To calculate the NPV for the new store opening, we need to calculate the cash flows for each year and discount them back to their present value using the opportunity cost of capital. So the NPV for the new store opening is NPV = -$3,489,860.72.
Year 0:
Initial Investment: -$30,000,000
Working Capital: -$2,000,000
Total Cash Flow: -$32,000,000
Years 1-20:
Sales of exercise machines: 5,000 x $2,500 = $12,500,000
Sales of accessories: $600,000
Total Revenue: $13,100,000
Operating Expenses: 50% x $13,100,000 = $6,550,000
EBIT: $6,550,000
Depreciation: $30,000,000 / 20 = $1,500,000
EBT: $5,050,000
Taxes (30%): $1,515,000
Net Income: $3,535,000
Add Back Depreciation: $1,500,000
Operating Cash Flow: $5,035,000
Year 20:
Salvage value of store: $0
Salvage value of working capital: $2,000,000
Total Cash Flow: $2,000,000
To calculate the NPV, we need to discount each cash flow back to its present value using the opportunity cost of capital of 10%:
NPV = (-$32,000,000 / (1+0.10)^0) + ( $5,035,000 / (1+0.10)^1 ) + ... + ( $2,000,000 / (1+0.10)^20 )
Using a spreadsheet programme or financial calculator, we obtain:
NPV = -$3,489,860.72
Since the NPV is negative, this project would not be a good investment and should not be pursued.
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suppose that in a given month $38 million is deposited into the banking system while $43 million is withdrawn. also suppose that the fed has set the reserve requirement at 20 percent and that banks have no excess reserves at the beginning of the month. what is the maximum amount of new checkable-deposit money that can be created (or removed) by the banking system as a result of these deposits and withdrawals?
The result is negative, it means that the maximum amount of checkable-deposit money that can be removed by the banking system as a result of these deposits and withdrawals is $25 million.
To determine the maximum amount of new checkable-deposit money that can be created or removed, we must first find the net change in deposits, which is the difference between the total deposits and total withdrawals. In this case:
Net change in deposits = Total deposits - Total withdrawals
Net change in deposits = $38 million - $43 million
Net change in deposits = -$5 million
Now, we need to calculate the maximum change in checkable-deposit money using the money multiplier. The money multiplier is the inverse of the reserve requirement, so:
Money multiplier = 1 / Reserve requirement
Money multiplier = 1 / 20%
Money multiplier = 1 / 0.20
Money multiplier = 5
Next, we multiply the net change in deposits by the money multiplier to find the maximum change in checkable-deposit money:
Maximum change in checkable-deposit money = Net change in deposits * Money multiplier
Maximum change in checkable-deposit money = -$5 million * 5
Maximum change in checkable-deposit money = -$25 million
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-/3 Question 8 of 10 View Policies Current Attempt in Progress Crane, Inc, is expected to grow at a constant rate of 9.25 percent. If the company's next dividend, which will be paid in a year, is $1.26 and its current stock price is $22.35, what is the required rate of return on this stock? (Round intermediate calculations to 4 decimal places, e.g. 1.5325 and final answer to 2 decimal places, es, 17.54%) How many Rate of return ?
The required rate of return on Crane, Inc's stock can be calculated using the dividend discount model (DDM), which takes into account the expected growth rate and the current stock price. The required rate of return on Crane, Inc's stock is 15.70%.
First, we can use the formula for the constant growth DDM:
Stock Price = Next Dividend / (Required Rate of Return - Growth Rate)
Rearranging the formula to solve for the required rate of return, we get:
Required Rate of Return = (Next Dividend / Stock Price) + Growth Rate
Plugging in the values given, we get:
Required Rate of Return = ($1.26 / $22.35) + 9.25%
= 15.70%
Therefore, the required rate of return on Crane, Inc's stock is 15.70%. This means that investors would expect to earn a return of at least 15.70% on their investment in Crane, Inc's stock to justify the current stock price, given the expected dividend and growth rate.
In summary, the required rate of return on a stock is the minimum rate of return that an investor expects to earn to justify the investment. The DDM is a common method used to calculate the required rate of return for stocks, taking into account the expected dividend, growth rate, and current stock price.
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A company's gearing ratio would rise if a. A decrease in long term loan balance is less than the decrease in the overall equity O balance b. Long term loan interest rates fall O C. A decrease in long term loan balance is more than the decrease in the overall equity balance d. Long term loan interest rates rise
A company's gearing ratio would rise if there was a decrease in its long-term loan balance that was greater than the decrease in its overall equity balance. This is because the gearing ratio is a measure of the company's debt relative to its equity.The correct answer is C.
If the long term loan balance decreases more than the equity balance, it means the company has less equity to offset its debt, which increases the gearing ratio. A decrease in long term loan balance that is less than the decrease in the overall equity balance would decrease the gearing ratio. Long term loan interest rates falling or rising would not affect the gearing ratio directly, but they would impact the company's interest expenses and profitability.
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shops near a college consistently get raided by fans after football games. their insurers attach riders to their policies stating damage from raiding will not be covered. the shops enter a non-binding agreement stating if another raid occurs and a store incurs damage, the other businesses will help with the financial burden of the loss. what is this called?
The non-binding agreement entered into by the shops near the college is called a mutual aid agreement or a mutual aid pact.
This non-binding agreement among the shops near the college, where they agree to help each other with the financial burden of losses due to raiding after football games, can be referred to as a mutual aid agreement or a cooperative agreement. This type of agreement is a voluntary arrangement between businesses or organizations to provide assistance to each other in times of need, such as during natural disasters or incidents like the raiding of shops after football games. It is not legally binding, but rather a commitment to help each other out in a spirit of cooperation and mutual support.
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if a firm finances with equity rather than with debt, it will bear no interest expense and thus yield greater net profits. group of answer choices true false
True.
When a firm finances with equity, it does not incur any interest expense as it would with debt financing. This can result in greater net profits since the firm will not have to pay interest on the borrowed funds. However, it is important to note that equity financing may involve sharing ownership and profits with investors, which could impact the firm's overall financial situation. The interest expense for a bond that has the same coupon rate as the market rate is always the same for all periods of the bond. This shows that the bond was issued at neither premium nor discount but at par.
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when organizing notes for an investigative report, investigators should: question 3 options: use a table of contents. place the notes in concurrent order. use headings to guide the reader. prepare an exhibit list.
When organizing notes for an investigative report, investigators should take several steps to ensure a clear and concise presentation of information. It is essential to use headings to guide the reader through the various sections of the report.
Headings help to break down complex information, making it easier to understand and follow. Additionally, investigators should place the notes in a logical, concurrent order. This chronological arrangement helps maintain a coherent narrative and allows the reader to follow the investigation's progress.
Preparing an exhibit list is another crucial aspect of organizing notes for an investigative report. An exhibit list provides an overview of all the evidence gathered and serves as a reference point for the reader, ensuring that crucial details are easily accessible.
While a table of contents can be helpful in longer documents, it is not always necessary for an investigative report, as concise and well-structured headings can often serve the same purpose.
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true or false: the value of managerial options is taken into account when performing conventional npv analysis.
False. The price of managerial options is commonly now not taken into consideration while acting traditional net present value (NPV) evaluation.
Managerial options talk to the strategic choices or opportunities to be had to managers, along with the option to expand, postpone, or abandon a project. these options have value, which may be significant in certain situations, and can effect a venture's ordinary profitability.
However, NPV analysis typically focuses on quantifying the coins flows related to a mission and discounting them to decide their gift price, with out explicitly considering managerial alternatives. To account for the cost of managerial options, opportunity valuation techniques such as real options evaluation can be used.
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false. the value of managerial options is taken into account when performing conventional npv analysis.
The traditional net present value (NPV) analysis primarily considers the monetary inflows and outflows of a project, not the managerial flexibility or strategic options the project might provide. By making specific project-related decisions, the manager has the capacity to seize present opportunities and reduce potential future hazards. These alternatives may provide value to the project that is not accounted for by the traditional NPV analysis. Alternative approaches, including real options analysis, which factor the value of the options into the project's cash flows and discount rate, can be used to account for managerial options.
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"The rate of unemployment of a country can be increased_____.a. encouraging foreign firms to establish subsidiaries that produce the same
products local firms produce.
b. encouraging foreign firms to establish licensing arrangements for products
local firms produce.
c. encouraging foreign firms to establish subsidiaries that produce products
local firms do not produce.
d. none of the above would reduce employment.
The rate of unemployment in a country can be increased by encouraging foreign firms to establish subsidiaries that produce the same products local firms produce or establishing licensing arrangements for products local firms produce.
When foreign corporations create subsidiaries that produce the same products as local firms or establish licensing arrangements for items produced by local enterprises, local firms may face greater competition. As a result, local businesses may lose market share and income, leading to downsizing and layoffs. This may lead to a rise in the country's unemployment rate.
In contrast, encouraging foreign corporations to create subsidiaries that provide things that local firms do not produce can have a favorable influence on employment. This can result in the development of new jobs, which can help to lower the unemployment rate.
Overall, governments must carefully assess the impact of foreign investment on domestic businesses and labor markets. While the foreign investment may provide advantages such as job creation and economic progress, it can also have negative implications such as rising unemployment if it is not effectively handled.
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Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.65 million and create incremental cash flows of $479,787.00 each year for the next five years. The cost of capital is 11.09%. What is the internal rate of return for the J-Mix 2000?
The internal rate of return (IRR) for the J-Mix 2000 is 15.28%. The IRR is a metric used to measure the profitability of an investment.
It is calculated by discounting the cash flows of the investment and finding the rate of return it will generate. In this case, the J-Mix 2000 has an initial cost of $1.65 million and generates incremental cash flows of $479,787.00 each year for the next five years.
When we discount these cash flows using the cost of capital of 11.09%, we find that the IRR of the J-Mix 2000 is 15.28%. This means that the investment will generate a 15.28% return over its lifetime, making it a profitable investment for Caspian Sea Drinks.
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Jonathan Williams is considering an offer to sell his medical practice, allowing him to retire five years early. He has been offered $500,000 for his practice and he can invest this amount in an account earning 10% per year, compounded annually. If the practice is expected to generate the following cash flows should Jonathan accept this offer and retire now?
Year Cash Flow
1 $150,000
2 $150,000
3 $135,000
4 $115,000
5 $100,000
In evaluating the offer to sell his medical practice, Jonathan Williams must consider the present value of the cash flows associated with it.
If the practice is expected to generate the cash flows noted above, then the offer of $500,000 is likely to be a reasonable one. This amount, invested in an account earning 10% per year compounded annually, would generate a total of $825,000 over the five years.
This amount is significantly higher than the cash flows associated with the practice, indicating Jonathan should accept the offer and retire early.
Furthermore, the offer of $500,000 provides Jonathan with the ability to retire five years early, allowing him to enjoy the rest of his life free from the stress of running a practice. Therefore, Jonathan should accept the offer and retire early.
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a company stops a cluster of amazon ec2 instances over a weekend. the costs decrease, but they do not drop to zero. which resources could still be generating costs? (select two.)
The resources that could still be generating costs even after stopping a cluster of Amazon EC2 instances over a weekend are: Elastic Block Store (EBS) volumes and Elastic IP addresses.
Elastic Block Store (EBS) volumes: If EBS volumes are attached to EC2 instances, stopping the instances doesn't stop the EBS volumes. The EBS volumes continue to run, and their charges still apply.
Elastic IP addresses: Elastic IP addresses (EIPs) are charged hourly when they are not associated with a running instance. If the EIPs are not released after stopping the instances, they will continue to generate costs.
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A firm operating in perfect capital markets has a capital structure consisting of 10% debt and 90% equity. The firm's managers decide to "lever up" their company by borrowing a great deal of money and using the proceeds to retire most of the outstanding stock. After this recapitalization takes place, the capital structure weights are 90% debt and 10% equity. Which statement below is most likely to be false according to Modigliani and Miller?
A. The overall risk of the firm will be higher after the recapitalization than it was previously.
B. After the firm increases debt from 10% to 90% of the firm's capital structure, the cost of debt will rise to reflect the increased risk of the company's debt.
C. The equity remaining in the firm after the recapitalization is much more risky than the equity that was in place before the recapitalization.
D. The value of the company will remain the same in spite of such a dramatic change in its capital structure.
According to Modigliani and Miller's theory, the statement which is most likely to be false is Statement D. The value of the company will remain the same in spite of such a dramatic change in its capital structure.
According to M&M's propositions, the value of a firm is determined by its operating income and investment decisions, not its capital structure, in perfect capital markets. However, in real-world situations, capital markets are not perfect, and factors such as taxes, bankruptcy costs, and agency costs can influence a firm's value.
Therefore, it is unlikely that the value of the company will remain the same after such a dramatic change in its capital structure, as it introduces higher financial risk and may affect the company's cost of capital.
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in the current year, erin had the following capital gains (losses) from the sale of her investments: $1,500 ltcg, $25,500 stcg, ($8,500) ltcl, and ($14,500) stcl. what is the amount and nature of erin's capital gains and losses? multiple choice $4,000 net short-term capital gain. $4,000 net long-term capital loss. $4,500 net short-term capital gain. $4,500 net long-term capital loss. none of the choices are correct.
Erin's capital gains and losses are as follows:
- $7,000 net long-term capital loss
- $11,000 net short-term capital gain
In the current year, Erin had the following capital gains (losses) from the sale of her investments: $1,500 LTCG, $25,500 STCG, ($8,500) LTCL, and ($14,500) STCL.
To determine the amount and nature of Erin's capital gains and losses, we will follow these steps:
1. Calculate the net long-term capital gains and losses: $1,500 LTCG - $8,500 LTCL = -$7,000 net long-term capital loss.
2. Calculate the net short-term capital gains and losses: $25,500 STCG - $14,500 STCL = $11,000 net short-term capital gain.
From these calculations, we can see that none of the multiple-choice options provided are correct.
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Of the following options which would be the most appropriate place to keep a security fund (also called an emergency fund or rainy day fund)?
A. In a locked box under your bed
B. In the stock market or a certificate of deposit (CD)
C. In a savings account or a money market fund
D. In your checking account
The most appropriate place to keep a security fund (also called an emergency fund or rainy day fund) would be option c- in a savings account or a money market fund.
Option A, keeping the fund in a locked box under your bed, is not a good idea because the money is not earning any interest and is at risk of loss or theft.
Option B, investing the fund in the stock market or a certificate of deposit (CD), may offer a higher return on investment, but it also carries a higher level of risk, as the value of stocks and CDs can fluctuate, and you may not be able to access your money quickly in case of an emergency.
Option D, keeping the fund in your checking account, is also not a good idea because checking accounts typically offer low interest rates, and the money is easily accessible, which may tempt you to spend it on non-emergency expenses.
A savings account or a money market fund, on the other hand, typically offer higher interest rates than checking accounts, and the money is still easily accessible in case of an emergency. This ensures that you can access your funds quickly and easily when you need them, while also earning some interest on your money.
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66.0% complete question all of the following statements regarding npv are true except a.a positive npv indicates the present value of the cash flows exceeds the initial investment. b.a negative npv indicates the present value of the cash flows is less than the initial investment. c.an npv equal to zero indicates the present value of the cash flows is equal to the initial investment. d.the internal rate of return is the discount rate that causes the initial investment to exceed the present value of the cash flows.
NPV is a useful tool for evaluating the profitability of an investment or project, and it takes into account the time value of money by discounting future cash flows to their present value. A positive NPV indicates profitability, a negative NPV indicates loss, and an NPV of zero indicates a break-even point. The internal rate of return is the rate at which the NPV is zero, and it represents the expected rate of return of the investment or project.
Net Present Value (NPV) is a financial concept used to determine the profitability of a project or investment. It takes into account the initial investment and the expected future cash flows generated by the project, and discounts them back to their present value using a discount rate. The resulting NPV tells you whether the project or investment is expected to generate a profit or a loss, based on the present value of its future cash flows.
Now let's look at each statement individually:
a. A positive NPV indicates that the present value of the cash flows exceeds the initial investment. This means that the project or investment is expected to generate a profit, as the present value of the expected future cash flows is greater than the initial investment.
b. A negative NPV indicates that the present value of the cash flows is less than the initial investment. This means that the project or investment is expected to generate a loss, as the present value of the expected future cash flows is less than the initial investment.
c. An NPV equal to zero indicates that the present value of the cash flows is equal to the initial investment. This means that the project or investment is expected to break even, as the present value of the expected future cash flows is exactly equal to the initial investment.
d. The internal rate of return is the discount rate that causes the initial investment to exceed the present value of the cash flows. This statement is actually not true. The internal rate of return (IRR) is the discount rate that makes the NPV equal to zero, meaning that the present value of the expected future cash flows is exactly equal to the initial investment. So, the IRR is the rate of return that the project or investment is expected to generate, and it is the rate at which the NPV is zero.
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Question 2 of 7. Part 2635, 18 United States Code Section 208 prohibits you from working on Government matters that will affect your own personal financial interest or the financial interests of certain other people, including which three of the following? Any organization in which you are serving as an officer, director, trustee, general partner or employee Any person or organization with whom you are negotiating or have an arrangement for future employment Your spouse, minor child, or general partner Any organization in which you are volunteering as yourself
These people include any organization in which the individual is serving as an officer, director, trustee, general partner, or employee; any person or organization with whom the individual is negotiating or has an arrangement for future and their spouse, minor child, or general partner.
This information is typically required to be disclosed in order to avoid conflicts of interest and ensure transparency in business dealings. Failure to disclose such relationships can result in legal and ethical violations.
It is important for individuals to disclose any potential conflicts of interest and recuse themselves from any decisions that may impact their personal financial interests or the financial interests of those mentioned above.
Failure to do so can result in legal and ethical consequences.
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which of the strategies for expanding sales revenue below presents the most risk for an organization?
The strategy that presents the most risk for an organization is likely the one that involves launching a new and untested product or service.
The strategy which bring the risk of organizationThis is because it requires a significant investment of resources, including time, money, and personnel, without any guarantee of success.
If the product or service fails to gain traction in the market, the organization could be left with significant losses and a damaged reputation.
Additionally, if the product or service is poorly designed or executed, it could lead to customer dissatisfaction, which could further harm the organization's reputation and sales revenue.
Therefore, launching a new and untested product or service carries the most risk for an organization seeking to expand its sales revenue.
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The before-tax cost of debt is the interest rate that a firm pays on any new debt financing. Omni Consumer Products Company (OCP) can borrow funds at an interest rate of 10.20% for a period of four years. Its marginal federal-plus-state tax rate is 40%. OCP's after-tax cost of debt is (rounded to two decimal places). At the present time, Omni Consumer Products Company (OCP) has 20-year bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1, 181.96 per bond, carry a coupon rate of 13%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 40%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 7.42% 6.45% 5.16% 5.81%
Based on the information provided, a reasonable estimate for its after-tax cost of debt would be 5.81%.
How to calculate the after-tax cost of debt?First, we can calculate the before-tax cost of debt:
Before-tax cost of debt = 10.20%
Next, we can calculate the after-tax cost of debt:
After-tax cost of debt = Before-tax cost of debt x (1 - Marginal tax rate)
After-tax cost of debt = 10.20% x (1 - 0.40) = 6.12%
For the second part of the question, we need to calculate the current yield-to-maturity of the existing bonds to get an estimate of the before-tax cost of debt. Then we can use the same formula as above to calculate the after-tax cost of debt.
First, we can calculate the annual coupon payment of the bond:
Annual coupon payment = Coupon rate x Face value = 13% x $1,000 = $130
Next, we can use a financial calculator or Excel to calculate the yield-to-maturity of the bond, which is 8.71%.
Now we can calculate the before-tax cost of debt:
Before-tax cost of debt = Yield-to-maturity = 8.71%
Finally, we can calculate the after-tax cost of debt:
After-tax cost of debt = Before-tax cost of debt x (1 - Marginal tax rate)
After-tax cost of debt = 8.71% x (1 - 0.40) = 5.22%
Therefore, a reasonable estimate for OCP's after-tax cost of debt for new debt issuances would be 5.22%, which is closest to option D, 5.81%.
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13. Maximizing revenue: A sports arena has 40 roaming soda salespeople, each of whom sells 200 sodas per event. Management estimates that for each additional salesperson, the yield per salesperson decreases by 4. How many additional salespeople should management hire to maximize the number of sodas sold?
To maximize revenue for the sports arena, management must find the optimal number of salespeople to hire. The yield per salesperson decreases as additional salespeople are hired, but the number of sodas sold increases. To find the optimal number, we need to consider the trade-off between increasing the number of salespeople and decreasing the yield per salesperson.
Let's start by calculating the total number of sodas sold with the current number of salespeople. With 40 salespeople, each selling 200 sodas per event, the total number of sodas sold is 8,000 (40 x 200).
Now, let's assume that management hires one additional salesperson. With 41 salespeople, the yield per salesperson decreases by 4, so each salesperson would sell 196 sodas per event. The total number of sodas sold would be 8,036 (41 x 196).
If management hires another salesperson, the yield per salesperson would decrease to 192, and the total number of sodas sold would be 8,012 (42 x 192).
Continuing this process, we can see that the optimal number of salespeople to hire is 42. With 42 salespeople, each selling 192 sodas per event, the total number of sodas sold would be 8,064.
In conclusion, to maximize the number of sodas sold, management should hire 2 additional salespeople, bringing the total number of salespeople to 42. This decision balances the trade-off between increasing the number of salespeople and decreasing the yield per salesperson.
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Marisa is a new marketing analyst for the Paragould Hotel chain. She is reviewing the hotel's current social media activities and trying to classify where each will fit into the three main areas the company wants to focus on. 1) Give your customers a specific hashtag and CTA so you can easily monitor and reward mentions. 2) Assign a social currency or value to the social actions your consumers take. 3) Be prepared to surprise and delight someone for his or her actions as they happen
Using good customer experiences and/or unexpected rewards like presents or one-of-a-kind events, surprise and delight is a marketing strategy that draws in and nurtures current and new customers. The value that information has when it is shared among people is known as social currency.
People want to keep sharing things when they have a positive social currency. In essence, it's a strategy for using the influence of customer recommendations and reviews to increase brand loyalty and consumer trust. Influence can be gained by individuals in several ways. As subject matter experts, they might post compelling information on social media that draws an audience.
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You have recently been hired as a financial analyst for a children's toy manufacturing company. The company is growing and has capital to invest in expansion projects. Currently, your business is financed entirely with equity – there is no debt. However, shareholders have decided to consider issuing debt that would be used to buy back common shares, which will change the company's capital structure and introduce a financial leverage effect.
The current financial structure is as follows: the company's assets have a market value of $12 million. There are currently 400,000 shares outstanding and the stock price is $30 - there is no debt.
The scenario to consider would be as follows: a bond issue that could return $3 million, the coupon rate would be set at 6% for a required return of 6%. It is assumed that the restructuring would have no effect on the share price.
For your analysis, three profitability scenarios will be studied: pessimistic with an EBIT of $450,000, normal with an EBIT of $750,000 and optimistic with an EBIT of $1,050,000. You perform the analysis in a non-tax context.
Questions:
a) Make a comparative table of the current financial structure vs the proposed structure for your company.
b) Make a table leading to the calculation of the return on equity and the EPS of the current financial structure according to the three EBIT scenarios retained.
c) Make a table leading to the calculation of the return on equity and the EPS of the proposed financial structure according to the three EBIT scenarios retained.
d) Calculate the degree of financial leverage for the current financial structure based on the EBIT of the normal scenario
e) Calculate the degree of financial leverage for the proposed financial structure based on the normal scenario EBIT.
f) Calculate the EBIT which is called the "point of indifference" to help shareholders decide whether or not to change the financial structure.
a) The comparative table for the current financial structure vs the proposed structure is as follows:
Current Structure Proposed Structure
Assets $12 million $15 million
Equity $12 million $12 million
Debt $0 $3 million
Shares 400,000 400,000
Share price $30 $30
b) The table for the return on equity and EPS of the current financial structure according to the three EBIT scenarios is:
Pessimistic Normal Optimistic
EBIT $450,000 $750,000 $1,050,000
Interest $0 $0 $0
Earnings $450,000 $750,000 $1,050,000
ROE 3.75% 6.25% 8.75%
EPS $1.125 $1.875 $2.625
c) The table for the return on equity and EPS of the proposed financial structure according to the three EBIT scenarios is:
Pessimistic Normal Optimistic
EBIT $450,000 $750,000 $1,050,000
Interest $180,000 $180,000 $180,000
Earnings $270,000 $570,000 $870,000
ROE 2.25% 4.75% 7.65%
EPS $0.675 $1.425 $2.175
d) The degree of financial leverage for the current financial structure based on the EBIT of the normal scenario is:
Degree of financial leverage = EBIT / (EBIT - Interest) = $750,000 / ($750,000 - $0) = 1
e) The degree of financial leverage for the proposed financial structure based on the normal scenario EBIT is:
Degree of financial leverage = EBIT / (EBIT - Interest) = $750,000 / ($750,000 - $180,000) = 1.429
f) The "point of indifference" EBIT can be calculated using the following formula:
EBIT = (Interest expense + Equity return of current structure) / (1 - Tax rate)
Since the scenario is non-taxable, we can simplify the formula to:
EBIT = Interest expense + Equity return of current structure
For the current structure, the equity return is:
Equity return = EBIT x (1 - tax rate) = $750,000 x (1 - 0) = $750,000
The interest expense for the proposed structure is:
Interest expense = Debt x Interest rate = $3 million x 6% = $180,000
Therefore, the "point of indifference" EBIT is:
EBIT = $750,000 + $180,000 = $930,000
This means that if the EBIT is greater than $930,000, the proposed financial structure would result in higher earnings per share compared to the current structure.
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wayne sells fire protection systems to companies and government agencies. he has a yearly sales goal and receives a percentage of this goal for each system he sells; the more he sells, the more money he makes. how is wayne being compensated?
Wayne sells fire protection systems to companies and government agencies. He has a yearly sales goal and receives a percentage of this goal for each system he sells; the more he sells, the more money he makes. Wayne is being compensated through "a commission-based pay structure".
In a commission-based pay structure, an employee is paid a percentage of the sales they generate or a flat fee for each sale they make. This incentivizes the employee to sell as much as possible, as their compensation is directly tied to their sales performance.
In Wayne's case, his compensation is tied to his yearly sales goal and the percentage of the goal he achieves through the sale of fire protection systems. This motivates him to work hard to meet or exceed his sales goal, as doing so will result in a higher commission payment.
Therefore, Wayne is being compensated through a commission-based pay structure.
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You have collected Sanofi Inc's historical earnings per share information up to the end of year 2020. You have determined that the average growth rate of earnings is 12%. The 2020 year-end EPS amounted to R21.78. Based on your analysis of Sanofis fundamentals you estimate that the firm's earnings will continue to grow at its average historical growth rate for the next year but that in the following year, as a result of the launch of a new product the firm is currently developing, earnings will grow at a rate of 20% per year for two years. After this, you project that the earnings growth rate will decrease by 10% for the next year, to its long-term sustainable rate. You project that the firm will maintain a 50% dividend pay-out ratio and that the appropriate market capitalisation rate for Sanofi Inc is 15%.
You currently have 100 shares of Sanofi, Your expected dividend amount in 2021 is equal to R ___round off your answer to two decimal places. If the firm's shares are currently trading at R620 per share, you will buy/sell/hold) ___the shares because they are (undervalued/overvalued correctly valued)___ as the intrinsic value is equal to R ___round off your answer to two decimal places. The terminal value at the end of the 4th year is equal to R___ round off your answer to the nearest whole number
Your expected dividend amount in 2021 is equal to R 13.07.
You should hold the shares because they are correctly valued as the intrinsic value is equal to R 620. The terminal value at the end of the 4th year is equal to R 1204.
1. Calculate 2021 EPS: R21.78 * 1.12 = R24.39
2. Calculate 2021 dividend: R24.39 * 0.50 = R12.20
3. Calculate 2022 EPS: R24.39 * 1.20 = R29.27
4. Calculate 2022 dividend: R29.27 * 0.50 = R14.64
5. Calculate 2023 EPS: R29.27 * 1.20 = R35.12
6. Calculate 2023 dividend: R35.12 * 0.50 = R17.56
7. Calculate 2024 EPS: R35.12 * 0.90 = R31.61
8. Calculate 2024 dividend: R31.61 * 0.50 = R15.81
9. Calculate intrinsic value: [R12.20/(1.15)] + [R14.64/(1.15²)] + [R17.56/(1.15³)] + [(R15.81+R1204)/(1.15⁴)] = R 620
10. Terminal value calculation: R31.61 * (1-0.1)/(0.15-0.1) = R 1204
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as a result of being an armed services veteran, dan should be eligible for a(n):
As a result of being an armed services veteran, Dan may be eligible for a range of benefits provided by the United States Department of Veterans Affairs (VA).
Some of the benefits that he could be eligible for include healthcare, disability compensation, education and training, home loans, life insurance, and vocational rehabilitation and employment services.
To access these benefits, Dan would need to apply for them through the VA. The eligibility requirements for each benefit can vary, so it is important for Dan to research which benefits he is eligible for and apply accordingly. Additionally, Dan may be able to receive state-specific benefits for veterans depending on the state he resides in.
It's worth noting that eligibility for VA benefits can depend on various factors such as Dan's length of service, discharge status, and any service-connected disabilities he may have. Therefore, Dan may want to consult with a VA representative to determine his eligibility and navigate the application process.
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assume that a series of inflation rates three consecutive years is 1 percent, 2 percent, and 4 percent, while nominal interest rates in the same three periods are 5 percent, 5 percent, and 6 percent, respectively. further assume that expected inflation in each period equals the realized inflation in the previous period. if someone lends money in beginning of period 2, for one year, based on the expected inflation at the time, what will be the change in his/her actual real interest rate relative to the expected one?
Based on the information given, the change in the actual real interest rate relative to the expected one is a decrease of 1 percentage point.
To calculate the change in the actual real interest rate relative to the expected one, we need to first calculate the expected and actual real interest rates.
The expected real interest rate at the beginning of period 2 is:
Expected Real Interest Rate = Nominal Interest Rate - Expected Inflation Rate
Expected Real Interest Rate = 5% - 1% = 4%
The actual real interest rate at the end of period 2 is:
Actual Real Interest Rate = Nominal Interest Rate - Actual Inflation Rate
Actual Real Interest Rate = 5% - 2% = 3%
To calculate the change in the actual real interest rate relative to the expected one, we need to subtract the expected real interest rate from the actual real interest rate:
Change in Actual Real Interest Rate = Actual Real Interest Rate - Expected Real Interest Rate
Change in Actual Real Interest Rate = 3% - 4% = -1%
Therefore, the actual real interest rate is lower than the expected real interest rate by 1 percentage point.
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If all other factors are equal, selecting a lower deductible will _________ your auto insurance premium.A. DecreaseB. IncreaseC. Have no effect on
If all other factors are equal, selecting a lower deductible will B. Increase your auto insurance premium.
Here's a step-by-step explanation:
1. Auto insurance policies generally have two components: the premium and the deductible.
2. The premium is the amount you pay regularly (usually monthly or annually) to maintain your coverage.
3. The deductible is the amount you pay out-of-pocket before the insurance company begins covering the expenses in case of an accident or loss.
4. When selecting a deductible, you have the option to choose between a lower or higher amount.
5. If you choose a lower deductible, it means you'll pay less out-of-pocket in case of an accident or loss, and the insurance company will have to cover more expenses.
6. Since the insurance company takes on more risk with a lower deductible, they compensate for this by increasing your premium.
7. Therefore, selecting a lower deductible increases your auto insurance premium. Remember to carefully consider your financial situation and risk tolerance when choosing a deductible for your auto insurance policy.
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Instuctions:What's the most expensive publicly traded stock in the United States? Go to finance. Yahoo.com and enter BRKA (for Berkshire Hathaway Class A). What is the current share price? What are the 52-week high and low? How many shares traded on an average day? How many shares have traded today?
As of April 14, 2023, the most expensive publicly traded stock in the United States is Berkshire Hathaway Class A (BRKA).
According to finance.yahoo.com, the current share price for BRKA is $501,789.50. The 52-week high for BRKA is $603,100.00, while the 52-week low is $459,000.00.
On an average day, around 255 shares of BRKA are traded, which is not surprising given its high price. Today, however, there have been no trades yet as the market has not yet opened.
It's worth noting that BRKA is a unique stock in that it is not split like most publicly traded stocks. As a result, each share of BRKA is worth a significant amount of money, which makes it less accessible to individual investors. Nonetheless, BRKA remains one of the most highly regarded stocks in the market due to the track record of its management team led by legendary investor Warren Buffet.
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Annabeth's Interiors is considering a project with a sales price of $12.60, variable cost per unit of $9.30, and annual fixed costs of $135,300. The tax rate is 23 percent and the discount rate is 14 percent. The project requires $232,000 of fixed assets that will be worthless at the end of the 7-year project. What is the present value break-even point in units per year if the firm uses straight line depreciation?
PV Break-even = ________ units
**Note: partial units cannot be sold.
Please do not round until the final step. Please also demonstrate ALL steps. I really want to understand how to reproduce this on my own. Thank you!
The PV break-even point in units per year for Annabeth's Interiors is 16,580 units.
To calculate the PV break-even point, we need to find the annual fixed costs after depreciation, which is $101,000 ($135,300 - $232,000/7). Then, we can use the formula:
PV of total contribution margin = PV of total fixed costs
Where PV of total contribution margin = (sales price - variable cost) x quantity x PV factor
And PV of total fixed costs = fixed costs after depreciation x PV factor
Substituting the given values, we get:
(12.60 - 9.30) x Q x 3.433 = 101,000 x 3.433
Q = 16,580 units
This means that Annabeth's Interiors needs to sell at least 16,580 units per year to cover all their costs and break even in present value terms. It's important to note that this assumes straight line depreciation and all other given assumptions hold true.
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the factor used most often when underwriting a disability income policy isa. annual earningsb. sex of the insuredc. marital statusd. occupation
The factor used most often when underwriting a disability income policy is occupation. The correct option is D.
When determining the premium and coverage for a disability income policy, insurance companies primarily consider the policyholder's occupation. This is because certain jobs have higher risks of injury or illness, which could lead to a disability.
A person's occupation plays a significant role in assessing the likelihood of a claim being filed and the potential payout for a disability.
While other factors, such as annual earnings, sex of the insured, and marital status, may also be taken into account during the underwriting process, occupation remains the primary factor in determining the terms and conditions of a disability income policy.
Insurance companies may also use these factors in conjunction with occupation to further refine their risk assessment, but occupation will still have the most significant impact on the underwriting process.
Complete question:
The factor used most often when underwriting a disability income policy is:
a. annual earnings
b. sex of the insured
c. marital status
d. occupation
The factor used most often when underwriting a disability income policy is occupation.
Explanation:The factor used most often when underwriting a disability income policy is occupation. When determining the premium for a disability income policy, insurance companies consider the nature of the insured's occupation, as certain occupations carry different levels of risk for disability. For example, a construction worker may have a higher risk of a disabling injury compared to an office worker. Therefore, the occupation of the insured is an important factor in underwriting a disability income policy.
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Last year, Talon Technical Services had total revenue of $1.2 million and total client-management-related overhead costs of $78,000. This year, Talon anticipates total client-management-related overhead of $83,850. Talon calculates this estimate using the same activity-based rate it used last year, which means the firm expects total revenue of _____________ for the year ahead.
a. $1,420,000
b. $1,361,850
c. $1,290,000
d. $1,283,850
The expected revenue is given as:
Expected total revenue = $83,850 / 0.065 ≈ $1,420,000
To find the expected total revenue for the year ahead, we can use the activity-based rate from last year. First, we need to determine the rate:
Activity-based rate = (Total client-management-related overhead costs) / (Total revenue)
Rate = $78,000 / $1,200,000 = 0.065
Next, we can use this rate to calculate the expected total revenue:
Expected total revenue = (Expected client-management-related overhead costs) / (Activity-based rate)
Expected total revenue = $83,850 / 0.065 ≈ $1,420,000
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