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# Finance

### Opening a branch

King, Inc., a successful Midwest firm, is considering opening a branch office on the west coast. Under normal economic conditions, with a 45% probability of occurring, King can expect to earn a net income of \$50,000 per year. In a mini-recession, at 25% probability, King will earn \$20,000. In a severe recession, at a 20% probabi

### Calculate current price per share for Cali Corporation

Calculate the current price per share for Cali Corporation Sales = 10,000 units Sales price per unit = \$12 Variable cost per unit = \$6 Fixed costs = \$10,000 Long-term debt = \$15,000 Interest rate on long-term debt = 8% Tax rate = 40% Dividend payout ratio = 60% Expected long-term growth rate = 8% Shares of common sto

### 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

### Johnson Industries: What is the project's initial investment outlay?

Johnson Industries is considering an expansion project. The necessary equipment could be purchased for \$9 million, and the project would also require an initial \$3 million investment in net operating working capital. The company's tax rate is 40%. What is the project's initial investment outlay?

### Relationship of Financial Markets and Institutions

The recent economic difficulties in the United States are often linked to financial markets and institutions. This raises the question, what is the relationship between financial markets, financial institutions and macroeconomic performance of the economy?

### Contemporary issues in IFM

Evaluate contemporary issues in IFM for the Apple Company.

### Why did ICBC issue equity in markets outside of China; listing for foreign investors

Why did ICBC feel it was necessary to issue equity in markets outside of China? What are the advantages of such a move? Can you see any disadvantages? What was the attraction of the ICBC listing to foreign investors? What do you think are the risks for a foreigner associated with investing in ICBC? This question comes

### Supernormal Growth Stock Valuation for Taussig Technologies: Calculate yields

Taussig Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years. This same supernormal growth rate is expected to last for another 2 years (g1 = g2 = 20%). a.) If D0 = \$1.60, rs = 10%, and gl = 6%, then what is TTC's stock worth today? What is expected dividend yield and its capital gains y

### Rolen Riders Preferred Stock Valuation

Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 10% of its \$100 par value. Preferred stock of this type currently yields 8%. Assume dividends are paid annually. a.) What is the value of Rolen's preferred stock? b.) Suppose interest rate levels have risen to the point where the pre

### Boehm Incorporated Constant Growth Valuation

Boehm Incorporated is expected to pay a \$1.50 per share dividend at the end of this year (i.e., D=\$1.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, r, is 15%. What is the value per share of Boehm's stock?

### What factors should be considered in price setting? Which is most important? Why?

What factors should be considered in price setting? Which is most important? Why?

### 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

### Finance: Are topics relevant to non-profit organizations?

Discuss whether or not you feel the following topics are relevant to Non-Profit Organizations. Discuss how you feel these topics are similar or different in a Non-Profit Organization. 1. ethics 2. capital budgeting 3. strategic planning 4. financial ratios 5. EFN 6. cash flows and other financial statements You may

### MC short selling and efficient portfolio choices

1- You wish to sell short 100 shares of XYZ Corporation stock. If the last two transactions were at 34.10 followed by 34.15, you only can sell short on the next transaction at a price of : a. 34.10 or higher. b. 34.15 or higher. c. 34.15 or lower. d. 34.10 or lower. 2- Stocks A, B, and C have the same expected return an

### Calculations and Ratios of a Firm

What calculations and ratios should a firm utilize to ensure it is competing at a high level? Why?

### Finance: Analyze and select investment from CBS bond, Alabama Power, or Emerson

You have finally saved \$10,000 and are ready to make your first investment. You have the three following alternatives for investing that money: ? A CBS bond with a par value of \$1,000, an interest rate of 7.625, and a maturity of 10 years. The bond is selling for \$986 ? Alabama Power Company preferred stock with a \$50 par

### Company raise funds with preferred stock instead of debt

Why would a company raise funds with preferred stock instead of debt? One of the reasons they are issued with preferences is because they also have restrictions compared to common shares. The restrictions commonly include: - no voting rights or say in the makeup of the board of directors - no requirement for any payment o

### Preferred stock participating characteristic

In the summary of the preferred stock vs. common stock, one of the things mentioned was that "Preferred stockholders do not participate in the earnings of the company beyond the stated rate in the way that common stockholders do." This is not always the case. Sometimes preferred stock is structured so that they will share in

### Exercises 5.8, 5.10, 5.14: TOI on discounts, note receivable interest, prepaid rent

Exercise 5.8 Cash discounts- ROI a. Calculate the approximate annual rate return in investment of the following cash discount: 1. 1/15, n30. 2. 2/10, n60. 3. 1/10, n90. b. Which of these terms, if any, is not likely to be a significant incentive to the customer to pay promptly? Explain your answer. Exercise 5.10 Not

### Preparing Journal Entries for Depreciation and Amortization

A company purchased a new factory machine for \$650,000. The machine is expected to be productive for 5 years and, at the end of the 5 years, it is expected to be worth \$50,000 in salvage value. The machine manufactures widgets and is expected to produce 5 million widgets over its productive life. As it eventually turned out,

### Outlay to Fund Replacement of the Old Delivery Van

This company is considering a replacement of an old delivery van with a new one that is more efficient. The old van cost \$30,000 when it was purchased 5 years ago. The old van is being depreciated using the simplified straight line method over a useful life of 10 years. The old van could be sold today for \$5,000. The new van has

### Weighted-Average Interest to Finance Building Construction

Hanson Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were \$1,800,000 on March 1, \$1,200,000 on June 1, and \$3,000,000 on December 31. Hanson Company borrowed \$1,000,000 on March 1 on a 5-year, 12% note to help finance construction of the building. In addit

### Tropical Paradise Resort: Price Services

The Tropical Paradise Resort is located on the coast of an exotic island in the Pacific Ocean. The room rates are \$300 a night. If you have a room, you also have free access to the pool, gym and tennis courts. The resort offers also the following services: - aerobics classes (\$5 per class) - therapeutic massages (\$40 per

### Payback Period for ABC Corporation

The ABC Corporation is considering a project which has an up-front cost paid today at t = 0. The project will generate positive cash flows of \$70,000 a year at the end of each of the next five years. The project's NPV is \$90,000 and the company's WACC is 12 percent. What is the project's simple, regular payback?

### Use Excel Solver to Develop Unit Prices for Products and Service

Please see attached document. Develop prices using Excel Solver - Lindo is OK, but Excel Solver is much preferred so that changes can be made. You will need baselines in terms of units. Please feel free to make the following assumptions for a period of 1 year: # of units (basic license products): 350 # of units (ente

### Effective Annual Rates and Calculating Monthly Payments

I am in dire need of help on this work. Thanks! Merchants Bank offers to lend you \$30,000 at a nominal rate of 6.0%, simple interest, with interest paid quarterly. Gold Coast Bank offers to lend you the \$30,000, but it will charge 7.0%, simple interest, with interest paid at the end of the year. What's the difference in the

### Expected return, variance, and standard deviation

Given the data below, calculate the expected return, variance, and standard deviation of the following company. In a recessionary economy, which is expected to occur with a 30% probability, the expected returns would be -5% In an expanding economy, with an expected probability of occurrence of 20% the expected return would

### Pennington's: Calculate the average days for the firm to pay its suppliers.

Pennington's has annual sales of \$1.46 million. The cost of goods sold is equal to 78 percent of sales. The firm has an average accounts receivable balance of \$148,900 and an average accounts payable balance of \$163,500. How many days on average does it take the firm to pay its suppliers?