A family spends $28,000 a year for living expenses. If prices increase by 4 percent a year for the next three years, what amount will the family need for its living expenses? Answer: PV (1 + i)^n or, PV (1 + .04)^3 or, $28,000 * 1.125 = $31,500 needed for the family’s annual living expenses. 5. What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 5.5 percent?
Investment A will generate $2 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.5 million at the end of the first year and its revenues will grow at 2% per year for every year after that. a. Which investment has the higher IRR? i.
The total amount is $1,517,391 |13. Tuttle Buildings Inc. has decided to go public by selling $6,000,000 of new common stock. Its | |investment bankers agreed to take a smaller fee now (6% of gross proceeds versus their normal 10%) in exchange for a 1 year option to | |purchase an additional 250,000 shares at $7.00 per share. The | |Investment bankers expect to exercise the option and purchase the 250,000 shares in exactly one year, when the stock price is forecasted to| |be $6.50 per share. However, there is a chance that the stock | |price will actually be $12.00 per share one year from now.
At the end of 2010, current liabilities were $1 million, consisting of $250,000 of accounts payable, $500,000 of note payable, and $250,000 of accruals. The after tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Baxter’s additional funds needed for the coming year. AFN = (Ao*/S0)∆S - (Lo*/S0)∆S - (M)(S1)(1 –POR) = $1,000,000 – $1,000,000 – 0.05($6,000,000)(1 – 0.7) = (0.6)($1,000,000) - (0.1)($1,000,000) - (0.05)($6,000,000)(0.3) = $600,000 - $100,000 - $90,000 = $410,000 Chapter 13: Corporate Valuation, Value-Based Management, and Corporate Governance Problem 13-2: Value of Operations of Constant Growth Firm. EMC Corporation has never paid a dividend.
Nikko Corp's total common equity at the end of last year was $305,000 and its net income after taxes was $60,000. What was its ROE(Return on Equity)? (Points : 6) 16.87% 17.75% 18.69% 19.67% 20.66% Formula used in Return on Equity calculation is: 3. You have a chance to buy an annuity that pays $1,000 at the end of each year for three years. You could earn 5.5% on your money in other investments with equal risk.
What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.) • 32% • 16% • 12% • 40% Final Exam Answers just a click away STR 581 Capstone Final Examination 5. External financing needed: Jockey Company has total assets worth $4,417,665. At year-end it will have net income of $2,771,342 and pay out 60 percent as dividends.
This project will need $3.4 million less than the P04 project and the only component in the investment, which will be more, compared to P04 is the building cost (378 K$). Cannibalization of other store’s sales As the nearest target store closest to the project is 80 miles away, no cannibalization of sales is expected. And this store will generate a sale of $30.5 million in 5 years, which will be almost 2.7 million dollars above expected sales from P04. This store is assumed to take it’s a maximum market share from Walmart in 2008. Store Sensitivities Even if this store has 18.1% lower sales than the forecasted level by R&P, it can achieve the accepted NPV of prototype, besides, construction cost can increase to near $10 million and still the project can achieve the expected NPV of the P04.
Estimates regarding each project are provided below: Project A Project B Initial Investment $800,000 $650,000 Annual Net Income $50,000 45,000 Annual Cash Inflow $220,000 $200,000 Salvage Value $0 $0 Estimated Useful Life 5 years 4 years The company requires a 10% rate of return on all new investments. Part (a) Calculate the payback period for each project. Part (b) Calculate the net present value for each project. Part (c) Which project should Jackson Company accept and why? 12.
Advertising is budgeted at a flat percentage of 2% of gross profit or $28,412 for year 9 and this has remained consistent for each of the previous 3 years. For a company that is looking to increase sales by 3.2% as stated above, the company needs to take a greater focus on advertising to generated increased sales. Executive compensation is another area of concern. The company sustained executive compensation from years 7 and 8 at the level that is also budgeted for year 9 and that amount is $220,000. The company saw great growth and sales in years 7 to justify this amount in year 8 however the company needs accountability from its executive leaders to sustain
Construct a single month's cash budget with the information given. What is the average cash gain or (loss) during a typical month for the Chadmark Corporation? Current month sales collected: 3000 x 40% x (100%-2%) = $1176 ADD: Prior month sales collected: 3000 x 60% = $1800 LESS: purchases $1500 LESS: other expenses $700 = $776 average cash gain during a typical month. 5. (TCO G) Clayton Industries is planning its operations for next year, and Ronnie Clayton, the CEO, wants you to forecast the