1. A Firm Finances With 30% Debt, 5% Preferred Stock, And The Remainder As

1. A firm finances with 30% debt, 5% preferred stock, and the remainder as common stock. The after-tax cost of debt is 4%, the after-tax cost of preferred stock is 9%, and the after-tax cost of equity is 13%. If the tax rate is 20%, find the WACC for this firm 2. A firm finances with 20% debt, 50% equity, and the remainder as preferred stock. The before-tax cost of debt is 7%, the before-tax cost of preferred stock is 10%, and the before-tax cost of equity is 16%. If the tax rate is 20%, find the WACC for this firm.

Messman Manufacturing Will Issue Common Stock To The Public For $50. The Expected Dividend

Messman Manufacturing will issue common stock to the public for $50. The expected dividend and the growth in dividends are $3.00 per share and 5%, respectively. If the flotation cost is 12% of the issue’s gross proceeds, what is the cost of external equity, re? Round your answer to two decimal place.

Calculate Selling Prices, Using Alternative Approaches To Costing And Pricing.. And To Think About

Calculate selling prices, using alternative approaches to costing and pricing.. and to think about the circumstances where each approach might be appropriate. This will illustrate the impact that different ways of measuring ‘cost’ can have on decision-making. The relevant cost, however, often depends on the timescale involved. In the short term, fixed costs may be unavoidable regardless of the course of action taken, in which case only the variable costs are relevant to the decision. In the longer term the level of most costs can be adjusted (and hence become avoidable) and so, for decisions with longer-term implications, fixed costs become relevant also. A long-standing controversy in setting selling prices based on cost, is which cost figure should be used: full cost, including fixed costs (absorption costing) or variable cost (marginal costing)? The case of Peter Smith requires you to focus on these alternative approaches and their implications. Peter Smith Banjo strings Peter Smith produces three different types of guitar strings, which sell in packs of six strings. Monthly cost and output figures for each string type are as follows: Table Product cost and output data Fine gauge Medium gauge Flatwound Total Total variable cost £8,000 £18,000 £20,000 £46,000 Fixed cost* £6,000 £6,000 £6,000 £18,000 Number of packs of 6 produced 4,000 4,000 4,000 12,000 * Total fixed cost is apportioned among the three products on a ‘units basis’, that is, according to the number of units (packs of strings) of each product produced. Currently the company uses a full cost plus approach to setting selling prices, adding a 30% profit mark-up to full cost. The Chief Executive, however, is very worried about the low level of sales and the resulting unused production capacity (the company is only operating at about 70% of capacity). It has been suggested to her by the company’s accountant that an alternative approach to pricing, based on marginal costing, be adopted. The justification provided by the accountant was that it was necessary to reduce price in order to generate more sales and any price that exceeds the variable cost would produce a positive contribution towards fixed costs which would be incurred anyway, regardless of the level of sales. Task Calculate the selling price per pack for each product, using, firstly, the current absorption costing approach and then, the proposed marginal costing approach. Remember that the difference between the two approaches is simply that with absorption costing a fixed cost per unit (pack) must be calculated and then the variable cost per unit added in order to arrive at a full cost figure. Once you have calculated the cost per pack, simply add the specified percentage of the cost figure as the profit mark-up. With the marginal cost approach, the logic, in this case, would be to consider any price significantly in excess of the variable cost as potentially acceptable. With the current absorption costing approach, a fixed, customary percentage is added to full cost as the profit mark-up. If your calculations are correct, you should have noticed just how much difference the different costing approaches can make to the selling price charged to customers! Comment on the difference in cost and price: is it significant? In what circumstances would each approach be appropriate? Record your results, spreadsheets and comments in a simple report with the title: Comparing absorption and marginal costing. Also add any description to help me the student understand the answers you give. (idiots guide, assuming a basic knowlege of cash accounting already exists)

A Project Has An Initial Cost Of $38,950, Expected Net Cash Inflows Of $13,000

A project has an initial cost of $38,950, expected net cash inflows of $13,000 per year for 12 years, and a cost of capital of 11%. What is the project’s NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Round your answer to the nearest cent.

A Project Has An Initial Cost Of $60,275, Expected Net Cash Inflows Of $12,000

A project has an initial cost of $60,275, expected net cash inflows of $12,000 per year for 7 years, and a cost of capital of 13%. What is the project’s MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

A Project Has An Initial Cost Of $67,575, Expected Net Cash Inflows Of $14,000

A project has an initial cost of $67,575, expected net cash inflows of $14,000 per year for 11 years, and a cost of capital of 8%. What is the project’s PI? Do not round your intermediate calculations. Round your answer to two decimal places.

A Project Has An Initial Cost Of $54,300, Expected Net Cash Inflows Of $14,000

A project has an initial cost of $54,300, expected net cash inflows of $14,000 per year for 9 years, and a cost of capital of 13%. What is the project’s payback period? Round your answer to two decimal place

2. You Are Contemplating An Investment In The Stock Of Idol Corporation. You Know

2. You are contemplating an investment in the stock of Idol Corporation. You know that the price of Idol stock is estimated using the constant-growth dividend discount model and its required return (cost of equity) is estimated using the CAPM. Yesterday, Idol paid a dividend of $3.00 per share. The dividend is expected to grow at an annual rate of 4% throughout the foreseeable future. Idol’s trailing P/E ratio is 18, its debt/equity ratio is 1.25, and its bonds are rated BB. The yield to maturity (cost of debt) for the bonds of Idol Corporation is 8% (which represents a 500 basis point spread over the risk-free rate).   You also know that the expected market return (S

5. Shortly After Its Recent Bankruptcy, A New Incarnation Of Sears (to Be Known

5. Shortly after its recent bankruptcy, a new incarnation of Sears (to be known as New Sears or “Nears”) is being formed. You have the opportunity to invest in “Nears”. If you invest $200 today, you will receive a zero-coupon bond that will pay $1,000 (face value or principal) at the end of 20 years. To be adequately compensated for the risk of this bond, you know that you should expect a spread (relative to comparable Treasury securities of at least 765 basis points. We also know that that yield for a 90-day Treasury bill is 0.50%, the yield for a 5-year Treasury note is 1.00%, the yield for a 10-year Treasury bond is 1.95%, the yield for a 20-year Treasury bond is 2.35%, and the yield for a 30-year Treasury bond is 3.05%. A. Provide calculations to identify whether the “Nears” bond appears to be a good investment. Interest rate on the 20 year is 8.38%. B. How much reinvestment rate risk does this bond have? Explain using less than 25 words. Since this is a zero coupon bond the reinvestment risk they have no investment risk since they issue no coupon payments.

In This Assignment An Examination Of Internal And External Factors Is Used For An

In this assignment an examination of internal and external factors is used for an analysis of a common stock performance. Choose a common stock that has experienced considerable price fluctuations in the past few years. Here are several examples (but there are many others): IBM J.P. Morgan Chase AT

Suppose The Schoof Company Has This Book Value Balance Sheet: Current Assets $30,000,000 Current

Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Fixed assets 70,000,000 Notes payable $10,000,000 Long-term debt 30,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000 The notes payable are to banks, and the interest rate on this debt is 8%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the company’s permanent capital structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 9%, and a 15-year maturity. The going rate of interest on new long-term debt, rd, is 10%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $56 per share. Calculate the firm’s market value capital structure. Do not round intermediate calculations. Round your answers to two decimal places.

The Gilbert Instrument Corporation Is Considering Replacing The Wood Steamer It Currently Uses To

The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer has 6 years of remaining life. If kept, the steamer will have depreciation expenses of $400 for 6 years. Its current book value is $2,400, and it can be sold on an Internet auction site for $4,500 at this time. Thus, the annual depreciation expense is $2,400/6=$400 per year. If the old steamer is not replaced, it can be sold for $800 at the end of its useful life. Gilbert is considering purchasing the Side Steamer 3000, a higher-end steamer, which costs $8,200, and has an estimated useful life of 6 years with an estimated salvage value of $900. This steamer falls into the MACRS 5-years class, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The new steamer is faster and allows for an output expansion, so sales would rise by $2,000 per year; the new machine’s much greater efficiency would reduce operating expenses by $1,400 per year. To support the greater sales, the new machine would require that inventories increase by $2,900, but accounts payable would simultaneously increase by $700. Gilbert’s marginal federal-plus-state tax rate is 40%, and the project cost of capital is 12%. Should it replace the old steamer What is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.

St. Johns River Shipyards’ Welding Machine Is 15 Years Old, Fully Depreciated, And Has

St. Johns River Shipyards’ welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. The new welder will cost $82,000 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $26,000 to $52,000 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 40%, and the project cost of capital is 15%. Should the old welder be replaced by the new one?

Cheeseburger And Taco Company Purchases 9,251 Boxes Of Cheese Each Year. It Costs $10

Cheeseburger and Taco Company purchases 9,251 boxes of cheese each year. It costs $10 to place and ship each order and $9.97 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is the annual ordering cost of cheese inventory. Round the answer to two decimals.

The President Of The Company You Work For Has Asked You To Evaluate The

The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm’s R

Franks Fries Part 1 Franks Fries, LLC Is Currently All Equity Financed, Has An

Franks Fries part 1 Franks Fries, LLC is currently all equity financed, has an EBIT of $2 million, and is in the 34% tax bracket. Frank, the company’s founder, is the lone shareholder. If the firm were to convert $4 million of equity into debt at a cost of 10%. What would be the total cash flow to Frank if he holds all the debt? (Do not include the dollar sign($) in your response. Enter your answer in the following format: X,XXX,XXX)

U.S.-based Investment Banks Have Undergone What Many Would Consider Substantive Changes In The Last

U.S.-based investment banks have undergone what many would consider substantive changes in the last eleven years, over the period 2007 to 2018. This period coincides with the Great Recession, which was a significant driver of changes to investment bank business and characteristics. Such changes include wider fluctuations in mergers and acquisitions, reduced initial public offering underwriting, reductions in staffing, and associated impact on investment bank balance sheets. For this case study, address the following items: 1. Identify one of the top ten investments banks as of 2018. 2. Provide a concise description of the bank’s core competency with examples of recent activities or transactions. Be sure to provide specific $ data on the magnitude of the bank’s recent activities. 3. How has the size of your selected investment bank changed in the last decade? Use $ valuations to illustrate the change. In which investment bank functions did their overall business increase and/or decrease? 4. Prepare a balance sheet analysis of the bank, comparing 2007 B/S $ values to the most recently published B/S (either 2017 or 2018). Be sure to include the following items, in Excel spreadsheet format: a. % change in total assets, liabilities, and equity positions over this period b. Past and current leverage position of the investment bank, and % change over this period c. Comparison of book to market value of the bank, 2007 to current value 5. Refer to the following short article and address the question in detail: a. Article: Edelmann, C.,

Franks Fries Part 2 Franks Fries, LLC Is Currently All Equity Financed, Has An

Franks Fries part 2 Franks Fries, LLC is currently all equity financed, has an EBIT of $2 million, and is in the 34% tax bracket. Frank, the company’s founder, is the lone shareholder. If the firm were to convert $4 million of equity into debt at a cost of 10%. What is Frank’s total cash flow if the firm remains unlevered? (Do not include the dollar sign($) in your response. Enter your answer in the following format: X,XXX,XXX)

Frank’s Fries Part 3 Franks Fries, LLC Is Currently All Equity Financed, Has An

Frank’s Fries part 3 Franks Fries, LLC is currently all equity financed, has an EBIT of $2 million, and is in the 34% tax bracket. Frank, the company’s founder, is the lone shareholder. If the firm were to convert $4 million of equity into debt at a cost of 10%. Assume that all earnings are paid out as dividends. Now consider the fact that Frank must pay personal tax on the firm’s cash flow. Frank pays taxes on interest at a rate of 33%, but pays taxes on dividends at a rate of 28%. Calculate the total cash flow to Frank after he pays personal taxes in the unlevered state. (Do not include the dollar sign($) in your response. Enter your answer in the following format: XXX,XXX)

Frank’s Fries Part 4 Franks Fries, LLC Is Currently All Equity Financed, Has An

Frank’s Fries part 4 Franks Fries, LLC is currently all equity financed, has an EBIT of $2 million, and is in the 34% tax bracket. Frank, the company’s founder, is the lone shareholder. If the firm were to convert $4 million of equity into debt at a cost of 10%. Assume that all earnings are paid out as dividends. Now consider the fact that Frank must pay personal tax on the firm’s cash flow. Frank pays taxes on interest at a rate of 33%, but pays taxes on dividends at a rate of 28%. Calculate the total cash flow to Frank after he pays personal taxes in the levered state. (Do not include the dollar sign($) in your response. Enter your answer in the following format: X,XXX,XXX)

True Or False? 1. The Demand For Foreign Goods Implies Supplying The Domestic Currency.

True or False? 1. The demand for foreign goods implies supplying the domestic currency. 2. If a nation’s currency rises in value, foreigners can purchase more of that nation’s output. 3. The devaluation of one currency implies a revaluation of other currencies. 4. If the American dollar is devalued, American goods are more expensive to people holding dollars. 5. The International Monetary Fund may lend currency reserves to a nation with a deficit in its merchandise trade balance. 6. The political climate abroad will affect the risk associated with foreign investments.

How Does Underwriting Shift Risk Away From The Securities Issuer To The Investment Banker?

How does underwriting shift risk away from the securities issuer to the investment banker? (Kindly ask you to answer in one paragraph)

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