FIN 571 UOP TUTORIAL / Uoptutorial

FIN 571 Entire Course

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FIN 571 Week 1 Individual Practice Quiz

FIN 571 Week 1 Individual Assignment Business Structures

FIN 571 Week 1 DQ 1

FIN 571 Week 1 DQ 2

FIN 571 Week 2 Individual Assignment Business Structure Advice

FIN 571 Week 2 Learning Team Reflection

FIN 571 Week 2 Individual Practice Quiz

FIN 571 Week 2 Individual Assignment Ratio Analysis Problems

FIN 571 Week 2 DQ 1

FIN 571 Week 2 DQ 2

FIN 571 Week 3 Individual Practice Quiz

FIN 571 Week 3 DQ 1

FIN 571 Week 3 DQ 2

FIN 571 Week 3 Individual Assignment Interpreting Financial Results

FIN 571 Week 3 Learning Team Reflection

FIN 571 Week 4 Individual Practice Quiz

FIN 571 Week 4 DQ 1

FIN 571 Week 4 DQ 2

FIN 571 Week 4 Individual Assignment Analyzing Pro Forma Statements

FIN 571 Week 4 Learning Team Reflection

FIN 571 Week 4 Team Assignment Operating Leverage and Forecasting

FIN 571 Week 5 DQ 1

FIN 571 Week 5 DQ 2

FIN 571 Week 5 Individual Practice Quiz

FIN 571 Week 5 Learning Team Reflection

FIN 571 Week 5 Individual Wileyplus Assignment

FIN 571 Week 5 Individual Assignment DCF and WACC Problems

FIN 571 Week 6 Learning Team Reflection

FIN 571 Week 6 Individual Assignment Working Capital Simulation Managing Growth Assignment

FIN 571 Week 6 Individual Practice Quiz

FIN 571 Week 6 Individual Wileyplus Assignment

FIN 571 Week 6 Individual Assignment Homework Problems

FIN 571 Final Exam Guide (New)

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FIN 571 Final Exam Guide (New)

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Multiple Choice Question 51

Which of the following is considered a hybrid organizational form?

partnership

limited liability partnership

sole proprietorship

corporation

Multiple Choice Question 59

Which of the following is a principal within the agency relationship?

the board of directors

a company engineer

the CEO of the firm

a shareholder

Multiple Choice Question 57

Teakap, Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. How much long-term debt does the firm have?

Multiple Choice Question 78

Which of the following presents a summary of the changes in a firm’s balance sheet from the beginning of an accounting period to the end of that accounting period?

The statement of net worth.

The statement of retained earnings.

The statement of cash flows.

The statement of working capital.

Multiple Choice Question 63

Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?

Multiple Choice Question 70

Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?

Multiple Choice Question 84

Which of the following is not a method of “benchmarking”?

Evaluating a single firm’s performance over time.

Conduct an industry group analysis.

Identify a group of firms that compete with the company being analyzed.

Utilize the DuPont system to analyze a firm’s performance.

Multiple Choice Question 67

Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)

Multiple Choice Question 62

PV of multiple cash flows: Ferris, Inc., has borrowed from their bank at a rate of 8 percent and will repay the loan with interest over the next five years. Their scheduled payments, starting at the end of the year are as follows—$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.)

Multiple Choice Question 64

PV of multiple cash flows: Ajax Corp. is expecting the following cash flows—$79,000, $112,000, $164,000, $84,000, and $242,000—over the next five years. If the company's opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)

Multiple Choice Question 72

Future value of an annuity: JayadevAthreya has started on his first job. He plans to start saving for retirement early. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years? (Round to the nearest dollar.)

Multiple Choice Question 57

Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)

Multiple Choice Question 62

Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company's bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)

Multiple Choice Question 57

PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 percent, what is the present value of their dividends over the next four years?

Multiple Choice Question 79

Capital rationing. TuleTime Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows, then what is the profitability index for the project?

Multiple Choice Question 88

What decision criteria should managers use in selecting projects when there is not enough capital to invest in all available positive NPV projects?

The modified internal rate of return.

The profitability index.

The internal rate of return.

The discounted payback.

Multiple Choice Question 60

How firms estimate their cost of capital: The WACC for a firm is 13.00 percent. You know that the firm's cost of debt capital is 10 percent and the cost of equity capital is 20%. What proportion of the firm is financed with debt?

Multiple Choice Question 68

The cost of equity: Gangland Water Guns, Inc., is expected to pay a dividend of $2.10 one year from today. If the firm's growth in dividends is expected to remain at a flat 3 percent forever, then what is the cost of equity capital for Gangland if the price of its common shares is currently $17.50?

Multiple Choice Question 85

If a company's weighted average cost of capital is less than the required return on equity, then the firm:

Is financed with more than 50% debt

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FIN 571 Week 1 Individual Assignment Business Structures

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Watch the "Your Business Structure" and "Corporate Business Structures" videos on the Electronics Reserve Readings page.

Identify the different business structures.

Write a 350 to 700 word explanation of how each business structure might and might not be advantageous.

Click the Assignment Files tab to submit your assignment.

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FIN 571 WEEK 1 INDIVIDUAL PRACTICE QUIZ

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Multiple Choice Question 42

Which of the following business organizational forms subjects the owner(s) to unlimited liability?

a) sole proprietorship

b) partnership

c) corporation

d) a and b

Multiple Choice Question 44

Which of the following business organizational forms is easiest to raise capital?

a) sole proprietorship

b) partnership

c) corporation

d) a and b

Multiple Choice Question 50

Which organizational form best enables the owners of the firm to monitor the actions of other owners of the same firm?

private corporation

sole proprietorship

partnership

public corporation

Multiple Choice Question 81

Which of the following factors or activities can be controlled by the management of the firm?

Stock market conditions.

Capital budgeting.

The level of economic activity.

The level of interest rates.

Multiple Choice Question 82

The legal system and market forces impose substantial costs on individuals and institutions that engage in unethical behavior. Which of the following would not be an example of the above?

Agency conflicts.

Jail time.

Financial losses.

Legal fines.

Multiple Choice Question 48

The most common reason that corporate firms use the futures and options markets is

to make deposits.

none of these.

to hedge risk.

to take risk.

Multiple Choice Question 55

Galan Associates prepared its financial statement for 2008 based on the information given here. The company had cash worth $1,234, inventory worth $13,480, and accounts receivables of $7,789. The company's net fixed assets are $42,331, and other assets are $1,822. It had accounts payables of $9,558, notes payables of $2,756, common stock of $22,000, and retained earnings of $14,008. How much long-term debt does the firm have?

Multiple Choice Question 59

Tre-Bien Bakeries generated net income of $233,412 this year. At year end, the company had accounts receivables of $47,199, inventory of $63,781, and cash of $21,461. It also had accounts payables of $51,369, short-term notes payables of $11,417, and accrued taxes of $6,145. The net working capital of the firm is

Multiple Choice Question 81

Which of the following best represents cash flows to investors?

Net income, minus dividends paid to preferred stockholders.

Earnings before interest and taxes times 1 minus the firm’s tax rate.

Cash flow from operating activity, plus cash flow generated from net working capital.

Cash flow from operating activity, minus cash flow invested in net working capital, minus cash flow invested in long-term assets.

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FIN 571 WEEK 2 INDIVIDUAL ASSIGNMENT BUSINESS STRUCTURE ADVICE

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Write a 350 to 700 word response to the following e-mail:

Dear Consultant,

I am currently starting a business and developing my business plan. I'm in need of some advice on how to start forming my business. I am not sure exactly how it will be financed and whether or not I want to take on partners. I am interested and willing to learn the intricacies of my options to determine how to best proceed with my plan.

Please advise on what my options are, the advantages and disadvantages of each, and possible tax consequences for each scenario?


Respectfully,

John Owner

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FIN 571 Week 2 Individual Assignment Ratio Analysis Problems

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Ratio Analysis Problems

Ratio Analysis

(Individual Assignment)

You may use excel or word.doc format for this assignment.
Please post your homework as a word.doc or excel file in the class discussion section below by the due date.

1. Analysis of cost of goods sold problem.

1992 1993 1994

Gross Profit Margin 60% 55% 51%

What is happening to cost of goods sold? As was done in the week 2 online lecture on ratio analysis, please assume sales of 1 dollar each year as you do your analysis. This problem follows the process shown in the Week 2 Ratio Analysis online lecture section titled: "Another Income Statement Analytical Approach: Percent of Sales"

(5 points)

2. Overhead (or Sales, General and Administrative Expense) problem.

1992 1993 1994

Gross Profit Margin 40% 39% 41%

Operating Margin (NOI/Sales) 15% 10% 5%

What is happening to S,G and A (or overhead expenses)? Please set up an illustration assuming sales of 1.00 dollar each year just as you did in problem number one.

(5 points)

3. Balance Sheet Problem

1992 1993 1994

Annual Sales Growth (over prior yr) + 1% 0% +1%

Current Ratio 3.5X 2X 1.2X

Average Collection Period 25 days 30 days 55 days

What is happening to liquidity? Why? What are some follow-up questions your would ask? (5 points)

4. Using the data provided below, which is the better managed company? Why? Please support your answers by calculating appropriate ratios. (5 points)

Company A Company B

Sales 10 million dollars 20 million dollars

Net Income 1 million dollars 2 million dollars

Total Assets 10 million dollars 15 million dollars

Click the Assignment Files tab to submit your assignment.

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FIN 571 WEEK 2 INDIVIDUAL PRACTICE QUIZ

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Multiple Choice Question 53

Which one of the following statements about trend analysis is NOT correct?

It allows management to examine each ratio over time and determine whether the trend is good or bad for the firm.

This benchmark is based on a firm's historical performance.

The Standard Industrial Classification (SIC) System is used to identify benchmark firms.

All of these are true statements.

Multiple Choice Question 68

Coverage ratios: Sectors, Inc., has an EBIT of $7,221,643 and interest expense of $611,800. Its depreciation for the year is $1,434,500. What is its cash coverage ratio?

Multiple Choice Question 68

Multiples analysis: Turner Corp. has debt of $230 million and generated a net income of $121 million in the last fiscal year. In attempting to determine the total value of the firm, an investor identified a similar firm in Jacobs, Inc., an all-equity firm. This firm had 150 million shares outstanding, a share price of $14.25, and net income of $182 million. What is the total value of Turner Corp.? Round to the nearest million dollars.

Multiple Choice Question 46

Coverage ratios, like times interest earned and cash coverage ratio, allow

a firm's creditors to assess how well the firm will meet its interest obligations.

a firm's creditors to assess how well the firm will meet its short-term liabilities other than interest expense.

a firm's management to assess how well they meet short-term liabilities.

a firm's shareholders to assess how well the firm will meet its short-term liabilities.

Multiple Choice Question 54

Peer group analysis can be performed by

a) management choosing a set of firms that are similar in size or sales, or who compete in the same market.

b) using the average ratios of this peer group, which would then be used as the benchmark.

c) identifying firms in the same industry that are grouped by size, sales, and product lines, in order to establish benchmark ratios.

d) Only a and b relate to peer group analysis.

Multiple Choice Question 61

Efficiency ratio: If Viera, Inc., has an accounts receivable turnover of 3.9 times and net sales of $3,436,812, what is its level of receivables

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FIN 571 WEEK 2 LEARNING TEAM REFLECTION

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Read the Ethics case, "A Sad Tale: The Demise of Arthur Anderson" located in the WileyPLUS Week Fundamentals of Corporate Finance Chapter readings.

Discuss the mistakes made by Arthur Anderson and potential actions that leadership could have taken to prevent the organizational failure.

Write a 350- to 700-word summary of your discussion.

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FIN 571 WEEK 3 INDIVIDUAL ASSIGNMENT INTERPRETING FINANCIAL RESULTS

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Resource: Financial Statements for the company assigned by your instructor in Week 2.

Review the assigned company's financial statements from the past three years.

Calculate the financial ratios for the assigned company's financial statements, and then interpret those results against company historical data as well as industry benchmarks:

Compare the financial ratios with each of the preceding three (3) years (e.g. 2014 with 2013; 2013 with 2012; and 2012 with 2011).

Compare the calculated financial ratios against the industry benchmarks for the industry of your assigned company.

Write a 500 to 750 word summary of your analysis.

Show financial calculations where appropriate.

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FIN 571 WEEK 3 INDIVIDUAL PRACTICE QUIZ

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Multiple Choice Question 32

The operating cycle

ends not with the finished goods being sold to customers and the cash collected on the sales; but when you take into account the time taken by the firm to pay for its purchases.

To measure operating cycle we need another measure called the days' payables outstanding.

begins when the firm receives the raw materials it purchased that would be used to produce the goods that the firm manufactures.

begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.

Multiple Choice Question 57

You are provided the following working capital information for the Ridge Company:

Ridge Company

Account $

Inventory $12,890

Accounts receivable 12,800

Accounts payable 12,670

Net sales $124,589

Cost of goods sold 99,630

Operating cycle: What is the operating cycle for Ridge Company?

Multiple Choice Question 80

Ticktock Clocks sells 10,000 alarm clocks each year. If the total cost of placing an order is $65 and it costs $85 per year to carry the alarm clock in inventory, use the EOQ formula to calculate the optimal order size.

Multiple Choice Question 49

The asset substitution problem occurs when

managers substitute less risky assets for riskier ones to the detriment of equity holders.

managers substitute riskier assets for less risky ones to the detriment of bondholders.

managers substitute less risky assets for riskier ones to the detriment of bondholders.

managers substitute riskier assets for less risky ones to the detriment of equity holders.

Multiple Choice Question 53

M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock.

How much are your cash flows today?

Multiple Choice Question 62

M&M Proposition 2: Melba's Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of debt is 6%, and its cost of equity is 10%. The firm's marginal corporate income tax rate is 35%. What is the appropriate WACC?

Multiple Choice Question 39

According to the text, the financial plan covers a period of

ten years.

none of these.

one year.

three to five years.

Multiple Choice Question 45

The financing plan of a firm will indicate

the firm's dividend policy, the desired capital structure for the firm, and the firm's working capital policy.

the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the desired capital structure for the firm, and the firm's dividend policy.

Multiple Choice Question 74

Payout and retention ratio: Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest payment of $511,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders. Find the firm's dividend payout ratio and retention ratio

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FIN 571 WEEK 3 LEARNING TEAM REFLECTION

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Watch the "Concept Review Video: Working Capital Management" video located in theWileyPLUS Assignment: Week 3 Videos Activity.

Discuss strategies these business owners used to manage their working capital.

Write a 350-700 word summary of your discussion.

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FIN 571 Week 4 Individual Assignment Analyzing Pro Forma Statements

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Decide 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 capital.

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FIN 571 Week 4 Individual Practice Quiz

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Multiple Choice Question 66

Present value: Tommie Harris is considering an investment that pays 6.5 percent annually. How much must he invest today such that he will have $25,000 in seven years? (Round to the nearest dollar.)

Multiple Choice Question 61

PV of multiple cash flows: Jack Stuart has loaned money to his brother at an interest rate of 5.75 percent. He expects to receive $625, $650, $700, and $800 at the end of the next four years as complete repayment of the loan with interest. How much did he loan out to his brother? (Round to the nearest dollar.)

Multiple Choice Question 63

PV of multiple cash flows: Hassan Ali has made an investment that will pay him $11,455, $16,376, and $19,812 at the end of the next three years. His investment was to fetch him a return of 14 percent. What is the present value of these cash flows? (Round to the nearest dollar.)

Multiple Choice Question 65

PV of multiple cash flows: Pam Gregg is expecting cash flows of $50,000, $75,000, $125,000, and $250,000 from an inheritance over the next four years. If she can earn 11 percent on any investment that she makes, what is the present value of her inheritance? (Round to the nearest dollar.)

Multiple Choice Question 66

Present value of an annuity: Transit Insurance Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? (Round to the nearest dollar.)

Multiple Choice Question 71

Future value of an annuity: Carlos Menendez is planning to invest $3,500 every year for the next six years in an investment paying 12 percent annually. What will be the amount he will have at the end of the six years? (Round to the nearest dollar.)

Multiple Choice Question 61

Bond price: Briar Corp is issuing a 10-year bond with a coupon rate of 7 percent. The interest rate for similar bonds is currently 9 percent. Assuming annual payments, what is the present value of the bond? (Round to the nearest dollar.)

Multiple Choice Question 56

PV of dividends: Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent?

Multiple Choice Question 59

PV of dividends: Givens, Inc., is a fast growing technology company that paid a $1.25 dividend last week. The company's expected growth rates over the next four years are as follows: 25 percent, 30 percent, 35 percent, and 30 percent. The company then expects to settle down to a constant-growth rate of 8 percent annually. If the required rate of return is 12 percent, what is the present value of the dividends over the fast growth phase?

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FIN 571 Week 4 Learning Team Reflection

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Watch the "Concept Review Video: Stock Valuation" video located in the WileyPLUS Assignment: Week 4 Videos Activity.

Discuss how markets and investors value a stock.

Write a 350-700 word summary of your discussion.

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FIN 571 Week 4 Team Assignment Operating Leverage and Forecasting

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Operating Leverage and Forecasting Problems Team Assignment

Please complete the following problems. When calculating earnings per share and PE ratios, please show your work. This problem is similar to the examples shown in the lecture.

1. You manufacture hunting pack systems in China for 80 dollars each, including shipping. The manufacturing costs only include variable costs. Variable costs are not calculated as a percentage of sales in this case. Sales are a function of the number of packs sold and the price per pack. Likewise, variable costs are a function of the number of packs sold and the cost to produce each pack. You sell these packs to retailers for 200 dollars each. In the current year you will sell 100,000 packs. Your fixed costs including such items as insurance, marketing, travel, shows, office supplies, warehouse rentals etc. totals 5 million dollars this year and are not part of the 80 dollars per pack manufacturing cost. The federal income tax rate for your company is 40 percent.

Your company is publicly traded on the NASDAQ with 1,000,000 shares outstanding.

1. Please create a current income statement using the same format as found in the lecture. (5 points)

2. Please calculate earnings per share. (2 points)

3. Please calculate the price/earnings multiple assuming that the current stock price is 10 dollars per share. (2 points)

1. Create a two-year forecast of the income statement from the information provided in problem number one. Please create three columns of data: current year, year 2, and year 3. Assume that sales increase ten percent per year for year's two and three. Please show the earnings per share for each of the three years. (10 points)

3. Please estimate the stock price for year's two and three, assuming that the current PE multiple remains constant for each of the two forecasted years. (6 points

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FIN 571 Week 5 Individual Assignment DCF and WACC Problems

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Discounted Cash Flows and WACC Homework Problems

Please post the answers (and show your work) in the assignments section by midnight the last day of the week assigned.

1. Calculate the future value of 1,535 invested today for 8 years at 6 percent.

(5 points)

1. What is the total present value of the following cash stream, discounted at 8 percent? (5 points)

Year Amount

1 400

2 750

3 945

4 145

5 78

3. If you invested $2,000 per year into an IRA for 30 years and received 6 percent return each year, what would the account balance be in 30 years? (5 points)

4. A friend gives you a proposition. If you give him 1,500 dollars today, he will guarantee your receive 12 percent a year for the next 5 years. How much money will you receive from him at the end of 5 years? (5 points)

5. You want to buy a new Computer Aided Design (CAD) system for your business. The cost of the system is $150,000 and you expect to save over $40,000 per year in reduced labor costs. Please calculate the net present value of the CAD if your required return is 10 percent and the life of the system is expected to be 5 years. (10 points)

6. Your company is considering converting its heating system in the main office from coal to heating oil. The initial cost of removing the coal fired furnace and installing an new oil fired unit is $60,000. The life of the analysis is 7 years. In the past you spent $25,000 per year on coal. The new company says you will spend no more than $15,000 per year on heating oil. If your required return is 12 percent, should you make this investment? Please calculate the net present value of this project. (10 points)

7. You have collected the following information:

a. the yield on your company’s preferred stock 8%

b. the yield on your company’s debt 10%

c. the required return on your company’s common stock and internal equity 12%

d. debt total $5,000,000

e. preferred stock current market value $10,000,000

f. common stock and retained earnings total value $20,000,000

Please calculate the pre-tax weighted average cost of capital (WACC) for your company.

(10 points)

8. Your company’s marginal income tax rate is 40%. Please calculate the post tax WACC from the information provided in problem 7. (10 points

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FIN 571 Week 5 Individual Practice Quiz

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Multiple Choice Question 55

Genaro needs to capture a return of 40 percent for his one-year investment in a property. He believes that he can sell the property at the end of the year for $150,000 and that the property will provide him with rental income of $25,000. What is the maximum amount that Genaro should be willing to pay for the property?

Multiple Choice Question 54

The process of identifying the bundle of projects that creates the greatest total value and allocating the available capital to the projects is known as

risk analysis.

rationing.

capital rationing.

budgeting.

Multiple Choice Question 78

Capital rationing. You are considering a project that has an initial cost of $1,200,000. If you take the project, it will produce net cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the project is 10 percent, what is the profitability index of the project?

Multiple Choice Question 89

What might cause a firm to face capital rationing?

If a firm rejects some capital investments that are expected to generate positive NPV’s.

If investors require returns for their capital that are too high.

If a firm has more than one project with a positive NPV.

If a firm has several projects that are expected to generate negative IRR’s.

Multiple Choice Question 59

How firms estimate their cost of capital: The WACC for a firm is 19.75 percent. You know that the firm is financed with $75 million of equity and $25 million of debt. The cost of debt capital is 7 percent. What is the cost of equity for the firm?

Multiple Choice Question 61

The cost of debt: Bellamee, Inc., has semiannual bonds outstanding with five years to maturity and are priced at $920.87. If the bonds have a coupon rate of 7 percent, then what is the YTM for the bonds?

Multiple Choice Question 63

The cost of debt: Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are currently priced at $746.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 35%? Assume that your calculation is made as on Wall Street.

Multiple Choice Question 67

The cost of equity: RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent. If the risk-free rate of return is 10 percent and the expected return on the market is 18 percent, then what is the firm's beta if the firm's marginal tax rate is 35 percent?

Multiple Choice Question 83

Which type of project do financial managers typically use the highest cost of capital when evaluating?

New product projects

Efficiency projects

Market expansion projects

Extension project

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FIN 571 Week 5 Individual Wileyplus Assignment

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1. Problem 5.17

2. Problem 5.21

3. Problem 6.19

4. Problem 6.27

5. Problem 7.16

6. Problem 8.24

7. Problem 9.15

Problem 5.17

Your finance text book sold 53,250 copies in its first year. The publishing company expects the sales to grow at a rate of 20 percent for the next three years, and by 10 percent in the fourth year. Calculate the total number of copies that the publisher expects to sell in year 3 and 4. (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answers to the nearest whole number.)

Problem 5.21

Find the present value of $3,500 under each of the following rates and periods.

(If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.)

Problem 6.19

Trigen Corp. management will invest cash flows of $331,000, $616,450, $212,775, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 6.75 percent, what is the future value of these investment cash flows six years from today? (Round answer to 2 decimal places, e.g. 15.25.)

Future value $

Problem 6.27

You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $500,000 today, plus $500,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 6 percent, what is the present value of the cash flow stream that the company is offering you? (Round answer to the nearest whole dollar, e.g. 5,275.)

Present value $

Problem 7.16

Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Using the table of returns and probabilities below, find

Probability Return

Boom 0.1 25.00%

Good 0.4 15.00%

Level 0.3 10.00%

Slump 0.2 -5.00%

What is the expected return on Barbara’s investment? (Round answer to 3 decimal places, e.g. 0.076.)

Expected return

What is the standard deviation of the return on Barbara’s investment? (Round intermediate calculations and answer to 5 decimal places, e.g. 0.07680.)

Standard deviation

Problem 8.24

Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $936.05. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,048.77, what is the yield that Trevor would earn by selling the bonds today? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

Effective annual yield %

Problem 9.15

The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 11.6 percent? (Round answer to 2 decimal places, e.g. 15.25.)

Current price

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FIN 571 Week 5 Learning Team Reflection

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Watch the "Concept Review Video: Cost of Capital" video located in the WileyPLUS Assignment: Week 5 Videos Activity.

Discuss some of the corporate finance challenges faced by this company.

Write a 350-700 word summary of your discussion.

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FIN 571 Week 6 Individual Assignment Homework Problems

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Week 6

Homework

Complete the following problems. You should do this work in excel. A set of ungraded practice problems similar to the homework is provided in the week six material to help you do this assignment.

Please post your answers in the classroom discussion section underneath the week six assignment.

1.Net Present Value: Johnson Complex Fabrications is a metal parts manufacturing company. It has developed a new process for producing extruded aluminum tubing. The process requires $1,968,450 initial investment. It expected to have a life of five years and would produce net cash inflows for each of the next five years: year 1 $512,496; year 2 $242,637; year 3 $814,558; year 4 $887,225 and year 5 $712,642.
What is the Net Present Value (NPV) if the discount rate is 15.9 percent? (10 points)

2. Free Cash Flow (FCF) and NPV for a project. Daniels Agricultural Products is considering buying a new farm that it plans to operate for ten years. The farm will require an initial investment of 12 million dollars. The investment will consist of 2 million dollars for land and 10 million dollars for trucks and other equipment. The land, all trucks and all other equipment is expected to be sold at the end of ten years for a price of five million dollars, which is two million dollars above book value. The farm is expected to produce revenue of 2 million dollars each year and annual cash flow from operations is projected to be 1.8 million dollars. The marginal tax rate is 35 percent and the company’s required return or discount rate is 10 percent. Calculate the NPV of this investment. (10 points)

3. Replace an existing asset: Davis Plumbing is considering updating its current manual accounting system with a high end electronic system. While the new accounting system would save the company money, the initial purchase cost of the system continues to decline. The company’s opportunity cost of capital or discount rate is 10 percent. The initial investment costs and annual savings made at different times in the future are shown below: (10 points)

Year Initial Investment Savings Per Year

0 5,000 7,000

1 4,500 7,000

2 4,000 7,000

3 3,600 7,000

4 3,300 7,000

5 3,100 7,000

When should Davis replace the system to have the highest present value of the NPV? (10 points)

4. Scenario analysis: Park City Boutique Brewery management forecasts that if the firm sells each case of Special Homebrewed for 20 dollars then the demand for the product will be 15,000 cases per year. If they raised the price per case ten percent then they expect demand to fall to 90 percent of the expected sales at the current price of 20 dollars per case. The firm’s variable cost per case is ten dollars and the total fixed cash costs for the year are 100,000 dollars. Depreciation and amortization charges are 20,000 dollars and the firm has a 30 percent marginal tax rate. Management anticipates it will need to increase working capital by 3,000 dollars for the year, regardless of the pricing of the product. What will be the effect of the price increase on the firm’s free cash flow for the year? (10 points)

5. WACC for a firm: Acme Co. has a capital structure, based on current market values, that consists of 50 percent debt, 10 percent preferred stock and 40 percent common stock. If the returns required by investors are 8 percent for the debt, 10 percent for the preferred stock and 15 percent for the common stock, what is Acme’s after tax weighted average cost of capital. Assume that the firm’s marginal tax rate is 40 percent. (10 points

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FIN 571 Week 6 Individual Assignment Working Capital Simulation Managing Growth Assignment

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Resources:

Harvard Business Publishing: Working Capital Simulation: Managing Growth Assignment

Ch. 1 - 21 ofFundamentals of Corporate Finance

WileyPLUS Assignments

All additional resources from each week

Review the following scenario:

Acting as the CEO of a small company, you will apply the principles of capital budgeting to invest in growth and cash flow improvement opportunities in three phases over 10 simulated years. Each opportunity has a unique financial profile and you must analyze the effects on working capital. Examples of opportunities include taking on new customers, capitalizing on supplier discounts, and reducing inventory.

You must understand how the income statement, balance sheet, and statement of cash flows are interconnected and be able to analyze forecasted financial information to consider possible effects of each opportunity on the firm's financial position. The company operates on thin margins with a constrained cash position and limited available credit. You must optimize use of internal and external credit as you balance the desire for growth with the need for maintaining liquidity.

Sign-in to the simulation and review each of the following:

Welcome Statement

How to Play

Terminology Primer

More Details (this includes information to help you understand how to play the simulation)

Write a paper of no more than 1,400 words that analyzes your decisions during each phase (1-3) and how they influenced each of the following final outcomes (metrics) of SNC:

Sales

EBIT

Net Income

Free Cash Flow

Total Firm Value

Address the following in your paper:

A summary of your decisions and why you made them

How they affected SNC's working capital

What general effects are associated with limited access to financing

Include scholarly references (in addition to your course textbook and simulation materials) to support your positions.

Format your paper consistent with APA guidelines.

Click the Assignment Files tab to submit your assignment

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FIN 571 Week 6 Individual Practice Quiz

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Multiple Choice Question 55

Planning models that are more sophisticated than the percent of sales method have

working capital accounts like inventory, accounts receivables, and accounts payables vary directly with sales.

fixed assets that do not always vary directly with sales.

all of these are true.

all variable costs change directly with sales.

Multiple Choice Question 66

Firms that achieve higher growth rates without seeking external financing

have less equity and/or are able to generate high net income leading to a high ROE.

are not highly leveraged.

all of these are true.

have a high plowback ratio.

Multiple Choice Question 85

External financing needed: Triumph Company has total assets worth $6,413,228. Next year it expects a net income of $3,145,778 and will pay out 70 percent as dividends. If the firm wants to limit its external financing to $1 million, what is the growth rate it can support

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FIN 571 Week 6 Individual Wileyplus Assignment

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Problem 10.14

Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $1,968,450. Have a life of five years, and would produce the cash flows shown in the following table.

Year Cash Flow

1 $512,496

2 -242,637

3 814,558

4 887,225

5 712,642

What is the NPV if the discount rate is 15.9 percent? (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.)

NPV is $

Problem 11.20

Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.00 million. This investment will consist of $2.00 million for land and $10.00 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of $5.00 million, $2.00 million above book value. The farm is expected to produce revenue of $2.00 million each year, and annual cash flow from operations equals $1.80 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)

NPV $

Problem 11.24

Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountain’s opportunity cost of capital is 10 percent, and the costs and values of investments made at different times in the future are as follows:

Year Cost Value of Future Savings

(at time of purchase)

0 $5,000 $7,000

1 4,500 7,000

2 4,000 7,000

3 3,600 7,000

4 3,300 7,000

5 3,100 7,000

Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)

The NPV of each choice is:

NPV0 = $

NPV1 = $

NPV2 = $

NPV3 = $

NPV4 = $

NPV5 = $

Suggest when should Bell Mountain buy the new accounting system?

Bell Mountain should purchase the system in .

Problem 12.24

Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 90 percent as high if the price is raised 10 percent. Chip’s variable cost per bottle is $10, and the total fixed cash cost for the year is $100,000. Depreciation and amortization charges are $20,000, and the firm has a 30 percent marginal tax rate. Management anticipates an increased working capital need of $3,000 for the year. What will be the effect of the price increase on the firm’s FCF for the year? (Round answers to nearest whole dollar, e.g. 5,275.)

At $20 per bottle the Chip’s FCF is $ and at the new price Chip’s FCF is $

Problem 13.11

Capital Co. has a capital structure, based on current market values, that consists of 50 percent debt, 10 percent preferred stock, and 40 percent common stock. If the returns required by investors are 8 percent, 10 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Capital’s after-tax WACC? Assume that the firm’s marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

After tax WACC =

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FIN 571 Week 6 Learning Team Reflection

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Watch the "Corporate Finance Video: Stable Money Makers" located in the WileyPLUS Assignment: Week 6 Videos Activity.

Identify a capital improvement that could help Betty with her Alpaca business.

Write a summary of no more than 700 words explaining how the capital improvement you identified could help the business.

Click the Assignment Files tab to submit your assignment-----------------------------------------------------------------------------------------------

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