Finance 20 maths | Business & Finance homework help

1 ,
 Your company, RMU Inc., is considering a new project whose data are shown below.  What is the project’s Year 1 cash flow?
Sales revenues                                                        $22,250
Depreciation                                                              $8,000
Other operating costs                                             $12,000
Tax rate                                                                       35.0%
 
 

2
 Mushali Services is now at the end of the final year of a project. The equipment originally cost $22,500, of which 75% has been depreciated. The firm can sell the used equipment today for $6,000, and its tax rate is 40%. What is the equipment’s after-tax salvage value for use in a capital budgeting analysis? Note that if the equipment’s final market value is less than its book value, the firm will receive a tax credit as a result of the sale.
 
 

3
McCall Manufacturing has a WACC of 10%.  The firm is considering two normal, equally risky, mutually exclusive, but not repeatable projects.  The two projects have the same investment costs, but Project A has an IRR of 15%, while Project B has an IRR of 20%.  Assuming the projects’ NPV profiles cross in the upper right quadrant, which of the following statements is CORRECT?
a.   Each project must have a negative NPV.
b.   Since the projects are mutually exclusive, the firm should always select Project B.
c.    If the crossover rate is 8%, Project B will have the higher NPV.
d.   Only one project has a positive NPV.
e.   If the crossover rate is 8%, Project A will have the higher NPV.
 
 
a. Each project must have a negative NPV
 
b. Since the projects are mutually exclusive, the firm should always select Project B
 
c. If the crossover rate is 8%, Project B will have the higher NPV
 
d. Only one project has a positive NPV
 
e. If the crossover rate is 8%, Project A will have the higher NPV

4
 If a stock’s dividend is expected to grow at a constant rate of 5% a year, which of the following statements is CORRECT? The stock is in equilibrium.

a.   The expected return on the stock is 5% a year.
b.   The stock’s dividend yield is 5%.
c.    The price of the stock is expected to decline in the future.
d.   The stock’s required return must be equal to or less than 5%.
e.   The stock’s price one year from now is expected to be 5% above the current price.
 
 
a. The expected return on the stock is 5% a year
 
b. The stock’s dividend yield is 5%
 
c. The price of the stock is expected to decline in the future
 
d. The stock’s required return must be equal to or less than 5%
 
e. The stock’s price one year from now is expected to be 5% above the current price

5
 Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company’s beta is 1.25, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company’s current stock price?
 
 

6
 Desai Industries is analyzing an average-risk project, and the following data have been developed.  Unit sales will be constant, but the sales price should increase with inflation.  Fixed costs will also be constant, but variable costs should rise with inflation.  The project should last for 3 years, it will be depreciated on a straight-line basis, and there will be no salvage value.  This is just one of many projects for the firm, so any losses can be used to offset gains on other firm projects.  What is the project’s expected NPV?
WACC                                                                    10.0%
Net investment cost (depreciable basis)           $200,000
Units sold                                                              50,000
Average price per unit, Year 1                         $25.00
Fixed op. cost excl. deprec. (constant)           $150,000
Variable op. cost/unit, Year 1                           $20.20
Annual depreciation rate                                33.333%
Expected inflation rate per year                      5.00%
Tax rate                                                               40.0%
 

7
 Data Computer Systems is considering a project that has the following cash flow data.  What is the project’s IRR?  Note that a project’s IRR can be less than the WACC (and even negative), in which case it will be rejected.
Year                           0                1                2                3    
Cash flows           -$1,100       $450         $470         $490
 
8
 GM Inc.’s common stock currently sells for $45.00 per share, the company expects to earn $2.75 per share during the current year, its expected payout ratio is 70%, and its expected constant growth rate is 6.00%. New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred. By how much would the cost of new stock exceed the cost of common from retained earnings?
 

9
 Huang Company’s last dividend was $1.25. The dividend growth rate is expected to be constant at 15% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firm’s required return (rs) is 11%, what is its current stock price?

10
 If a typical company correctly estimates its WACC at a given point in time and then uses that same cost of capital to evaluate all projects for the next 10 years, then the firm will most likely
a.   become riskier over time, but its intrinsic value will be maximized.
b.   become less risky over time, and this will maximize its intrinsic value.
c.    accept too many low-risk projects and too few high-risk projects.
d.   become more risky and also have an increasing WACC.  Its intrinsic value will not be maximized.
e.   continue as before, because there is no reason to expect its risk position or value to change over time as a result of its use of a single cost of capital.
 
e. continue as before, because there is no reason to expect its risk position or value to change over time as a result of its use of a single cost of capital

11
 Assume that Kish Inc. hired you as a consultant to help estimate its cost of common equity. You have obtained the following data: D0 = $0.90; P0 = $27.50; and g = 7.00% (constant). Based on the DCF approach, what is the cost of common from retained earnings?
 
12
 Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company’s last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?
 

13
 As a member of UA Corporation’s financial staff, you must estimate the Year 1 cash flow for a proposed project with the following data.  What is the Year 1 cash flow?
Sales revenues, each year                                                  $42,500
Depreciation                                                                     $10,000
Other operating costs                                                        $17,000
Interest expense                                                                $4,000
Tax rate                                                                              35.0%
 

14
 Kigugu Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company’s last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?

15
 Lafarge Inc. estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%.  Which of the following projects (A, B, and C) should the company accept?
a.   Project B, which is of below-average risk and has a return of 8.5%.
b.   Project C, which is of above-average risk and has a return of 11%.
c.    Project A, which is of average risk and has a return of 9%.
d.   None of the projects should be accepted.
e.   All of the projects should be accepted.

16
 Several years ago the Metalusa Inc. sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $925 and the company’s tax rate is 40%. What is the component cost of debt for use in the WACC calculation?
 

17
 Susmel Inc. is considering a project that has the following cash flow data.  What is the project’s payback?
Year                           0               1            2                3    
Cash flows             -$500         $150        $200         $300

18
 Rivoli Inc. hired you as a consultant to help estimate its cost of common equity. You have been provided with the following data: D0 = $0.80; P0 = $22.50; and g = 8.00% (constant). Based on the DCF approach, what is the cost of common from retained earnings?
 
19
 If D0 = $1.75, g (which is constant) = 3.6%, and P0 = $32.00, what is the stock’s expected total return for the coming year?
 
20
 Hindelang Inc. is considering a project that has the following cash flow and WACC data.  What is the project’s MIRR?  Note that a project’s MIRR can be less than the WACC (and even negative), in which case it will be rejected.
WACC:  12.25%
Year                           0                1               2              3            4    
Cash flows             -$850         $300         $320         $340         $360 
  

 

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees


We value our customers, and so ensure that our papers are 100 percent original. Our Team of professionals does not miss the mark; they ensure that step by step each paper is written uniquely. We never duplicate or work as we compare papers rest assured. We deliver our work a day before time to ensure that you don’t miss your deadlines. It is not only doing the work but delivering it at the right time. We capture the consequences of late remittances. .

Money-back guarantee

We value customer satisfaction here at popularessaywriters.com and make sure that you get the best value for your Money. It happens that sometimes you can pay twice for your order or may want to cancel it, or you feel that it doesn’t meet your requirements; our money back guarantee will give you the opportunity to get back your money. We will also refund 100% of money paid double. In case your paper does not satisfy your requirements , we request that you notify us via writing within 2 days otherwise on the third day we will assume that you have been satisfied. Do all your correspondences through our email address popularessaywriters@gmail.com.

Read more

Zero-plagiarism guarantee

At popularessaywriters.com, our professional writers know the consequence plagiarism does for our clients. We have updated software’s such as article checker and copyscape to check for originality of the custom papers before submission of the final paper to the you. Our guarantee to the customer is that we will write 100% original papers for them that are quality, timely and of low cost. We have experienced professional and competent PhD writers who will write quality custom papers for you..

Read more

Free-revision policy

. At popularessaywriters.com, we are proud to provide top-quality Essay writing service to our esteemed customers. We are ready to take up that challenging academic assignment that is giving you sleepless nights and simplify it for you according to your desired requirements. We are willing to revise your paper if it does not meet your requirements. At popularessaywriters.com, we do not compromise with quality; thus, we offer unlimited free revisions until the customer is satisfied with their custom paper. Our unlimited free revision services are provided under the following terms:.. .

Read more

Privacy policy

Popularessawriters.com knows that client’s information is an essential tool for our company. It means that whatever the client requests from our service is kept strictly confidential. It means that whoever writes for this company understands the terms and conditions hence you should not be worried because you will never see your work somewhere else...

Read more

Fair-cooperation guarantee

Rest assured that we will always be attentive to your needs and requirements. We belief in the phrase treat your neighbour as you would want them to treat you. We leave nothing to chance and always look forward to a good interaction with each other.. .

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency