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Expected rate of return..

Starlight, Inc. must choose between two asset purchases. The annual rate of return and related probabilities given below summarize the firm's analysis. Asset A Asset B Rate of Return Probability Rate of Return Probability 8% 40% 7%

Prepare budgeted financial statements for the Ma & Pa Kettle's Chili Company: 1. Ma & Pa Kettle's Chili Company has begun selling a new chili recipe and they want you to help them with next year's budgeted financial statements. Using the Ma & Pa Kettle information complete Ma & Pa's forecast and answer the questions which follow. Ma & Pa Kettle's Chili Company has begun selling a new chili recipe and they want you to help them with next year's budgeted financial statements. Using the worksheet below, complete Ma & Pa's forecast and answer the question which follows. Assumptions To begin with, Ma & Pa are sure sales will grow 50% next year. Assume that is true. Then assume that COGS, Current Assets, and Current Liabilities all vary directly with Sales (that means if sales grows a certain percentage, then the account in question will grow by that same percentage). Assume that fixed expenses will remain unchanged and that $1,000 worth of new Fixed Assets will be obtained next year. Lastly, the current dividend policy will be continued next year. Ma & Pa Kettle Chili Company, Inc. Financial Forecast for 2010 2009 Est for 2010 Sales $10,000 _______ COGS 4,000 _______ Gross Profit 6,000 _______ Fixed Expenses 3,000 _______ Before-Tax Profit 3,000 _______ Tax @ 33.3333% 1,000 _______ Net Profit $2,000 _______ Dividends $0 _______ Current Assets $25,000 _______ Net Fixed Assets 15,000 _______ Total Assets $40,000 ______ Current Liabilities $17,000 ______ Long-term debt 3,000 ______ Common Stock 7,000 ______ Retained Earnings 13,000 ______ Total Liabs & Eq $40,000 ______ Amount need to balance the balance sheet _____ This is the question. (Projected total assets minus projected total liabilities & equity *) If this number is positive it means Ma & Pa need additional external funding to finance their projected asset growth. If this number is negative it means Ma & Pa have programmed too much financing for the amount of assets they project.

Prepare budgeted financial statements for the Ma & Pa Kettle's Chili Company: 1. Ma & Pa Kettle's Chili Company has begun selling a new chili recipe and they want you to help them with next year's budgeted financial statements. Using the Ma & Pa Kettle information complete Ma & Pa's forecast and answer the questions which

Monetary Impact, Cost Benefit and Additional Benefit

1. Identify one each (1) benefit, (2) disbenefit, and (3) monetary cost that would impact each of the following projects: a. A new electrical distribution station in a developing part of the city, with feeds from the city power plant and from a regional electrical grid b. Annexation of an adjoining semirural area into th

S&R Rentals rents and services different types of yard-improvement equipment. Information about the company's financial performance for a recent fiscal period is provided below:

The following document contains some brain teasers randomly selected for another study template by my peers for an upcoming study session 1. S&R Rentals rents and services different types of yard-improvement equipment. Information about the company's financial performance for a recent fiscal period is provided below: Average

Gross estate address including Van Gogh artwork

Susan owns a Van Gogh painting valued at $10 million. In addition to the painting, Susan owns approximately $15 million of other assets. For estate planning purposes, Susan has given the painting to the Van Gogh museum in Amsterdam with the understanding that Susan will retain the painting in her residence during her lifetime; t

This posting addresses the value of the decedent's estate.

Suppose the decedent dies in 2006 and has interests in the following assets: $400,000 residence owned jointly with right of survivorship with her husband; $500,000 real estate parcel owned jointly with right of survivorship with her sister (decedent furnished all consideration); $200,000 brokerage account owned as a tenancy-in-

Post-2008 Economic and Financial Realities

Given the new economic and market realities prevailing since the 2008 great recession, first list and then explain in detail four behavioral finance lessons that can be of value to anyone going forward in life. You may answer this question from the perspective of your own personal life as an individual, or the perspective of you

Finance Problem: Basic Valuation

B5. (Expected return and risk) General Eclectic Corporation is considering three possible capital investment projects. The projected returns depend on the future state of the economy as given here. a. Calculate each project's expected return, variance, and standard deviation. b. Rank the projects on the basis of (1) expected

fraud red flags

While performing an audit of CCC Corporation, the audit team noticed something that didn't look right. The company's receivables aging report showed that bank loan receivables were approximately $91 million. That audit team calculated the bank loan edible receivables to be approximately $50 million. The client didn't identify sp

PV of Accounts, PV of Income Stream & Discounted Value Gold Mine

A. Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%? B. Suppose you have two bank accounts, one called Account A and an

Transaction Analysis and Financial Statements

Expert Consulting Services Inc. was organized on March 1, 2010 by two former college roommates. The corporation provides computer consulting services to small businesses. The following transactions occurred during the first month of operations: March 2: Received contributions of $20,000 from each of the two principa

Cost of equity and capital

How will Rensselaer Felt's WACC and cost of equity change if it issues $ 50 million in new equity and uses the proceeds to retire long- term debt? Assume the company's borrowing rates are unchanged. Use the three- step procedure . Step 1 Calculate the opportunity cost of capital. Step 2 Estimate the cost of debt, r D , at the

Evaluating investment opportunity: Japan example

You have an investment opportunity in Japan. It requires an investment of $1 million today and will produce a cash flow of Y114 in one year with no risk. Suppose the risk free interest rate in the US is 4%, the risk free interest rate in Japan is 2%, and the current competitive exchange rateis Y110 per $1. What is the NPV of the

Which stock is riskier? Explain.

Common stock A has an expected return of 10%, a standard deviation of future returns of 25%, and a beta of 1.25. Common stock B has an expected return of 12%, a standard deviation of future returns of 15%, and a beta of 1.50.

Subchapter S; S corporations; Lang Corporation; S corporation stock purchases

1. What are the eligibility requirements that a corporation must meet in order to qualify under Subchapter S? 2. What limits are placed on the selection of a tax year of an S corporation? How do these limits differ from those applicable to C corporations and partnerships? 3. Durrabusiness is organized as a regular C corpo

Characteristics of MACS; efficiency in handling insurance claims

Chow Company is an insurance company in Hong Kong. Chow hires 55 people to process insurance claims. The volume of claims is extremely high and all claims examiners are kept extremely busy. The number of claims in which errors are made runs about 10%, If a claim has an error, it must be corrected by the claims examiners. Aft

Financial Management Theory

1. Much of financial management theory is based upon the assumption that individuals act rationally in their decision making. Text has noted several areas where the conclusion is that individuals do not act rationally. What is the implication of this conclusion on our understanding of traditional financial management. 2. How

Differential analysis and financial analysis

A frequent activity in managerial accounting is differential analysis. Differential analysis is about relevant costs for decision-making in management accounting. Only those costs and benefits that "differ" between alternatives are relevant in a decision. All other costs and benefits are irrelevant and should be ignored. Differe

Estimating the Current Price of BB Stock

BB Company pays a dividend of $4.00 The dividend expected growth rate for the three coming years : 6% After the three years : 4% The expected beta for BB stock 1.2 The risk free rate 3.00% The market rate 9.00% Find the estimated current price.

Stock Split Questions

Grullon Co. is considering a 7-for-3 stock split. The current stock price is $67.50 per share, and the firm believes that its total market value would increase by 5% as a result of the improved liquidity that should follow the split. What is the stock's expected price following the split?

Dynamic Futon: Forecast Level of Payable

Dynamic Futon forecasts the following purchases from suppliers: Jan. Feb. Mar. Apr. May Jun. Value of goods ($ millions) 32 28 25 22 20 20 a. Forty percent of goods are supplied cash-on-delivery. The remainder are paid with an average delay of one month. If Dynamic Futon starts the year with payables of $22

Net Income VS Cash Flows

Compare and contrast net income and cash flows. Compare and contrast market value and book value of the assets.

Financial Reporting and Current Assets: Example Problem

Which of the following is not a current asset? Choose one answer. a. Prepaid property taxes that relate to the next operating period. b. The cash surrender value of a life insurance policy carried by a corporation on its president. c. Marketable securities purchased as a temporary investment of cash. d. Insta

Carol Vessey Current Pricing Practices: Optimal Markup on Cost and Price

Carol Vessey is a managing partner of Dry Air, Inc., a New Orleans-based dehumidifier-systems distribution firm. Vessey has been asked to complete an analysis of profit margins for the firm. Unfortunately, her predecessor on this project was abruptly transferred, leaving little information on the firm's current pricing practices