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Leverage and Break even

I have attached a file of the problems. Solve and submit problem 1. Be sure to show your work. 1. Carlsbad Machine Company is considering an expansion of its facilities. Its current income statement is as follows: Carlsbad Machine Company Income Statement Sales $4,000,000 Less: Variable expense (50% of sales) 2,000,

Bonds & Stock Value

Question 1 Blue Water Designs is preparing a bond offering with a 7 percent coupon rate and a face value of $1,000. The bonds will be repaid in 5 years. The company plans to issue the bonds at par value and pay interest semiannually. Given this, which one of the following statements is correct? The bonds will be sold at a

Perpetual system

Cash 8400 Inventory 2000 Common stock 8000 Retained Earnings 2400 During 2012, D & L Enterprises experienced the following events: 1. purchased inventory costing 5600 on account from Smoot Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of 500 were paid in cash. 2. Returne

Binomial Model

The current price of a stock is $20. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and theat expires in 1 year. (Hint: Use daily compounding.) Answer is: $2.39 need to explain how to get it

Comprehensive accounting cycle problem

The following trial balance was prepared for Gifts, Etc. on Dec. 31, 2010, after the closing entries were posted. debit credit cash 110,000 Acct. Rec. 136,000 Allowance for doubtful accts.

Financial Management Schedules

10. (This problem combines material from Chapters 21 and 22.) The financial manager has determined the following schedules for the cost of funds: Cost of Debt Ratio Cost of Debt Equity 0% 5% 13% 1

Systematic and Unsystematic Risks

I need to know whether each of the following is mostly a systematic or unsystematic risk factor. a. Bernie Ebbers resigns unexpectedly as CEO of MCI Corporation b. Disney receives an unsolicited bid from General Electric. c. The United States reports an unexpected increase in the consumer confidence index level. d. Apple

How Much Should You Pay to Purchase Each Share of Stock?

Michelak's Maritime Industries has relatively stable earnings and pays an annual dividend of $2.50 per share. This dividend has remained constant over the past few years and is expected to remain constant for some time to come. If you want to earn 12% on an investment in the common stock of Michelak's, how much should you pay to

financial function positions and activity in organization

As an example take a look at the company or organization you work in and identify those people whose jobs involve a financial function. Describe those positions and the activity and discuss how vital the activity is to the organization. How could knowledge of financial maters, processes, and rules help a person involved in co

Financial Management of U.S. Companies

Which of the following statements is true regarding the goal of financial management? A U.S. company considering international operations will have a different goal than a company that only conducts operations in the U.S. The firm's structure (i.e. corporation, sole proprietorship, partnership) is not relevant to

Prior period adjustments/preferred stock

1. Prior period adjustments are reported in the: income statement. balance sheet. statement of retained earnings. statement of cash flows. 2. Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as: Participating prefe

Current price and holding period

How would the price of a share of stock vary with the time an investor prefers to hold the stock? That is, suppose you have a planned holding period of 3 years and someone else has a planned holding period of 5 years. How would that affect the current price of the stock? Explain.

Abnormal rates of return

Problem1: Compute the abnormal rates of return for the following stocks during period t (ignore differential systematic risk): Stock Rit Rmt B 11.5%

Choosing a Loan

You are enrolling in an MBA program. To pay your tuition, you can either take out a standard student loan (so the interest payments are not tax deductible) with an EAR of 5 ½ % or you can use a tax-deductible home equity loan with an APR (monthly) of 6%. You anticipate being in a very low tax bracket, so your tax rate will be

Starting Your Own Business

What risks are there when starting your own business? What obstacles are there to raising capital for a new venture? Discuss the business plan as a vehicle for raising capital. Given the difficulties of accurately predicting the future, is a business plan useful?

Portfolio and characteristic line

Which one is right and why? (explain in one sentence) A portfolio is: a). a group of assets, such as stocks and bonds, held as a collective unit by an investor. b). the expected return on a risky asset. c). the expected return on a collection of risky assets. d). the variance of returns for

Oakton River Bridge Case Study (Integer Programing Model)

Oakton River Bridge Case study The Oakton River had long been considered an impediment to the development of a certain medium sized metropolitan area in the southeast. Lying to the east of the city, the river made it difficult for people living on its faster bank to commute to jobs in and around the city and to take advantage

Finance Allocation

Assume that $2 mil of Financial Services are related to billing and managerial reporting and $1 mil are related to payroll and personnel management activities. a. Devise and implement a cost allocation scheme that recognizes that Financial Services has two widely different functions? b. Is there any additional information

Finance: Cost Allocation for St. Mary's Hospital

Assume that the hospital uses salary dollar as the cost driver for the General Administration, housekeeping labor hours as the cost driver for Facilities, and patient services revenue as the cost driver for Financial Services. (The majority of the costs of the Facilities Department are devoted to housekeeping services) a. Wha


St Mary's Hospital has three support departments and four patient services departments. The direct cost to each of the support departments is as follows: General Administration $2,000,000 Facilities: $5,000,000 Financial Services: $3,000,000 1. Assume the hospital uses the direct method for cost allocation. Furthermor

Expected Return on Investment

The expected return for an investment is 30%. If we know the following information about the return distribution of the investment, what return will the investment produce if the economic climate is average? Climate Return Probability Poor 20% 0.30 Average

Finance Beta Calculations

Please calculate the beta and dividend payout ratio of a company with a stock price of $87.00, a dividend payment of $7.10 every year, increasing for the last 10 years, at a growth rate of 6%, while the current market rate of return stands at 13.19%, and an ROE or (cost of equity capital) of 15.37%. Risk-free investments are ret

Finance: Practice exam questions

1. The primary users of external financial reports are a. Those who direct day to day operations of a business enterprise b. Individuals who have an economic interest in the firm but who are not part of management c. Managers of an enterprise who plan, implement plans, and control costs d. None of the above

Nelson's Margin Call: Stock Decline and Margin Call

Nelson purchased 1,300 shares of stock for $12.75 a share. The initial margin requirement is 70 percent and the maintenance margin is 40 percent. What is the maximum percent by which the stock price can decline before he receives a margin call?