1. You own your own firm, and you want to raise $30 million to fund an expansion. Currently, you own 100% of the firm's equity, and the firm has no debt. To raise the $30 million solely through equity, you will need to sell two-thirds of the firm. However, you would prefer to maintain at least a 50% equity stake in the firm to r
3 Staffing Company purchased net assets (i.e., assets minus liabilities) of Time Management Inc. for $390,000. Time Management Inc. is a retailer of software, books, seminars and related items. Its net asset has been carried on its books at a total of $183,000. An appraisal of all of Time Management Inc. assets and liabilities r
Faulk Corp is going through a period of growth. The company just paid a dividend of $1.50 per share and expects dividends to grow at a 22% rate for the next 7 years and then level off to a constant rate thereafter. The beta of stock is 1.4, the risk free rate of return is 5%, and the expected return on the market is 11%. The
A homeowner just obtained a 30 - year amortized mortgage loan for $150,000 at a nominal annual rate of 6.5%, with monthly payments. What percentage of the total payments made during the first 3 months will go toward payment of interest?
Zymase is a biotechnology start-up firm. Researchers at Zymase must choose one of three different research strategies. The payoffs (after-tax) and their likelihood for each strategy are show below. The risk of each project is diversifiable. Strategy Probability Pay-off (million) A 100% 75
Raviv Industries has $100 million in cash that it can use for a share repurchase. Suppose instead Raviv invests the funds in an account paying 10% interest for one year. a. If the corporate tax rate is 40%, how much additional cash will Raviv have at the end of the year net of corporate taxes? b. If investors pay a 20% tax r
1. Advise the difference between financing and investment policies in working capital management and in each case provide an example to illustrate the answer. 2. Please note that R on teh below statement stands for South African rand known as ZAR. Mxolisi LTD has a total equity of R500,000. The market risk premium require
Julie is considering buying stock in and only one of the following companies Uninvest.com which runs a website against geared retirement income and has a 10% probability of returning 20% this year and 90% probability of returning 7% or speculate incorporate will invest in type derivate security and has a 50% chance of returning
2. Suppose the market portfolio has an expected return of 10% and a volatility of 20%, while Microsofts stock has volatility of 30%. a. Given its higher volatility, should we expect Microsoft to have an equity cost of capital that is higher than 10%? b. What would have to be true for Microsofts equity cost of capital to be
Would the financial stability of a business be a factor in determining which investment criteria method is appropriate to access particular investments or projects?
Kim and Dan Bergholt are both government workers. They are considering purchasing a home in the Washington D.C. area for about $280,000. They estimate monthly expenses for utilities at $220, maintenance at $100, property taxes at $380, and home insurance payments at $50. Their only debt consists of car loans requiring a monthly
Hi, Can you assist me with this problem? Thanks in advance! ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The Federal Reserve System resembles the U.S. constitution in that it was designed with many checks and balances. Explain and illustrate.
With all else equal (i.e. level of credit risk, history, etc) for an applicant, how would the manner of which interest is paid compare among short-term loans? For example, if interest is to be paid in arrears (at end of term), how is this different from paying interest on a monthly basis?
Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing the slope and installing the lift costs another $1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the
Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of the growth year. The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the value per share of the company's stock?
1. Baruk Industries has no cash and a debt obligation of $36 million that is now due. The market value of Baruk's assets is $81 million, and the firm has no other liabilities. Assume perfect capital markets. a. Suppose Baruk has 10 million shares outstanding. What is Baruk's current share price? b. How many new shares must B
Hachey Company has accounts receivable of $95,100 at March 31, 2007. An analysis of the accounts shows these amounts. Balance, March 31 Month of Sale 2007 2006 March 65,000 75,000 February 12,600 8,000 Dec and Jan 10.100 2,400 Nov and Oct 7,400 1,100
Many potential investors feel CD's are safe investments as well. Certificates of Deposit (CD's) offers varying interest rates based on a certain time period of investment. Inflation could certainly represent an impact to purchasing power and impact the return of your investment although probably minimal given a short-time period
I would like some help to ensure I am on the right track with these questions, thank you. (one choice per question) In which of the following ways do companies change the composition of their management? [A] The shareholders of a company engage in a proxy contest to replace the current board. [B] The firm can sell new
Taxes represent another variable to consider for investors. Depending on the investment, taxes are either paid upfront (i.e. IRA) or upon withdrawals (i.e. 401K). External impacts such as taxes and inflation can prevent any investments from being considered 'riskless'. Are there any other external impacts an investor should
2. Suppose the market portfolio has an expected return of 10% and a volatility of 20%, while Microsoft's stock has a volatility of 30%. a. Given its higher volatility, should we expect Microsoft to have an equity cost of capital that is higher than 10%? b. What would have to be true for Microsoft's equity cost of capital to be
1. Problem 12.20 - CVP Application and What-If Questions; Sales Mix Issue, page 488. This provides a simple illustration of CVP analysis. 2. Problem 12.26 - Understanding the Effects of Operating Leverage, page 492. This provides an illustration of CVP analysis. 3. Problem 13.10 - Product Costing and Manufacturing Overhe
My subject is not listed. Looking for help with Corporate Finance, university level. ( 2nd year) The question is as follows: Snail corporation wants to purchase Bug corporation. The financial manager of Snail corporation forecasted the following free cash flows (FCFs) for Bug corporation for year 1-6 : $3.3mil, $3.6mil,
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. Which stock is riskier? Explain.
Pick any publicly traded company that their financials are published on the SEC website. For the purpose of this assignment we have selected Kirkland's Inc. Kirkland is specialty retailer of home décor in the United States, operating 299 stores in 34 states and offers a broad selection of distinctive merchandise. 1. Do
Healthy Foods, Inc., sells 50-pound bags of grapes to the military for $10 a bag. The fixed costs of this operation are $80,000, while the variable costs of the grapes are $.10 per pound. a. What is the break-even point in bags? b. Calculate the profit or loss on 12,000 bags and on 25,000 bags. c. What is the degree of operat
This exercise is designed to refresh your understanding of basic accounting concepts and test your knowledge of income statements and balance sheets and the impact of various transactions and them. Show the effect of the following transactions listed below on the total assets, current ratio and net income of the firm. Use (+)
Mullineaux Corporation has a target capital structure of 60% common stock, 5% preferred stock, and 35% debt. Its cost of equity is 14%, the cost of preferred stock is 6%, and the cost of debt is 8%. The relevant tax rate is 35%. A. What is Mullineaux's WACC? B. The company president has approached you about Mullineaux's ca
1. Using the rule 72, approximate the following amounts a. If the value of land in an area is increasing 6 percent a year, how long will it take for property values to double? b. If you earn 10 percent on your investments how long will it take your money to double? c. At an annual interest rate of 5 percent how long will it
1) Assume that the CAPM is a good description of stock price returns. The market expected return is 7% with 10% volatility and the risk-free rate is 3%. New news arrives that does not change any of these numbers but it does change the expected return of the following stocks: Expected R