Showing 1000–1008 of 1965 results
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FIN571 Week 4 assigment- Analyzing Pro forma statement
$5.00Decide upon an initiative you want to implement that would increase sales over the next five years, (for example, market another product, corporate expansion, and so on). Using the sample financial statements, create pro forma statements of five year projections that are clear, concise, and easy to read. Be sure to double check the calculations in your pro forma statements. Make assumptions that support each line item increase or decrease for your forecasted statements. Discuss and interpret the financials in relation to the initiative. Make recommendations on potential discretionary financing needs.
Write a 350 – 700 word analysis of the company’s short term and long term financing needs and determine strategies for the company to manage working capita
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Asset W has an expected return of 13.55 percent and a beta of 1.36
$2.00Asset W has an expected return of 13.55 percent and a beta of 1.36. If the risk-free rate is 4.61 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Leave no cells blank – be certain to enter “0” wherever required. Do not round intermediate calculations. Enter your portfolio expected return answers as a percentage and round to 2 decimal places (e.g., 32.16). Round your portfolio beta answers to 3 decimal places (e.g., 32.161).) Percentage of Portfolio Portfolio Portfolio in Asset W Expected Return Beta 0% % 25 % 50 % 75 % 100 % 125 % 150 %
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Using Hatfield’s data and its industry averages
$7.00Using Hatfield’s data and its industry averages, how well run would you say Hatfield appears to be in comparison with other firms in its industry? What are its primary strengths and weaknesses? Be specific in your answer, and point to various ratios that support your position. Also, use the Du Pont equation as one part of your analysis.
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Aunt Sally’s Foods, Inc. Case
$10.00Aunt Sally’s Foods, Inc. is a full line producer and distributor of ready to use jarred food products such as gravies and sauces. Their products are well received in the marketplace competing with such brand names as Franco-American, Ragu and Heinz. Consider the following expansion opportunity for Aunt Sally’s Foods, Inc. Sally is considering expansion into a new line of all natural, cholesterol free, low sodium, low-calorie tomato sauces. Sally has paid $250,000 for a marketing study to assist in this opportunity and other potential valuations.
The study indicates that the new product will have sales of $2,100,000 per year for each of the next 6 years. However, existing product line sales will be reduced by $600,000 per year. Manufacturing plant and equipment will cost $1,200,000 and will be depreciated on the straight-line method to zero with a 15% salvage (market) value at the end of 6 years. Annual fixed costs are projected at $140,000 per year and variable costs are projected at 50% of sales. Also, an initial working capital outlay of $250,000 will be required which will be recaptured at the end of the 6 years. Sally’s tax rate is 30% and the firm requires an 18% return.
Based on the following criteria: 1) Net Present Value, and 2) Internal Rate of Return, should Sally undertake this project? (Please round to the nearest dollar on all calculations)
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Bartram-Pulley Company (BPC) Case
$10.00The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $6,750 and has an expected life of 3 years. Annual net cash flows from each project begin 1 year after the initial investment is made and have the following probability distributions:
Project A Project B Probability Net Cash Flows Probability Net Cash Flows 0.2$6,000 $6,000 0.2 $ 0 0.6 6750 0.6 6,750 0.27,500 7,500 0.2 18,000 BPC has decided to evaluate the riskier project at a 12 percent rate and the less risky project at a 10 percent rate.
a. What is the expected value of the annual net cash flows from each project? What is the coefficient of variation (CV)? (Hint: sB = $5,798 and CV B 0.76.)
b. What is the risk-adjusted NPV of each project?
c. If it were known that Project B was negatively correlated with other cash flows of the firm whereas Project A was positively correlated, how would this knowledge affect the decision? If Project B”s cash flows were negatively correlated with gross domestic product (GDP), would that influence your assessment of its risk?
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SCAMPINI SUPPLIES COMPANY CASE
$10.00The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given below. The company”s cost of capital is 10 percent.
Year Annual Operating Cash Flow Salvage Value 0 ($22,500) $22,500 1 6,250 17,500 2 6,250 14,000 3 6,250 11,000 4 6,250 5,000 5 6,250 0 a. Should the firm operate the truck until the end of its 5-year physical life, or, if not, what is its optimal economic life?
b. Would the introduction of salvage values, in addition to operating cash flows, ever reducethe expected NPV and/or IRR of a project?
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Eco Plastics Company Case Study
$10.00Since its inception, Eco Plastics Company has been revolutionizing plastic and trying to do its part to save the environment. Eoc s founder, Marion Cosby, developed a biodegradable plastic that her company is marketing to manufacturing companies throughout the southeastern United States. After operating as a private company for six years, Eco went public in 2009 and is listed on the Nasdaq stock exchange.
As the chief financial officer of a young company with lots of investment opportunities. Eco s CFO closely monitors the firm s cost of capital. The CEO keeps tabs on each of the individual cost of Eco s three main financing sources: long-term debt, preferred stock, and common stock. The target capital structure for ECO is given by the weights in the following table:
Source of capital Weight Long-term debt 30% Preferred stock 20 Common stock equity 50 Total 100% As the present time, Eco can raise debt by selling 20-year bonds with a $1,000 par value and a 10.5% annual coupon interest rate. Eco s corporate tax rate is 40%, and its bonds generally require an average discount of $45 per bond and floatation cost of $32 per bound when being sold. Eco s outstanding preferred stock pays a 9% dividend and has a $95-per-shar par value. The cost of issuing and selling addional preferred stock is expected to be $7 per share. Because Eco is a young firm that requires lots of cash to grow it does not currently pay a dividend to common stock holders. To track the cost of common stock the CFO uses the capital asset pricing model (CAPM). The CFO and the firm s investment advisors believe that the appropriate risk-free rate is 4% and that the market s expected return equals 13%. Using data from 2009 through 2012, Eco s CFO estimates the firm s beta to be 1.3.
Although Eco s current target capital structure includes 20% preferred stock, the company is considering using debt financing to retire the outstanding preferred stock, thus shifting their target capital structure to 50% long-term debt and 50% common stock. If Eco shifts its capital mix from preferred stock to debt, its financial advisors expects its beta to increase to 1.5.
To Do
a. Calculate Eco s current after-tax cost of long-term debt.
b. Calculate Eco s current cost of preferred stock.
c. Calculate Eco s current cost of common stock.
d. Calculate Eco s current weighted average cost capital.
e. (1) Assuming that the debt financing costs do not change, what effect would a shift to a more highly leveraged capital structure consisting of 50% long-term debt, 0% preferred stock, and 50% common stock have on the risk premium for Eco s common stock? What would be Eco s new cost of common equity?
(2) What would be Eco s new weighted average cost of capital?
(3) Which capital structure-the original one or this one-seems better? Why?
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EX 6-3 Perpetual inventory using FIFO
$5.00EX 6-3 Perpetual inventory using FIFO
Beginning inventory, purchases, and sales data for portable DVD players are as follows:
April 1 Inventory 120 units at $39 6 Sale 90 units 14 Purchase 140 units at $40 19 Sale 110 units 25 Sale 45 units 30 Purchase 160 units at $43 The business maintains a perpetual inventory system, costing by the first-in, first-out method.
a. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale.
b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?
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21st Century Cat variance of cash flows
$5.0021st Century Cat is a film producing company which is contemplating the production of a new film. They estimate that:The production of the film will require an investment of £300,000 in year 0.The distribution will generate a stream of cash flows equal to £200,000 in year 1, and£100,000 in each of years 2 and 3.In year 3, the producer will sell the rights to a tv broadcaster for £90,000.Distribution costs will be £75,000 in year 1, and £50,000 in each of years 2 and 3.Due to regulation aimed at promoting cinema, all income generated by the project istax-free.
a. The company’s financial experts say that the appropriate discount factor for the project is 10%. Calculate the NPV using this discount factor and determine whether the project should be funded.
b. Assume now that the company has a debt/equity ratio equal to one. The company’s bonds yield a 6% return, the company’s beta is equal to 0.5, the market risk premium is 5%, while the risk-free rate is 3%. Calculate the NPV of the project with the new data.
c. The experts say that the discount factor you used in b. underestimates the risk of the project. They claim that there is high uncertainty on whether the new film will be a hit or not. The variance of cash flows is accordingly very high. The relatively low beta you employ fails to capture this. How would you reply to this comment? Give your answer in no more than 100 words.