Busa 5062 Finance Problem

In: Business and Management

Submitted By Laynebaril
Words 474
Pages 2
BUSA 5062 Finance Problem
Click Link Below To Buy: http://hwcampus.com/shop/busa-5062-finance-problem/ 1. Calculating project NPV [LO01] You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufactures of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago $1.4 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based n a recent appraisal, the company believes it could sell the land for $1.5 million on an aftertax basis. The company also hired a marketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketing report is as follows:
The zither industry will have a rapid expansion in the next four years. With the 2,800 units each year for brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,200,4,300, 3,900, and each year for the next four years, respectively. Again, capitalizing on the name recognizing of PUTZ, we feel that a premium price of $ 780 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued.
PUTZ believes that fixed costs for the project will be $425,000 per year, and variable costs are 15 percent of sales. The equipment necessary for production will cost $4.2 million and will be depreciated according to a three-year MACRS schedule. At the end of the project, the equipment can be scrapped for $400,000. Net working capital of $125,000 will be required immediately. PUTZ has a38 percent tax rate, and the required return on the project is 13 percent. What is the NPV of the project? Assume the company has other profitable projects.

2. Project Evaluation: [LO1] Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave…...

Similar Documents

Managerial Finance Problems

...Managerial Finance Important Exercises and   Problems for the Final Prepared by Lody                           Previous Final Exam Qs BMMF Final Exam 2010   Part 1 : answer the first two questions then choose 2 only Q1 - the same as question (13-10) & (13-8) - [15 mark]   Q2 - he gave us some equations and asks us to find : [10 marks] (a) the sales using 3 formulas , i think first we used Current Ration to find Total Liability , then Quick Ratio to find Inventories then Inventory turnover to get the sales (b) the DSO first we must find the Receivables = Total assets - (cash & short-term investments + inventories) then find the DSO = Receivables / sales / 365   Q3- [7.5 marks] (a) define LRP (b) similar question to 1-4   Q4- [7.5 marks] the same question as 6-1   Q5- [7.5 marks] the same question as ST-1 from chapter 10   Part 2 : answer only 2 questions   Q1- what are the key features bond ? and Discuss The relationship between Coupon interest and Market interest?   Q2- - What are the differences between Systematic risk and Unsystematic risk ? - Define Standard Diviation -   Q3- what is the difference between Independent & Mutualy Exclusive projects , give example of each                 Contents Interest Rate calculation​6 Problem 1-1 (Expected Rate of Interest) page 42​6 Another clear answer: (1-1)​7 Problem (1-2) page 42, Default Risk...

Words: 3814 - Pages: 16

Healthcare Finance Chapter 17 Problems

...into the product of three other ratios, each of which has an important economic interpretation: ROE or Net income Net income ──────── = ──────── × Total equity Total revenue Total revenue ───────── Total assets × Total assets ──────── . Total equity = Total margin × Total asset turnover × Equity multiplier The total margin measures expense control, the total asset turnover ratio measures asset utilization, and the equity multiplier measures debt utilization. By comparing the company’s Du Pont equation to those for other managed care firms or the industry average, managers would learn which of the three areas contributed most to the low ROE. Then, they could conduct further analysis into the deficient areas to try to pinpoint the precise problem areas as a starting point for corrective action. 17.8 No. Different lines of business have different critical measures of performance. For example, a critical measure for hospitals is fixed asset utilization, because hospitals require a large fixed asset base. On the other hand, managed care and home health care businesses do not require a large asset base, so this measure is more or less meaningless for such organizations. However, other ratios, such as the medical loss ratio (the proportion of premiums spent on medical care) for managed care organizations, may not be meaningful for hospitals. The key here is that the ratios used must contain information that has economic value to the organization being analyzed. Thus,......

Words: 3811 - Pages: 16

Problem Chapter 6 Finance

...invoices dated on November 25 under each of the following credit terms: a. net 30 date of invoice b. net 30 EOM c. net 45 date of invoice d. net 60 EOM P16–5 Borrow or pay cash for an asset Bob and Carol Gibbs are set to move into their first apartment. They visited Furniture R’Us, looking for a dining room table and buffet. Dining room sets are typically one of the more expensive home furnishing items, and the store offers financing arrangements to customers. Bob and Carol have the cash to pay for the furniture, but it would definitely deplete their savings, so they want to look at all their options. The dining room set costs $3,000 and Furniture R’Us offers a financing plan that would allow them to either (1) put 10% down and finance the balance at 4% annual interest over 24 months or (2) receive an immediate $200 cash rebate, thereby paying only $2,800 cash to buy the furniture. Bob and Carol currently earn 5.2% annual interest on their savings. a. Calculate the cash down payment for the loan. b. Calculate the monthly payment on the available loan. (Hint: Treat the current loan as an annuity and solve for the monthly payment.) c. Calculate the initial cash outlay under the cash purchase option. d. Assuming that they can earn a simple interest rate of 5.2% on savings, what will Bob and Carol give up (opportunity cost) over the 2 years if they pay cash? e. What is the cost of the cash alternative at the end of 2 years? f. Should Bob and Carol......

Words: 651 - Pages: 3

Basic Finance Chapter 20 Problem 1

...Basic Finance: Problem 1 FIN/370 John Rapa 11/22/13 Leah Harlan Basic Finance: Problem 1 Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 iebt (with a 10% rate of interest) and $5,000 in equity. Both firms sell 10,000 units of output at $2.50 per unit. The variable costs of production are $1, and fixed production costs are $12,000. (No income tax). a. What is the operating income (EBIT) for both firms? Sales Revenue = 10,000 X $2.50 = $25,000 Variable Cost = 10,000 X $1 = $10,000 Fixed Cost = $12,000 EBIT = $25,000 - $10,000 - $12,000 = $3,000 b. What are the earnings after interest? Firm A = 0 Interest (Earnings after tax = $3,000) Firm B = $5,000 X 10% = $500 Interest (Earnings after tax = $2,500) c. If sales increase by 10% to 11,000 units, by what percentage will each firm’s earnings after the interest increase? To answer the question, determine the earnings after taxes and compute the percentage increase in these earnings from the answers you derived in part b. Sales Revenue = 11,000 X $2.50 = $27,500 Variable Cost = 11,000 X $1 = $11,000 Fixed Cost = $12,000 EBIT = $27,500 - $11,000 - $12,000 = $4,500 Firm A = 0 Interest (Earnings after tax = $4,500) Firm B = $5,000 X 10% = $500 Interest (Earnings after tax = $4,000) Percentage Increase = ($4,500 - $3,000) X 100 = 50% ($4,000 - $2,500) = 60% $3,000 $2,500...

Words: 271 - Pages: 2

Comprehenseive Problem-Finance

...Running Head: Comprehensive Problem Comprehensive Problem Saundra Brown, Charlene Caldwell, Ludonna Flanningan, Shana Mount MMPBL/503 Professor Brian Friedel November 30, 2009 Comprehensive Problem The basic financial statements – balance sheet, income statement, and cash flow statement – all provide managers will valuable information. But there are a number of other types of analysis that can give the financial manager insights so he can better manager the business and improve the organization’s profitability. This paper will present a 7 step program with answers and recommendations along with discussion on trends, ratios, and stock performance. Sun Microsystems is a leading supplier of computer related product, including servers, workstations, storage devices, and network switches. Sun Microsystems are used for commercial and technical applications in various industries like telecommunications, financial services, manufacturing, government, education and research, retail, health care, digital media and entertainment (Sun Microsystems, 2009). Sun Microsystems operates in the United States, Europe, Middle East, Africa, Asia Pacific, Canada and Latin America (Sun Microsystems, 2009). Mr. Scott G. McNealy, President and CEO of Sun Microsystems, acknowledges in a letter to the stockholders a 2001 annual report on the condition of the company and the...

Words: 1766 - Pages: 8

Busa

...BUSA 3000 / Globalization and Business Practices Wednesday 7:15pm- 9:45pm ADL 224 Fall 2013 INSTRUCTOR: Dr. Evaristo Fernando Doria Cell 408.348.4217 Email: edoria@gsu.edu Office: J. Mack Robinson College of Business / 35 Broad Street / Floor 14 / Suite 1419 Student Office Hours: Tuesday and Thursday 4:00pm to 5:00pm. Request always an appointment to edoria@gsu.edu. Email during this course for assignments and exchange of information: busafall2013wednesday@gmail.com. All emails will be answered by instructor within 7 working days. If not, please contact instructor asap. [pic] @edoriaGSU This is my Business Newsletter for my Current and Former Students. You are invited to follow it. It will provide you with information about new job opportunities, business advice, global news, and other topics. TEXT and REQUIRED READINGS: Soft Cover available at GSU Bookstore: International Business: Strategy, Management, and the New Realities by S. Tamer Cavusgil, Gary Knight, John R. Riesenberger, Pearson Prentice-Hall, 2012. (ISBN 9781269390705.) Hard Cover includes material to be taught at IB 3090 course: International Business: Strategy, Management, and the New Realities Third Edition by S. Tamer Cavusgil, Gary Knight, John R. Riesenberger, Pearson Prentice-Hall, 2012. (ISBN 9780132991261.) Also Required: Reading the business section of foreign newspapers for your assigned country and other information sources about this country (suggested places to start:......

Words: 4937 - Pages: 20

Finance Questions and Problems-1

...The Financial Environment: Questions & Problems Questions 2.1, 2.2, 2.3, 2.6, 2.8; Problems: 2.1, 2.5 2.1 The three primary forms of businesses are: Proprietorship, Partnership, and Corporation. Benefits: Proprietorship: Easy to create form a legal perspective, inexpensive to create, subject to few governmental regulations Partnership: Low cost and easy to form, income is taxed as personal and not corporate. Corporation: Corporations have unlimited life, easy to transfer ownership, owners have limited liability. Disadvantages of proprietorship and partnership: Selling interest is difficult, owners have unlimited liability, the life of the business is limited to the life of the owners, restricted to small business status. Disadvantages of Corporations: Double taxation, time consuming and costly to set-up the corporation and file periodic reports. 2.2 Differences: Investor owned vs. not for profit: Investor owned: Individulas become owners when they purchase shares of common stock, shares can be either publicly held or privately held, stockholders have the right of control, a claim to residula earnings, and a claim on liquidation proceeds. Not-for-profit corporations: are tax exempt, run exclusively for the public - profits are not used for private gain, no single......

Words: 616 - Pages: 3

Busa

...Dawn Spradley BUSA Chapter 1 Homework 18 August 2014 Review Questions 1. What factors contribute to the rapid pace of change in business? Is the pace likely to accelerate or decrease over the next decade? Why? Increasing entrepreneurship, taking risks, and understanding the market are three factors that contribute to the rapid pace of change in business. In future decades, I feel that the pace is likely to continue to increase with advanced technology and better understanding of the market and overall world of business. 2. What role does entrepreneurship play in the economy? Who stands to gain from the success of individual entrepreneurs? How do other parties benefit? A successful entrepreneur can enrich and benefit a multitude of various people and places. Although the actual entrepreneur is ideally the main person that makes a gain from the product or company, they also lead to sharing the wealth by spending their money. Everywhere that the businessperson spends money is making a gain due to his/her initial wealth and success. This spending of money in other businesses and the taxes can greatly stimulate an economy. 3. How do nonprofit organizations compare to businesses? What role do nonprofits play in the economy? How do they interact with businesses? Nonprofit organizations are very much like a regular business. The only main difference is that nonprofits are not concerned with profits, like businesses are. 4. What are the factors of production?......

Words: 728 - Pages: 3

Finance Problems

...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 $2,011,756. have a life of five years, and would produce the cash flows shown in the following table. Year Cash Flow 1 $569,998 2 -211,846 3 883,551 4 797,704 5 737,014 What is the NPV if the discount rate is 12.65 percent? (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.) -153004.09 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.) 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 $12.20 million. This investment will consist of $2.20 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 $5.05 million, $2.28 million above book value. The farm is expected to produce......

Words: 1234 - Pages: 5

Solution to Assigned Problem Finance

...Solutions to Assigned Problems Chapter One 2. Example One: An individual opens a savings account at a local commercial bank with a $200 deposit. The bank loans out the $200 with other funds from other savings accounts to a local business man who is expanding his business. The local business man pays back the loan overtime with interest and the bank credits the savings account with interest. The individual withdraws money from the savings account to buy a new bike. Example Two: An individual deposits his monthly paycheck in a checking account. The bank accumulates the funds from many checking accounts and loans money to an individual buying a house. The new homeowner makes monthly mortgage payments to the bank. The bank uses the mortgage payments to cover the checks written by the person with the checking account. Example Three: An individual buys a municipal bond for an airport improvement project. The individual usually buys a municipal from a bond dealer, an investment banker marketing the bond, and the funds from the sale of the bond are delivered to the city minus a fee from the investment banker. The city uses the funds to build new facilities at the airport, for example a new parking lot. Once finished the fees received from parking are used to payback the buyer of the bond with interest. 7. The goal of the financial manager is to maximize the current share price or equity value of the firm. This goal encompasses many good business practices such as a...

Words: 16162 - Pages: 65

Fin 515 Week 1 Problem Set Managerial Finance

...FIN 515 Week 1 Problem Set Managerial Finance http://hwguiders.com/downloads/fin-515-week-1-problem-set-managerial-finance FIN 515 Week 1 Problem Set Managerial Finance Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_1_Problem_Set.docx, where flastname is your first initial and you last name, and submit it to the appropriate dropbox. Chapter 1 (page 19) 1. What is the most important difference between a corporation and all other organizational forms? 2. What does the phrase limited liability mean in a corporate context? 3. Which organizational forms give their owners limited liability? 4. What are the main advantages and disadvantages of organizing a firm as a corporation? 5. Explain the difference between an S corporation and a C corporation. Chapter 2 The following is provided for use in answering the next set of questions. You may also find table 2.5 on page 53 of your text and all questions on pages 56–57. 29. In fiscal year 2011, Starbucks Corporation (SBUX) had revenue of $11.70 billion, gross profit of $6.75 billion, and net income of $1.25 billion. Peet’s Coffee and Tea (PEET) had revenue of $372 million, gross profit of $72.7 million, and net income of $17.8 million. a. Compare the gross margins for Starbucks and Peet’s. b. Compare the net profit margins for Starbucks and Peet’s. c. Which firm was more profitable in 2011? 31. See......

Words: 592 - Pages: 3

Fin 515 Managerial Finance Week 6 Problem Set

...FIN 515 Managerial Finance Week 6 Problem Set To Buy this Class Copy & paste below link in your Brower http://homeworkregency.com/downloads/fin-515-managerial-finance-week-6-problem-set/ Or Visit Our Website Visit : http://www.homeworkregency.com Email Us : homeworkregency@gmail.com FIN 515 Managerial Finance Week 6 Problem Set Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_6_Problem_Set.docx (where flastname is your first initial and your last name), and submit it to the appropriate Dropbox. Chapter 29 (pages 983-984): 1. What inherent characteristic of corporations creates the need for a system of checks on manager behavior? 2. What are some examples of agency problems? 3. What are the advantages and disadvantages of the corporate organizational structure? 4. What is the role of the board of directors in corporate governance? Second Project The purpose of this project is for you to have some practice working with financial concepts in the real world. This will involve integrating some material from throughout the course. The project will also involve the development of your own approach to doing the work. The project does not provide a step-by-step procedure for you to follow. Your task is to determine the WACC for a given firm using what you know about WACC as well as data you can find through research. Your deliverable is to be a......

Words: 666 - Pages: 3

Busa 5062 Finance Problem

...BUSA 5062 Finance Problem Click Link Below To Buy: http://hwcampus.com/shop/busa-5062-finance-problem/ 1. Calculating project NPV [LO01] You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufactures of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago $1.4 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based n a recent appraisal, the company believes it could sell the land for $1.5 million on an aftertax basis. The company also hired a marketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the 2,800 units each year for brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,200,4,300, 3,900, and each year for the next four years, respectively. Again, capitalizing on the name recognizing of PUTZ, we feel that a premium price of $ 780 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. PUTZ believes that fixed costs for the project will be $425,000 per year, and variable costs are 15 percent of sales. The equipment necessary for production will cost $4.2 million and will be depreciated according to a three-year MACRS schedule. At the......

Words: 474 - Pages: 2

Busa 5062 Finance Problem

...BUSA 5062 Finance Problem Click Link Below To Buy: http://hwcampus.com/shop/busa-5062-finance-problem/ 1. Calculating project NPV [LO01] You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufactures of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago $1.4 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based n a recent appraisal, the company believes it could sell the land for $1.5 million on an aftertax basis. The company also hired a marketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the 2,800 units each year for brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,200,4,300, 3,900, and each year for the next four years, respectively. Again, capitalizing on the name recognizing of PUTZ, we feel that a premium price of $ 780 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. PUTZ believes that fixed costs for the project will be $425,000 per year, and variable costs are 15 percent of sales. The equipment necessary for production will cost $4.2 million and will be depreciated according to a three-year MACRS schedule. At the......

Words: 474 - Pages: 2

Corporate Finance 6446 Problem Set 3

...Corporate 1. To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. If the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation? a. 4.35% b. 4.58% c. 4.83% d. 5.08% e. 5.33% 2 Several years ago the Jakob Company 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? a. 4.28% b. 4.46% c. 4.65% d. 4.83% e. 5.03% 3 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? a. 9.29% b. 9.68% c. 10.08% d. 10.50% e. 10.92% 4 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? ......

Words: 1635 - Pages: 7