QUESTION Zydeco Enterprises is considering undertaking a special project requiring an initial outlay of $90,000. The project would have a two-year life, after which there will be no expected salvage or terminal value. The possible incremental after-tax cash flows and associated probabilities of occurrence are as follows: Net Cash flows for 1st year= $60,000*0.3= $18,000 […]
QUESTION IntegrativeRisk and valuation Giant Enterprises stock has a required return of 14.8%. The company, which plans to pay a dividend of $2.60 per share in the coming year, anticipates that its future dividends will increase at an annual rateconsistent with that experienced over the 20062012 period, when the following dividends were paid:YearDividend per share2012$2.4520112.2820102.1020091.9520081.8220071.8020061.73a. […]
QUESTION Figurate Industries has 750,000 shares of cumulative preferred stock outstanding. It has passed the last three quarterly dividends of $2.50 per share and now (at the end of the current quarter) wishes to distribute a total of $12 million to its shareholders. If Figurate has 3 million shares of common stock outstanding, how large […]
QUESTION Bond valuation Lahey Industries has outstanding a $1,000 par-value bond with an 8% coupon interest rate. The bond has 12 years remaining to its maturity date.a. If interest is paid annually, find the value of the bond when the required return is (1) 7%, (2) 8%, and (3) 10%.b. Indicate for each case in […]
QUESTION Relationship between future value and present valueMixed stream Using the information in the accompanying table, answer the questions that follow.Year (t)Cash flow1$ 800290031,00041,50052,000a. Determine the present value of the mixed stream of cash flows using a 5% discount rate.b. How much would you be willing to pay for an opportunity to buy this stream, […]
QUESTION Time value Jim Nance has been offered an investment that will pay him $500 three years from today.a. If his opportunity cost is 7% compounded annually, what value should he place on this opportunity today?b. What is the most he should pay to purchase this payment today?c. If Jim can purchase this investment for […]
QUESTION ETHICS PROBLEM The SEC is trying to get companies to notify the investment community more quickly when a material change will affect their forthcoming financial results. In what sense might a financial manager be seen as more ethical if he or she follows this directive and issues a press release indicating that sales will […]
QUESTION Pro forma income statement Euro Designs, Inc., expects sales during 2013 to rise from the 2012 level of $3.5 million to $3.9 million. Because of a scheduled large loan payment, the interest expense in 2013 is expected to drop to $325,000. The firm plans to increase its cash dividend payments during 2013 to $320,000. […]
QUESTION 1. Accounts receivable management An evaluation of the books of Blair Supply, which follows, gives the end-of-year accounts receivable balance, which is believed to consist of amounts originating in the months indicated. The company had annual sales of $2.4 million. The firm extends 30-day credit terms.Month of originAmounts receivableJuly$ 3,875August2,000September34,025October15,100November52,000December193,000Year-end accounts receivable$300,000a. Use the […]
QUESTION 1. Balance sheet preparation Adam and Arin Adams have collected their personal asset and liability information and have asked you to put together a balance sheet asof December 31, 2012. The following information is receivedfrom the Adams family.Cash$ 300Retirement funds, IRA$ 2,000Checking3,0002011 Sebring15,000Savings1,2002010 Jeep8,000IBM stock2,000Money market funds1,200Auto loan8,000Jewelry and artwork3,000Mortgage100,000Net worth76,500Medical bills payable250Household furnishings4,200Utility […]
