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Posted on: Friday, August 2, 2013 9:10 AM
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Subject: FIN 3030.zip
| ********** FIN 3030 Week-1 Asignment-1 DQ ************** Question-1 The separation of ownership and control is often a subject of concern for financial managers. Management decisions are sometimes not acceptable to shareholders. This, in turn, raises conflicts. These conflicts are called agency problems. Question-2 What are some of the problems related to financial ratio analysis? How can these problems be rectified? Justify your answers using examples and reasoning. ************ FIN 3030 Week-1 Assignment-3 ************
********** FIN 3030 Week-2 Asignment-1 DQ ************** Question 3: If the cost of debt is generally below cost of equity, why would firms want to issue equity? Question 4: How reliable are ratios when used to evaluate fast-growing companies? How is it used to evaluate fast-evolving economic sectors such as Internet companies? How are ratios helpful in evaluating turnarounds? What is the best measure of performance for companies in cyclical sectors? **************** FIN 3030 Week-2 Assignment 2 ****************** For each of the following find the correct equations and solve for the cost indicated. You must show work 1. A bond has a $1,000 par value (face value) and a contract or coupon interior rate of 8%. A new issue would have a flotation cost of 5% of the market value. The bonds mature in 10 years. The firm’s average tax rate is 28% and its marginal tax rate is 39%. The current price is $1100. What is the after tax cost of debt? 2. A new common stock issue paid a $1.50 dividend last year. The par value of the stock is $25, and earnings per share have grown at a rate of 3% per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend/earnings ratio of 40%. The price of this stock is now $30, but 4% flotation costs are anticipated. What is the cost of new common equity? 3. Internal common equity where the current market price of the common stock is $45.50. The expected dividend this coming year should be $4.00, increasing thereafter at a 6% annual growth rate. The corporation’s tax rate is 34%. What is the cost of common equity? 4. A preferred stock paying a 10% dividend on a $100 par value. If a new issue is offered, flotation costs will be 10% of the current price of $115. What is the cost of preferred equity? 5. The capital structure for the Shelby Corporation is provided below. The company plans to maintain its debt structure in the future. If the firm has a 5% after-tax cost of debt, a 12% cost of preferred stock, and a 20% cost of common stock, what is the firm’s weighted cost of capital? Bonds $2,500,000 Preferred Stock $ 350,000 Common Stock $4,350,000 6. A bond that has a $1,000 par value (face value) and a contract or coupon interior rate of 12%. A new issue would have a flotation cost of 6% of the market value. The bonds mature in 10 years. The firm’s average tax rate is 30% and its marginal tax rate is 34%.The current price is $989. What is after tax cost of debt? 7. A new common stock issue that paid a $1.75 dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of 8% per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend/earnings ratio of 30%. The price of this stock is now $28, but 5% flotation costs are anticipated. What is the cost of new common equity? 8. Internal common equity where the current market price of the common stock is $43.50. The expected dividend this coming year should be $3.25, increasing thereafter at a 7% annual growth rate. The corporation’s tax rate is 34%. What is the cost of common equity 9. A preferred stock paying a 10% dividend on a $125 par value. If a new issue is offered, flotation costs will be 12% of the current price of $150. What is the cost of preferred equity? 10. The capital structure for the Memphis Corporation is provided below. The company plans to maintain its debt structure in the future. If the firm has a 6% after-tax cost of debt, a 13.5% cost of preferred stock, and a 19% cost of common stock, what is the firm’s weighted cost of capital? Capital Structure ($000) Bonds $1,100 Preferred Stock $ 250 Common Stock $3,700 ************* FIN 3030 Week-3 Assignment-1 ***************** Question-1 Compare and contrast NPV, IRR, MIRR and payback. Which method of ranking investment proposals is best and why? Question-2 What impact does timing of the cash flows have on your overall return? How might this impact project acceptance? *************** FIN 3030 Week-3 Assignment-2 ******************** You will compare three projects. The following table lists each projects initial outlay (price of the project) in year 0 (zero). The following years are the cash inflows. All projects receive the same total cash inflows. They differ on when the cash flows occur and the amount of the annual cash flow You must submit your backup in Excel showing how answers were reached. Use the formula and the financial calculator or Excel to determine: Given three projects with the following cash flows:
******************** FIN 3030 Week-3 Assignment-3 ********************** First identify or calculate the capital spending, the operating cash flow, the change in net working capital, and finally the free cash flow to the firm of the project. Free Cash Flows are cash flows available to the firm after stakeholders have been paid (interest and dividends). It is these free cash flows that you find that are discounted at the weighted average cost of capital to calculate the net present value and the internal rate of return. You will assess whether to make the investment or not. Use your accept-reject rules for the net present value and the internal rate of return. Redbird, Inc. is considering an addition to its current operations. The figures are below.
************* FIN 3030 Week-4 Assignment-1 DB ************************* Question-3 Discuss the relationship between business risk, financial risk, and beta (systematic or market risk). Question 4: Explain why certain shareholders would have a preference on receiving dividends and on the amount of the dividend. ***************** FIN 3030 Week-4 Assignment-2 ************************ Assume that a firm has the following Income Statement Use this data to determine the business risk and the financial risk as measured by the degree of operating leverage and the degree of financial leverage, respectively. Also, determine the combined leverage as found with the degree of combined leverage. Utilize these risk measures to see the affect of a change in sales.
**************** FIN 3030 Week-4 Assignment-3 ************************** This part of the project is to analyze the following capital structure plans. You will use the EBIT-EPS analysis to evaluate the two plans. One plan is all equity and one has debt and equity.
********************* FIN 3030 Week-5 Assignment-1 ********************** Question 2: Discuss the optimal amount of accounts receivables relative to the cost and benefits. Question 3: Compare and contrast the impact of supply chain management on working capital needs. ******************* FIN 3030 Week-5 Assignment-2 ******************* 1. Cash Cycles: Go the internet and select an automobile manufacturing company (e.g. Ford, Toyota, Hyundai, etc.) Find its most recent quarterly income statement and balance sheet. a. Determine its Cash Cycle b. Evaluate its Cash Cycle. 2. EOQ: Lilly’s Manufacturing needs fastener supplies to manufacture its products. The CFO estimates that the company will need about 200,000 cases next year. The cost of storing cases is about $0.90. The ordering cost is $500 for a shipment. a. Determine the EOQ. b. How many times will you order? c. What would be the total costs for ordering the cases 1, 6, and 12 times per year? d. What questionable assumptions are being made by the EOQ model? ************ FIN 3030 Week-5 Assignment-3 ***************** Of Redbird’s sales, 20% is for cash, another 60% is collected in the month following sale, and 20 percent is collected in the second month following sale. November and December sales for 20X1 were $220,000 and $175,000, respectively. Redbird purchases its raw materials two months in advance of its sales equal to 70% of its final sales price. The supplier is paid one month after it makes delivery. For example, purchases for April sales are made in February, and payment is made in March. In addition, Redbird pays $10,000 per month for rent and $20,000 each month for other expenditures. Tax prepayments for $23,000 are made each quarter beginning in March. The company’s cash balance at December 31, 20X1, was $22,000; a minimum balance of $20,000 must be maintained at all times. Assume that any short-term financing needed to maintain cash balance would be paid off in the month following the month of financing if sufficient funds are available. Interest on short-term loans (12%) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month. Thus, if in the month of April the firm expects to have a need for an additional $60,500, these funds would be borrowed at the beginning of April with interest of $605 (.12 x 1/12 x $60,500) owed for April and paid at the beginning of May.
***************** FIN 3030 Week-6 Assignment-1 ********************** Question 1: Discuss strengths and weakness of the percent of sales method. Question 2: Discuss the effects on the breakeven of what happens during a business cycle: falling and rising sales and costs. *********************** FIN 3030 Week-6 Assignment-2 ******************** Orange Company is evaluating its financing requirements for the coming year. The firm has been in business for only three years, and the firm’s chief financial officer (Erica Stevens) predicts that the firm’s operating expenses, current assets, and current liabilities will remain at their current proportion of sales. Last year Orange had $20 million in sales with net income of $1 million. The firm anticipates that next year’s sales will reach $27 million with net income rising to $2 million. Given its present high rate of growth, the firm retains all its earnings to help defray the cost of new investments. The firm’s balance sheet for the year just ended is found below:
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