Each debenture can be converted into 25 shares of common stock at any time before 2019. What is the conversion value of the bond? Question 23 Warren Corporation’s stock sells for $42 per share. The company wants to sell some 20-year, annual interest, $1,000 par value bonds. Each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $47.
If the sales outlook for the coming three years was only 20,000,000 and B.E. continued producing at the rate of 30,000,000 units, a total of 10,000,000 units would be dumped into ending inventory at the end of each year once again reducing costs of goods sold and falsely increasing income. By the end of year 2013, B.E. Company would have 35,000,000 units sitting in ending inventory taking up space and costing money to store. Once again if the president’s bonus is based off of net income, this situation is the most favorable for a high paying bonus and encourages stockpiling inventory to inflate net income.
The net cash inflow and cash outflow are calculated using sales and production figures for the next 8 years. The unit cost from the first year is £0.89 which is the cost per mashing without depreciation and divided by 13,000 bottles. From this information provided, the cost will increase by 3.5% and also the selling price will increase by 4% every year (reference 4). These figures are based on the current rate inflation of 4% which is shown in appendix 9 The capital allowances are worked out on cased of 20% (Reference 5) and the annual investment allowance is £100,000 is available (Reference 6) in the first year which is restricted to £87,359. This figure is substrated from the acquisition giving a result of £332,641 which is the written down value.
• NPAT* excluding sass & bide put option revaluation $129 million, down 5.1% • Strong cash flow supports final dividend of 8 cps, full year dividend 18 cps, fully franked “Continued execution of five-point plan” * Excludes sass & bide put option revaluation: FY2012 ($3.0 million gain) and FY2013 ($2.2 million expense) Image: TBC (TBC) Image: Orla Kiely DELIVERING OUR PLAN / 3 Full year highlights • Sales and gross profit growth in key categories • Myer Exclusive Brands now 20.0% of sales mix • sass & bide double-digit sales and profit growth • Increased recognition of our customer service journey • Ongoing investment: new stores, refurbishments, brands, online • MYER one strengthened with Platinum tier, app launched • Online sales, page views and average monthly visits doubled • Net debt down 11.2%, lending facilities refinanced Image: sass & bide OVERVIEW / 4 12 September 2013 2 MYER Full Year Results 2013 • • • • • Overview Financial update Delivering our five-point plan Investing for the future Outlook Image: Wayne by Wayne Cooper (Myer Exclusive Brand) Financial
Contribution margin = $190 - $ 70 = $120 per passenger 90 X .60 = 54 filled seats Break-even point in passengers = $ 3,150,000/$120 = 26,250 passengers 26,250/54 = 486 train cars d) (Refer to original data.) Fuel cost is a significant variable cost to any railway. If crude oil increases by $ 20 per barrel, it is estimated that variable cost per passenger will rise to $ 90. What will be the new break-even point in passengers and in number of passenger train cars? New contribution margin = $70 Break-even point in passengers = fixed costs/contribution margin Passengers = 45,000 Train cars = 715 e) Springfield Express has experienced an increase in variable cost per passenger to $ 85 and an increase in total fixed cost to $ 3,600,000.
Again, note that the actual state rate is reduced by 25% to allow for the deductibility of state income taxes on the federal income tax return. If Dana’s state tax rate increases to 10%, corporate bonds are still superior to Treasury bonds. 50. [LO 1] At the beginning of his current tax year David invests $12,000 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 10 years. David receives $700 in interest ($350 every six months) from the Treasury bonds during the current
Cracker Jack valuation-discounted cash flow ($ in millions) 1997 figures taken from Cracker Jack proposed income statement 1997-2001. Sales increase from 1996 to 1997 was expected to be 2%. 1997 1998 1999 2000 2001 Residual Value Fair Market Value sales increases taken from Pepsico Annual Reports 1998-2001 7% 6% 8% 6% NET SALES $50.50 $54.04 $57.28 $61.86 $65.57 Cost of goods sold 27.3 29.21 30.96 33.44 35.45 GROSS MARGIN $23.20 $24.82 $26.31 $28.42 $30.12 Operating expenses 19.9 21.29 22.57 24.38 25.84 EBIT $3.30 $3.53 $3.74 $4.04 $4.28 Income tax provision on EBIT (40% of EBIT) 1.32 1.41 1.50 1.62 1.71 After-tax earnings before interest and taxes on interest 1.98 2.12 2.25 2.42 2.57 Add: non-cash items including depreciation expense 1.4 1.50 1.59 1.71 1.82 Funds Provided 0.58 0.62 0.66 0.71 0.75 Subtract: Capital Expenditures 0.4 0.43 0.46 0.49 0.52 Total cash flows exclusive of interest (net of tax) $0.18 $0.19 $0.20 $0.21 $0.23 $2.73 Present value factor at discount rate of 12% 0.893 0.797 0.712 0.636 0.567 0.567 Present value $0.16 $0.15 $0.14 $0.14 $0.13 $1.55 Total present value of cash flows $0.72 Present value of residual $1.55 Fair market capital value for the firm
The first step in helping Prescott was to calculate a new cost of capital—as the one used by WPC was 10 years old. I used the weighted average cost of capital equation to calculate a new WACC of 9.97%. My calculations are and assumptions are shown in further detail in the attached sheets. Next, I had to generate the free cash flows for years 2007-2013 using Prescott’s given assumptions. * $18 M purchase price * $1.8 M selling price * Investment in PPE (2007) was $16 M * Investment in PPE (2008) was $2 M * $4 M in Sales (2008) * $10 M in Sales (2009-2013) * COGS: 75% of Sales * SG&A: 5% of Sales * $2 M Operating Savings (2008) * $3.5 M Operating Savings (2009-2013) * Depreciation was on a straight-line basis for 6 years beginning in 2008 * $18 M / 6 years = $3 M * 40% tax rate * NWC: 10% of Sales * Salvage value was zero * The FCF per year was determined using the following: * Net Income + Depreciation Expense - ∆ Net Working Capital + Investment in PPE After generating the FCF for each year, I had to solve for NPV and IRR to value the investment.
Similarly, the remaining adult population (under 65), which currently receives 60% of all acute blood loss transfusions, is expected to grow 5.9% by 2030 ((6 – 5.67) / 5.67 = 5.9%). # over 65 # under 65 1995 x 5.67x (85% / 15% = 5.67) 2030 2x 3 * 2x (75% / 25% = 3) Assuming linear growth, we expect this age group to grow .84% by 2000. The revised estimates of usage for the year 2000 are as follows: Potential usage (1995) Change Potential Usage (2000) Under 65 1,200,000 *1.084 1,300,800 Over 65 800,000 *1.14 912,000 Current Usage Change Potential Usage Emergency Surgery 1,000,000 *.5 500,000 Due to the fact that many more units will be used in the field, the usage in this category will decline. On the other hand, many more of the trauma victims will survive increasing probability of having emergency surgery. We estimate that the net of those two changes will mean a 50% decline in potential.
Expected Return The Buckle (BKE) recently paid a $0.90 dividend. The dividend is expected to grow at a 19 percent rate. At the current stock price of $43.17, what is the return shareholders are expecting? C. 21.48% i = D1/P0 + g = D0(1 + g)/P0 + g = .90(1+.19)/43.17 + .19 = .2148 8. This is the interest rate that would exist on a default free security if no inflation were expected.