue? b.Which provider has the greater contribution margin? c.

Comment by Walker of Herman-Miller: Inefficient Markets and Corporate Decisions

Consider the comments of Brian Walker, the president of Herman-Miller North America, who was quoted in the chapter as having said: 'For dot.coms, it appears that the market has implicitly capitalized a lot of those costs. The market views their negative earnings as investments in the future. It's more difficult for a traditional

Calculating the market value of firm's common equity

Assume a firm has been growing at a 15 percent annual rate and is expected to continue to do so for 3 more years. At that time, growth is expected to slow to a constant 4 percent rate. The firm maintains a 30 percent payout ratio, and this year's retained earnings were $1.4 million. The firm's beta is 1.25, the risk-free rate is

Present Value and Future Value

1.A)The formula to calculate the value of $1 put into savings today is fv = pv*((1+i)^n). The variables are: fv = future value pv = present value i = interest rate per period n = the number of periods - an exponent in the formula a. What does the exponent in this case state that you need to do mathematically to th

Challenges and Opportunities Arising from Financial Crisis

1. Discuss the major challenges and opportunities arising from the global financial crisis. 2. Discuss the major factors behind the collapse of the U.S. mortgage markets. What role, if any, did financial innovation play in the collapse of the mortgage market that began in the summer of 2007? Also, evaluate the Federal Reserve's

Effective interest/CCC/payable days

Problem 1 Company A purchases goods from its supplier on terms of 2/10, net 40. The effective annual cost to Company A if it chooses not to take advantage of the trade discount offered and stretches the accounts payable to 60 days is closest to: What is the EAR, effective annual rate? Problem 2 Company A had sales of $980 m

Excessive Optimism and Overconfidence

Consider the contention that excessive optimism and overconfidence are important characteristics of leadership. Might these traits help managers initiate and complete daunting projects that they would otherwise reject or abandon? Discuss this contention.

General Mills highest variable cost; Eastman Kodak contribution margin

Variable Cost to Break Even General Mills makes Wheaties, Cheerios, Betty Crocker cake mixes, and many other food products. Suppose the product manager of a new General Mills cereal has determined that the appropriate wholesale price for a carton of the cereal is $48. Fixed costs of the production and marketing of the cer


CBS bond with a par value of $1,000, an interest rate of 7.625 percent, and a maturity of 10 years The bond is selling for $986. Alabama Power Company preferred stock with a $50 par value and a dividend of $2.8125 per 61 year. The stock is currently trading at $39 per share. Emerson Electric common stock that is selling fo

Campbell Company's Capital Budgeting Cash Flows

The Campbell Company is evaluating the proposed acquisition of a new milling machine. The machine's base price is $108,000, and it would cost another $12,500 to modify it for special use. The machine fall into the MACRS 3-year class, and it would be sold after 3 years for $65,000. The machine would require an increase in net wor

Financial Review: 75 multiple choice questions

See attached file also. Please provide answers and a brief explanation. 1. Which of the following is not a product cost? a. The cost of commissions paid to sales staff b. The cost of ordering production supplies c. The cost of rent of the manufacturing facility d. (a) and (c) 2. Dave Wilburn is a stockbroker. I

Finance - Interest rate and present value.

1. At an interest rate of 12%, the six-year discount factor is .507. How many dollars is $.507 worth in six years if invested at 12%? 2. If the PV of $139 is $125, what is the discount factor? 3. If the cost of capital is 9%, what is the PV of $374 paid in year 9? 4. A project produces a cash flow of $432 in year 1, $13

Calculate income from operations; changes in estimates

PRACTICE 8 Prepare an Income Statement to determine Income from continuing operations and below the line: a) extraordinary loss ($100 tax) and b) loss in discontinued operations ($120 tax). (PRACTICE 8) COMPUTATION OF INCOME FROM CONTINUING OPERATIONS Sales $12,000 Cost of goods sold 5,000

McKinnley Corp financing plan; Miller Co EOQ, inventory; Acme ROI, dividends

1. McKinnley Corporation is developing a plan to finance its asset base. The firm has $5,000,000 in current assets, of which 20% are permanent, and $12,000,000 in fixed assets. Long-term rates are currently 9.5%, while short-term rates are 7%. McKinnley's tax rate is 30%. a. Construct a conservative financing plan with 80

Is it better to finance or invest?

Please help with the following problem. Many times managers need to make decisions on what equipment to buy and how to finance it. Suppose you are in the market for a new car for your business. Choose a vehicle that will suit your needs. You have the cash to pay for it if needed. You can buy the car with cash or finance