Post FIN201 Unit 1 Discussion Latest 2017 JuneUnit 1.1 DB: Careers in FinanceFollow this link to the following web page: Finance Jobs Guide – Careers in FinanceReview the page thoroughly and begin to think about and explore what options may be available to you in the world of Corporate Finance. Respond to the forum by telling everyone: Which of the jobs and career areas in finance seems most interesting to you and why? What specifically about the position and its responsibilities interests you? Why do you feel the job fits with your career interests, aspirations and skill set?Also, review the hyper-links for “recommended books on jobs in Finance” (mid way down the page). Based on your review of each, which book do you think would serve you as an interesting resource to assist in your job search and tell us why please?Post FIN201 Unit 3 Discussion Latest 2017 JuneUnit 3.1 DB: Internet SearchSearch the Internet for any short article related to finance and then post a couple of sentences here about what you’ve learned or what your thoughts are. Please also post a link to the article so others can access it.Post FIN201 Unit 5 Discussion Latest 2017 JuneUnit 5.1 DB: Key Term Credit FacilityIn this article, what is the meaning of the term “credit facility”?WD 40 ARTICLE ON APPLICATION OF LEVERAGEDEAR SHAREHOLDERSOn March 26,2001 ,WD-40 Company (NASDAQ: WDFC) announced the acquisition of Global Household Brands, maker of such well-known products as X-14,,, 2000 Flushes, and Carpet Fresh., The acquisition represents another milestone in our creation of a new business model on which to build our fortress of brands. It furthers our successful transitioning to a global consumer products company with brands that deliver superior performance and value to end users who buy in a variety of trade channels.How we will finance the acquisition? We have stated in the past that we would lower our dividend payout when the right opportunity came along to enhance shareholder value. Such an opportunity is here right now. A five cent (per share) quarterly dividend reduction will allow us to qualify for a more favorable credit facility for financing the Global Household Brands acquisition: a syndicated senior secured credit facility totaling $85 million and led by Union Bank of California. This is an excellent move for us a vital investment in short- and long-term sales and earnings growth.’What the acquisition means to shareholders The acquisition offers several advantages. Not only will it give us an additional $69 million in sales revenues, but it will augment and further enhance our fortress of brands model, Global Household Brands has been a star performer in the household goods sector, and its acquisition will further diversify our product portfolio and substantially reduce our concentration on one product. As a result, no brand or trade channel will be greater than 60% of our total revenues/With this acquisition, WD-40 Company makes a big move into the household goods sector, joining the ranks of consumer goods companies, which the stock market has historically rewarded with higher price-earning (P/E) ratios.Our goals for the coming year Consumers remain the focus of our business, and the acquisition of Global Household Brands will allow us to broaden this focus. We will leverage their considerable knowledge and expertise in the grocery channel to complement our expertise in other channels. The combined company will have two marketing groups: The Do-it-Yourselfers Group for Solvol,, Lava,, WD-40,, and 3-IN-ONE, and the Household Products Group for2000 Flushes, Carpet Fresh, and X-14. Our distribution infrastructure will expand, as well, to support our new household product platform and new brand and product launch opportunities, Increased research and development will allow the combined company to leverage our collective brands and thus create greater shareholder value in both dividends and stock price. Non-core competencies, such as the Global Household Brands manufacturing, will be sold to one of our key suppliers, maintaining the outsourcing business model we have successfully managed over the past 48 years.’On behalf of WD-40 Company management, I want to express my appreciation for your support and underscore our continued commitment to achieve faster and more profitable growth through strategic acquisitions such as this one. We will continue to build, defend and acquire; in so doing, we will make WD-40 Company a fortress of brands in every sense of the term.Sincerely yours,Gaity Ridge, President and CEOPost FIN201 Unit 7 Discussion Latest 2017 JuneUnit 7 DB: Flotation CostsDefine the term: Flotation Costs.Should we expect the flotation costs for debt to be significantly lower than those for equity? Why or why not? Please support your answer using supporting information from the chapters in this unit and the course. Do you agree with the positions taken by your classmates? Can you provide counterpoints or insight as to why they may want to reconsider their view of expected flotation costs?Post FIN201 Unit 1 Quiz Latest 2017 JuneAttempt 1The biggest disadvantage of the sole proprietorship is:unlimited liability.double taxation.total control.limited access to capital.The agency relationship in corporate finance refers to:when the corporate hires an advertising agency to market their new product or service.when the board of directors are elected to staggered terms.when the board of directors oversee the CEO.when the shareholders hire a manager to run their company.Income Statement Barnyard, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $505,000, Interest expense = $57,500, and Net income = $322,500. What is the 2008 Taxes reported on the income statement?$447,500$125,000There is not enough information to calculate 2008 Taxes.$182,500Balance Sheet You are evaluating the balance sheet for Cypress Corporation. From the balance sheet you find the following balances: Cash and marketable securities = $690,000, Accounts receivable = $890,000, Inventory = $590,000, Accrued wages and taxes = $131,000, Accounts payable = $209,000, and Notes payable = $1,090,000. What is Cypress’s net working capital?$1,430,000$2,170,000$3,600,000$740,000Which of the following is NOT a function of the board of directors?Design compensation contracts for the CEO.Provide reports to the auditors.Hire the CEO.Evaluate the CEO.Statement of Cash Flows In 2008, Upper Crust had cash flows from investing activities of ?$225,000 and cash flows from financing activities of ?$155,000. The balance in the firm’s cash account was $95,000 at the beginning of 2008 and $110,000 at the end of the year. What was Upper Crust’s cash flow from operations for 2008?$15,000$380,000$110,000$395,000When a firm alters its capital structure to include more or less debt (and, in turn, less or more equity), it impacts which of the following?The residual cash flows available for stock holdersThe number of shares of stock outstandingThe earnings per share (EPS)All of the choicesIncome Statement Bullseye, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $903,000, Interest expense = $89,500, and Net income = $574,500. What is the 2008 Taxes reported on the income statement?$239,000There is not enough information to calculate 2008 Taxes.$813,500$328,500The overall goal of the financial manager is to:maximize shareholder wealth.minimize total costs.maximize net income.maximize earnings per share.Attempt 21. The agency relationship in corporate finance refers to:when the shareholders hire a manager to run their company.when the board of directors oversee the CEO.when the board of directors are elected to staggered terms.when the corporate hires an advertising agency to market their new product or service.2. Which of the following is NOT a function of the board of directors?Provide reports to the auditors.Design compensation contracts for the CEO.Evaluate the CEO.Hire the CEO.3. The biggest disadvantage of the sole proprietorship is:total control.double taxation.limited access to capital.unlimited liability.4. Statement of Cash Flows In 2008, Upper Crust had cash flows from investing activities of ?$270,000 and cash flows from financing activities of ?$163,000. The balance in the firm’s cash account was $86,000 at the beginning of 2008 and $118,000 at the end of the year. What was Upper Crust’s cash flow from operations for 2008?$465,000$118,000$433,000$32,0005. Which financial statement reports the amounts of cash that the firm generated and distributed during a particular time period?Income statementBalance sheetStatement of cash FlowsStatement of retained Earnings6. Income Statement Bullseye, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $903,500, Interest expense = $88,000, and Net income = $574,500. What is the 2008 Taxes reported on the income statement?$329,000$815,500There is not enough information to calculate 2008 Taxes.$241,0007. When a firm alters its capital structure to include more or less debt (and, in turn, less or more equity), it impacts which of the following?The residual cash flows available for stock holdersThe number of shares of stock outstandingThe earnings per share (EPS)All of the choices8. Balance Sheet You are evaluating the balance sheet for Cypress Corporation. From the balance sheet you find the following balances: Cash and marketable securities = $520,000, Accounts receivable = $720,000, Inventory = $420,000, Accrued wages and taxes = $42,000, Accounts payable = $120,000, and Notes payable = $920,000. What is Cypress’s net working capital?$578,000$1,082,000$1,660,000$2,742,0009. Income Statement Barnyard, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $506,500, Interest expense = $48,000, and Net income = $327,000. What is the 2008 Taxes reported on the income statement?There is not enough information to calculate 2008 Taxes.$458,500$131,500$179,50010. Balance Sheet Jack and Jill Corporation’s year-end 2009 balance sheet lists current assets of $246,000, fixed assets of $796,000, current liabilities of $193,000, and long-term debt of $296,000. What is Jack and Jill’s total stockholders’ equity?$553,000$1,042,000$489,000There is not enough information to calculate total stockholder’s equity.Post FIN201 Unit 3 QuizWhat annual rate of return is earned on a $5,000 investment when it grows to $9,500 in five years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)How many years will it take $2 million to grow to $5 million with an annual interest rate of 7 percent?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)What is the value in year 15 of a $250 cash flow made in year 3 if interest rates are 11 percent?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)A loan is offered with monthly payments and a 10 percent APR. Whats the loans effective annual rate (EAR)?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)Future Value of an Annuity What is the future value of a $1,100 annuity payment over 9 years if the interest rates are 7 percent?$13,175.79$2,022.31$10,120.48$10,593.00If the present value of an ordinary, 6-year annuity is $8,500 and interest rates are 9.5 percent, whats the present value of the same annuity due?(Round your answer to 2 decimal places.)Which cash flow would you rather pay, $425 today or $500 in two years if interest rates are 10 percent?Pay $425 todayPay $500 in two yearsWhat annual rate of return is implied on a $2,500 loan taken next year when $3,500 must be repaid in year 4?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)A deposit of $350 earns the following interest rates:a.8 percent in the first year.b.6 percent in the second year.c.5.5 percent in the third year.What would be the third year future value?(Round your answer to 2 decimal places.)What is the future value of a $700 annuity payment over six years if interest rates are 10 percent?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)Post FIN201 Unit 5 QuizPortfolio Beta You have a portfolio with a beta of .92. What will be the new portfolio beta if you keep 70 percent of your money in the old portfolio and 30 percent in a stock with a beta of 1.52?1.101.002.441.22Average Return The past five monthly returns for PG Company are 2.00 percent, -3.0 percent, 5.00 percent, 4.5 percent, and 2.7 percent. What is the average monthly return?11.23%17.23%3.45%2.25%Portfolio Beta You own $1,900 of City Steel stock that has a beta of 1.67. You also own $6,700 of Rent-N-Co (beta = 1.97) and $5,700 of Lincoln Corporation (beta = 1.07). What is the beta of your portfolio (closest to)?1.571.003.524.71Portfolio Return Year-to-date, Company O had earned a -3.70 percent return. During the same time period, Company V earned 9.6 percent and Company M earned 7.85 percent. If you have a portfolio made up of 40 percent Company O, 30 percent Company V, and 30 percent Company M, what is your portfolio return?6.715%13.75%3.755%21.15%Expected Return Compute the expected return given these three economic states, their likelihoods, and the potential returns:Economic StateProbabilityReturnFast Growth.129%Slow Growth.814%Recession.1-29%14.3%14.0%11.2%17.0%Investment Return HillCom Corp stock was $75.30 per share at the end of last year. Since then, it paid a $2.80 per share dividend last year. The stock price is currently $78.30. If you owned 200 shares of HillCom, what was your percent return?7.70%3.72%7.41%3.58%Investment Return MedTech Corp stock was $51.65 per share at the end of last year. Since then, it paid a $1.15 per share dividend. The stock price is currently $63.20. If you owned 100 shares of MedTech, what was your percent return?20.09%24.59%18.20%22.27%Average Return The past five monthly returns for PG Company are 1.50 percent, -2.0 percent, 4.50 percent, 4.0 percent, and 2.2 percent. What is the average monthly return?10.23%14.23%2.85%2.05%CAPM Required Return A company has a beta of 1.06. If the market return is expected to be 11.1 percent and the risk-free rate is 3.55 percent, what is the company’s required return?11.55%15.32%11.77%15.10%Portfolio Weights An investor owns $17,000 of Adobe Systems stock, $20,000 of Dow Chemical, and $30,000 of Office Depot. What are the portfolio weights of each stock?Adobe System = 0.25, Dow Chemical = 0.30, Office Depot = 0.45Adobe System = 0.27, Dow Chemical = 0.33, Office Depot = 0.40Adobe System = 0.33, Dow Chemical = 0.33, Office Depot = 0.33Adobe System = 0.30, Dow Chemical = 0.25, Office Depot = 0.45Post FIN201 Unit 7 QuizSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 10 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.Time0123456Cash Flow-1,070100500700700300700Use the NPV decision rule to evaluate this project; should it be accepted or rejected?$1,019.57, accept$2,089.57, accept$926.88, accept$-303.12, rejectUse the PI decision rule to evaluate these projects; which one(s) should be accepted or rejected?accept A, reject Baccept both A and Breject A, accept Baccept neither A nor BCompute the NPV for Project X with the cash flows shown below if the appropriate cost of capital is 11 percent.Time:012345Cash flow:-140-1400230205180$143.91$205.35$410.04$129.65Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 11 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.Time:0123Project A Cash Flow-33,00023,00043,00014,000Project B Cash Flow-43,00023,00033,00063,000Use the discounted payback decision rule to evaluate these projects; which one(s) should be accepted or rejected?accept A, reject Baccept neither A nor Breject A, accept Baccept both A and BSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.Time0123456Cash Flow-820150490690690290690Use the PI decision rule to evaluate this project; should it be accepted or rejected?-140.00%, reject1.40%, accept1.40%, reject140.04%, accept$1,148.32/$820 = 1.4004 = 140.04% acceptSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 14 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.Time0123456Cash Flow-960160440640640240640Use the discounted payback decision rule to evaluate this project; should it be accepted or rejected?2.76 years, accept2.87 years, accept3.15 years, reject3.13 years, rejectSuppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.Time:0123Project A Cash Flow-20,00010,00030,0001,000Project B Cash Flow-30,00010,00020,00050,000Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?rev: 12_04_2012accept neither A nor Baccept both A and Breject A, accept Baccept A, reject BCompute the Discounted Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 13 percent and the maximum allowable discounted payback is 3 years.Time:012345Cash flow:-9704705104303301803.08 years, reject3.52 years, reject5.08 years, reject2.52 years, acceptCompute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent.Time:012345Cash flow:-82-820107825744.28%, accept8.00%, reject31.80%, accept26.08%, acceptSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.Time0123456Cash Flow-980180420620620220620Use the payback decision rule to evaluate this project; should it be accepted or rejected?4.00 years, reject2.61 years, reject1.29 years, accept0 years, acceptPost FIN201 Mid TermBuying Stock with a Market Order You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $96.18 and $96.26, respectively. You place a market buy-order for 200 shares that executes at these quoted prices. How much money did it cost to buy these shares?$16$19,236$19,252$38,488Value of a Preferred Stock If a preferred stock from Ecology and Environment, Inc. (EEI) pays $15.50 in annual dividends, and the required return on the preferred stock is 7.10 percent, what’s the value of the stock?$1.10$2.18$110.05$218.31Expected Return Circuit City Stores (CC) recently paid a $.18 dividend. The dividend is expected to grow at a 23.20 percent rate. At the current stock price of $8.16, what is the return shareholders are expecting?23.22%23.20%25.92%2.21%Selling Stock with a Limit Order You would like to sell 400 shares of Pfizer, Inc.(PFE). The current bid and ask quotes are $27.35 and $27.38, respectively. You place a limit sell-order at $27.37. If the trade executes, how much money do you receive from the buyer?$10,940$10,952$21,892$10,948Five Years Future Value What is the future value of $600 deposited for five years earning 5% interest rate annually?$166$766$600$1,366Liquidity and Asset Management Ratios Oasis Products, Inc. has current liabilities = $11.1 million, current ratio = 1.60 times, inventory turnover ratio = 12.1 times, average collection period = 21 days, and sales = $113 million. What is the value of their cash and marketable securities? (Consider a 365 days a year.)$9,338,843$1,919,787$18,519,056$17,760,000P/E Ratio and Stock Price International Business Machines (IBM) has earnings per share of $7.00 and a P/E ratio of 15.22. What is the stock price?$44.44$.46$106.54$2.17Debt Management Ratios Trina’s Trikes, Inc. reported a debt-to-equity ratio of 1.91 times at the end of 2008. If the firm’s total debt at year-end was $10.90 million, how much equity does Trina’s Trikes have?$20.82 million$10.90 million$1.91 million$5.71 millionDeterminants of Interest Rate for Individual Securities The Wall Street Journal reports that the rate on 3-year Treasury securities is 7.30 percent, and the 6-year Treasury rate is 7.55 percent. From discussions with your broker, you have determined that expected inflation premium is 2.80 percent next year, 3.05 percent in Year 2, and 3.25 percent in Year 3 and beyond. Further, you expect that real interest rates will be 3.65 percent annually for the foreseeable future. What is the maturity risk premium on the 6-year Treasury security?.65%.85%.40%1.10%Compounding with Different Interest Rates A deposit of $710 earns interest rates of 10.1 percent in the first year and 7.1 percent in the second year. What would be the second year future value?$1,542.12$832.12$837.21$782.35Future Value of an Annuity What is the future value of a $1,200 annuity payment over 10 years if the interest rates are 8 percent?$13,723.07$2,590.71$17,383.87$12,960.00Debt Management Ratios Tierre’s Ts, Inc. reported a debt to equity ratio of 4.1 times at the end of 2008. If the firm’s total assets at year-end were $14.9 million, how much of their assets are financed with equity?$61.09 m$2.92 m$11.98 m$3.63 mTime to Maturity A bond issued by a corporation on September 1, 1989 is scheduled to mature on September 1, 2058. If today is September 2, 2009, what is this bond’s time to maturity?20 years69 years49 years58 yearsPresent Value of a Perpetuity A perpetuity pays $200 per year and interest rates are 6.5 percent. How much would its value change if interest rates increased to 9.0 percent?$854.70 decrease$500.00 decrease$500.00 increase$854.70 increasePresent Value of an Annuity What is the present value of a $2,200 annuity payment over 8 years if interest rates are 12 percent?$11,722.15$888.54$10,928.81$5,447.12Free Cash Flow You are considering an investment in Crew Cut, Inc. and want to evaluate the firm’s free cash flow. From the income statement, you see that Crew Cut earned an EBIT of $23.18 million, paid taxes of $3.82 million, and its depreciation expense was $7.82 million. Crew Cut’s gross fixed assets increased by $10.18 million from 2007 to 2008. The firm’s current assets increased by $6.18 million and spontaneous current liabilities increased by $3.82 million. What is Crew Cut’s operating cash flow, investment in operating capital and free cash flow for 2008, respectively in millions?$23.18, $10.18, $13.00$27.18, $10.18, $17.00$27.18, $12.54, $14.64$23.18, $11.64, $11.54Interest-on-Interest Consider a $2,800 deposit earning 10 percent interest per year for 7 years. How much total interest is earned on interest (excluding interest earned on the original deposit)?$696.41$196.00$1,960.00$2,656.41Internal Growth Rate Last year Umbrellas Unlimited Corporation had an ROA of 10% and a dividend payout ratio of 50%. What is the internal growth rate?100%1%2.25%5.26%Future Value of an Annuity Due If the future value of an ordinary, 5-year annuity is $7,200 and interest rates are 8 percent, what’s the future value of the same annuity due?$6,666.67$7,200$7,776.02$7,560Determinants of Interest Rate for Individual Securities A particular security’s default risk premium is 4.00 percent. For all securities, the inflation risk premium is 2.75 percent and the real interest rate is 3.25 percent. The security’s liquidity risk premium is .95 percent and maturity risk premium is 1.25 percent.The security has no special covenants. What is the security’s equilibrium rate of return?11.25%12.20%2.44%8.20%Post FIN201 Final ExamPortfolio Weights An investor owns $21,000 of Adobe Systems stock, $23,000 of Dow Chemical, and $33,000 of Office Depot. What are the portfolio weights of each stock?Adobe System = 0.33, Dow Chemical = 0.33, Office Depot = 0.33Adobe System = 0.30, Dow Chemical = 0.27, Office Depot = 0.43Adobe System = 0.27, Dow Chemical = 0.33, Office Depot = 0.40Adobe System = 0.27, Dow Chemical = 0.30, Office Depot = 0.43Income Statement Bullseye, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $907,500, Interest expense = $84,000, and Net income = $580,500. What is the 2008 Taxes reported on the income statement?$243,000$823,500$327,000There is not enough information to calculate 2008 Taxes.Portfolio Beta You own $1,500 of City Steel stock that has a beta of 1.61. You also own $6,100 of Rent-N-Co (beta = 1.91) and $5,100 of Lincoln Corporation (beta = 1.01). What is the beta of your portfolio (closest to)?3.111.511.004.53Portfolio Beta You own $21,000 of City Steel stock that has a beta of 3.31. You also own $38,000 of Rent-N-Co (beta = 1.76) and $20,600 of Lincoln Corporation (beta = -.84). What is the beta of your portfolio?1.501.004.894.23Sports Corp has 10.5 million shares of common stock outstanding, 5.5 million shares of preferred stock outstanding, and 1.5 million bonds. If the common shares are selling for $25.5 per share, the preferred shares are selling for $13.0 per share, and the bonds are selling for 96.95 percent of par, what would be the weight used for equity in the computation of Sports’s WACC?60.00%14.93%33.33%17.55%Suppose you sell a fixed asset for $123,000 when it’s book value is $151,000. If your company’s marginal tax rate is 28%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?$130,840$28,000$20,160$151,000Debt Management Ratios Zoe’s Dog Toys, Inc. reported a debt to equity ratio of 1.70 times at the end of 2008. If the firm’s total assets at year-end were $49.9 million, how much of their assets are financed with equity?$18.48m$31.42m$29.35m$84.83mRequired Return If the risk-free rate is 8.7 percent and the market risk premium is 3.4 percent, what is the required return for the market?8.7%12.1%3.4%5.3%IVY has preferred stock selling for 97.8 percent of par that pays a 7.2 percent annual coupon. What would be IVY’s component cost of preferred stock?7.04%7.20%15.84%7.36%Income Statement Barnyard, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $506,000, Interest expense = $59,000, and Net income = $324,000. What is the 2008 Taxes reported on the income statement?There is not enough information to calculate 2008 Taxes.$123,000$447,000$182,000Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.Time:0123Project A Cash Flow-36,00026,00046,00017,000Project B Cash Flow-46,00026,0004,00066,000Use the payback decision rule to evaluate these projects; which one(s) should be accepted or rejected?accept both A and Baccept A, reject Baccept neither A nor Breject A, accept BAverage Return The past five monthly returns for PG Company are 1.45 percent, -1.9 percent, 4.45 percent, 4.0 percent, and 2.2 percent. What is the average monthly return?2.79%10.13%2.03%13.93%You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $230,000. The truck falls into the MACRS 5-year class, and it will be sold after 5 years for $23,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,300. The truck will have no effect on revenues, but it is expected to save the firm $101,000 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 35 percent. What will the cash flows for this project be during year 2?$139,250$95,700$27,400$91,410Expected Return Compute the expected return given these three economic states, their likelihoods, and the potential returns:Economic StateProbabilityReturnFast Growth.131%Slow Growth.811%Recession.1-26%9.3%14.0%14.5%16.0%Portfolio Beta You own $1,100 of City Steel stock that has a beta of 1.53. You also own $5,300 of Rent-N-Co (beta = 1.83) and $4,300 of Lincoln Corporation (beta = .93). What is the beta of your portfolio (closest to)?1.442.604.291.00Investment Return MedTech Corp stock was $51.85 per share at the end of last year. Since then, it paid a $1.35 per share dividend. The stock price is currently $63.40. If you owned 200 shares of MedTech, what was your percent return?21.29%24.88%20.35%26.04%Portfolio Beta You own $1,900 of City Steel stock that has a beta of 1.69. You also own $6,900 of Rent-N-Co (beta = 1.99) and $5,900 of Lincoln Corporation (beta = 1.09). What is the beta of your portfolio (closest to)?3.674.771.591.00Asset Management and Profitability Ratios You have the following information on Universe It Ts, Inc.: sales to working capital = 12 times, profit margin = 25.2%, net income available to common stockholders = $3.2 million, and current liabilities = $1.2 million. What is the firm’s balance of current assets?$1.058m$5.962m$2.258m$1.267mInvestment Return HillCom Corp stock was $75.25 per share at the end of last year. Since then, it paid a $2.75 per share dividend last year. The stock price is currently $78.25. If you owned 100 shares of HillCom, what was your percent return?7.64%3.65%3.51%7.35%Required Return If the risk-free rate is 11.3 percent and the market risk premium is 6.6 percent, what is the required return for the market?6.6%4.7%11.3%17.9%Portfolio Weights An investor owns $21,000 of Adobe Systems stock, $24,000 of Dow Chemical, and $34,000 of Office Depot. What are the portfolio weights of each stock?Adobe System = 0.33, Dow Chemical = 0.33, Office Depot = 0.33Adobe System = 0.27, Dow Chemical = 0.33, Office Depot = 0.40Adobe System = 0.30, Dow Chemical = 0.27, Office Depot = 0.43Adobe System = 0.27, Dow Chemical = 0.30, Office Depot = 0.43Debt Management Ratios Trina’s Trikes, Inc. reported a debt-to-equity ratio of 1.97 times at the end of 2008. If the firm’s total debt at year-end was $10.30 million, how much equity does Trina’s Trikes have?$1.97 million$10.30 million$5.23 million$20.29 millionSuppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.Time:0123Project A Cash Flow-31,00021,00041,00012,000Project B Cash Flow-41,00021,00031,00061,000Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?rev: 12_04_2012reject A, accept Baccept both A and Baccept A, reject Baccept neither A nor BPortfolio Weights If you own 715 shares of Air Line Inc at $42.8, 330 shares of BuyRite at $56.05, and 430 shares of Motor City at $10.1, what are the portfolio weights of each stock?Air Line = .7150, BuyRite = .3300, MotorCity = .4300Air Line = .5729, BuyRite = .3462, MotorCity = .0809Air Line = .4847, BuyRite = .2237, MotorCity = .2915Air Line = .3333, BuyRite = .3333, MotorCity = .3333CAPM Required Return A company has a beta of .99. If the market return is expected to be 10.4 percent and the risk-free rate is 3.20 percent, what is the company’s required return?13.50%10.33%13.53%10.30%Asset Management Ratios Corn Products, Corp. ended the year 2008 with an average collection period of 34 days. The firm’s credit sales for 2008 were $10.5 million. What is the year-end 2008 balance in accounts receivable for Corn Products? (Consider a 365 days a year.)$0.3088 million$3.2381 million$357 million$0.9781 millionInvestment Return HillCom Corp stock was $75.90 per share at the end of last year. Since then, it paid a $3.40 per share dividend last year. The stock price is currently $78.90. If you owned 400 shares of HillCom, what was your percent return?4.31%4.48%8.11%8.43%You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $220,000. The truck falls into the MACRS 3-year class, and it will be sold after 3 years for $22,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,200. The truck will have no effect on revenues, but it is expected to save the firm $100,000 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 40 percent. What will the cash flows for this project be during year 2?$99,116$157,790$94,800$2,210FlavR Co stock has a beta of 2.05, the current risk-free rate is 2.05 percent, and the expected return on the market is 9.05 percent. What is FlavR Co’s cost of equity?16.40%20.60%13.15%11.10%Compute the NPV for Project X with the cash flows shown below if the appropriate cost of capital is 12 percent.Time:012345Cash flow:-170-1700290265240$511.01$168.95$286.05$189.23Portfolio Beta You have a portfolio with a beta of 2.40. What will be the new portfolio beta if you keep 10 percent of your money in the old portfolio and 90 percent in a stock with a beta of 2.65?1.005.052.6252.525Portfolio Beta You have a portfolio with a beta of 1.09. What will be the new portfolio beta if you keep 30 percent of your money in the old portfolio and 70 percent in a stock with a beta of 1.69?1.392.781.001.51Time to Maturity A bond issued by a corporation on June 15, 2007 is scheduled to mature on June 15, 2027. If today is December 16, 2008, what is this bond’s time to maturity?20 years18 years, 6 months18 years1 year, 6 monthsExpected Return If a company’s current stock price is $26.00 and it is likely to pay a $1.75 dividend next year. Since analysts estimate the company will have a 14% growth rate, what is its expected return?6.73%20.73%2.00%14.00%Post FIN201 Pre Built Problems Ch 91.FedEx Corp. stock ended the previous year at $108.19 per share. It paid a $0.50 per share dividend last year. It ended last year at $111.49.If you owned 340 shares of FedEx, what was your dollar return and percent return?(Round your percent return answer to 2 decimal places.)2.A Treasury bond that you own at the beginning of the year is worth $1,095. During the year, it pays $47 in interest payments and ends the year valued at $1,105.What was your dollar return and percent return?(Round your percent return answer to 2 decimal places.)3.Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 12 percent and standard deviation of 38 percent. The average return and standard deviation of Idol Staff are 15 percent and 26 percent; and of Poker-R-Us are 9 percent and 30 percent.4.An investor owns $11,000 of Adobe Systems stock, $12,000 of Dow Chemical, and $12,000 of Office Depot. What are the portfolio weights of each stock?(Round your answers to 4 decimal places.)5.Year-to-date, Yum Brands had earned a 3.30 percent return. During the same time period, Raytheon earned 4.38 percent and Coca-Cola earned ?0.49 percent.If you have a portfolio made up of 30 percent Yum Brands, 20 percent Raytheon, and 50 percent Coca-Cola, what is your portfolio return?(Round your answer to 2 decimal places.)6.The past five monthly returns for Kohls are 3.94 percent, 4.62 percent, ?2.08 percent, 9.45 percent, and ?2.96 percent. What is the average monthly return?(Round your answer to 3 decimal places.)7.The past five monthly returns for PG&E are ?3.51 percent, 4.73 percent, 4.11 percent, 6.98 percent, and 3.92 percent. Compute the standard deviation of PG&Es monthly returns.(Do not round intermediate calculations. Round your final answer to 2 decimal places.)8.Table 9.2 Average Returns for BondsBonds1950 to 1959Average0.0%1960 to 1969Average1.71970 to 1979Average5.21980 to 1989Average13.51990 to 1999Average9.82000 to 2009Average8.5Table 9.4 Annual Standard Deviation for BondsBonds1950 to 19594.5%1960 to 19696.41970 to 19796.71980 to 198915.51990 to 199912.72000 to 200910.3Use the tables above to calculate the coefficient of variation of the risk-return relationship of the bond market during each decade since 1950.(Round your answers to 2 decimal places.)Post FIN201 Pre Built Problems Ch 121.Suppose you sell a fixed asset for $111,000 when its book value is $131,000. If your companys marginal tax rate is 40 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?2.You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $15,500 to purchase and which will have OCF of $1,500 annually throughout the vehicles expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $22,000 to purchase and which will have OCF of $800 annually throughout that vehicles expected 4-year life. Both cars will be worthless at the end of their life. You intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future.If the business has a cost of capital of 12 percent, calculate the EAC.(Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)Which one should you choose?3.You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $58,500, has a 5-year life, and has an annual OCF (after tax) of $10,300 per year. The Keebler CookieMunster costs $91,500, has a 7-year life, and has an annual OCF (after tax) of $8,300 per year.If your discount rate is 12 percent, what is each machines EAC?(Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)4.Your firm needs a computerized machine tool lathe which costs $54,000 and requires $12,400 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 35 percent and a discount rate of 11 percent.If the lathe can be sold for $5,400 at the end of year 3, what is the after-tax salvage value?(Round your answer to 2 decimal places.)5.You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $60,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $19,800. Use of the truck will require an increase in NWC (spare parts inventory) of $1,800. The truck will have no effect on revenues, but it is expected to save the firm $20,400 per year in before-tax operating costs, mainly labor. The firms marginal tax rate is 34 percent.What will the cash flows for this project be?(Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)6.You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $380 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $215 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $159,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $33,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 39 percent and the required return on the project is 10 percent. (Use SL depreciation table)What will the cash flows for this project be?(Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your final answers to 2 decimal places.)Post FIN201 Unit 8 Application Report Latest 2017 JuneCompose a 4-6 page report, double-spaced, on the following topic. Be sure to illustrate your report with relevant financial numbers and data, and to explain the significance of this data. APA format is expected (include a cover page, outline, body of the report/paper, and a properly formatted works cited page (no abstract is needed for this assignment)).** DUE: Friday, June 23rd 11:59PM EST **BACKGROUND INFORMATION: During the Carter administration, long-term US Treasury yields exceeded 15%, and short-term T-Bills yielded near 20%. After Reagan’s inauguration, interest rates began to fall as Fed Chairman Volcker’s restrictive monetary policy succeeded in containing inflation. Over the past 30 years, US rates have steadily declined: T-Bills are hovering under 1% and the long bond is yielding about 4%.Lately, though, rising oil prices have incited inflationary forces. China and other developing nations have increased their consumption for oil, metals, materials, and food. Thus, both foreign and domestic factors have spurred demand and are contributing to rising prices on a global scale. In addition to this commodity-induced inflation, US consumers are faced with rising costs for essential services such as healthcare and education.The Chairwoman of the Federal Reserve, Janet Yellen, is faced with a dilemma. Should the Fed increase rates to contain inflation; or, should the Fed keep rates very low to spur the US economy which is beset by a collapse in home values, an extensive banking crisis, and a faltering stock market ?YOUR ASSIGNMENT: Given this economic background…Compose a 4-6 page report, double-spaced, on the following topic: If the Fed decides to raise interest rates next year, what effect would rising rates have upon the following: (1) Consumer financing for big-ticket items such as autos and homes; (2) the present and future values of annuities; (3) the NPV calculation; (4) the WACC; (5) corporate earnings ?Be sure to illustrate your report with relevant financial numbers. Hint: for topic (3), above, one approach you might adopt is to cite the NPV calculation from previous case problems, then to contrast it against a new calculation performed with a higher interest rate. Cite the numeric effect upon the NPV, and then explain its rationale and its significance. This is the kind of “numeric illustration” that you should provide for each of the five topic sections.Post FIN201 Unit 1 Discussion Latest 2017 JuneUnit 1.1 DB: Careers in FinanceFollow this link to the following web page: Finance Jobs Guide – Careers in FinanceReview the page thoroughly and begin to think about and explore what options may be available to you in the world of Corporate Finance. Respond to the forum by telling everyone: Which of the jobs and career areas in finance seems most interesting to you and why? What specifically about the position and its responsibilities interests you? Why do you feel the job fits with your career interests, aspirations and skill set?Also, review the hyper-links for “recommended books on jobs in Finance” (mid way down the page). Based on your review of each, which book do you think would serve you as an interesting resource to assist in your job search and tell us why please?Post FIN201 Unit 3 Discussion Latest 2017 JuneUnit 3.1 DB: Internet SearchSearch the Internet for any short article related to finance and then post a couple of sentences here about what you’ve learned or what your thoughts are. Please also post a link to the article so others can access it.Post FIN201 Unit 5 Discussion Latest 2017 JuneUnit 5.1 DB: Key Term Credit FacilityIn this article, what is the meaning of the term “credit facility”?WD 40 ARTICLE ON APPLICATION OF LEVERAGEDEAR SHAREHOLDERSOn March 26,2001 ,WD-40 Company (NASDAQ: WDFC) announced the acquisition of Global Household Brands, maker of such well-known products as X-14,,, 2000 Flushes, and Carpet Fresh., The acquisition represents another milestone in our creation of a new business model on which to build our fortress of brands. It furthers our successful transitioning to a global consumer products company with brands that deliver superior performance and value to end users who buy in a variety of trade channels.How we will finance the acquisition? We have stated in the past that we would lower our dividend payout when the right opportunity came along to enhance shareholder value. Such an opportunity is here right now. A five cent (per share) quarterly dividend reduction will allow us to qualify for a more favorable credit facility for financing the Global Household Brands acquisition: a syndicated senior secured credit facility totaling $85 million and led by Union Bank of California. This is an excellent move for us a vital investment in short- and long-term sales and earnings growth.’What the acquisition means to shareholders The acquisition offers several advantages. Not only will it give us an additional $69 million in sales revenues, but it will augment and further enhance our fortress of brands model, Global Household Brands has been a star performer in the household goods sector, and its acquisition will further diversify our product portfolio and substantially reduce our concentration on one product. As a result, no brand or trade channel will be greater than 60% of our total revenues/With this acquisition, WD-40 Company makes a big move into the household goods sector, joining the ranks of consumer goods companies, which the stock market has historically rewarded with higher price-earning (P/E) ratios.Our goals for the coming year Consumers remain the focus of our business, and the acquisition of Global Household Brands will allow us to broaden this focus. We will leverage their considerable knowledge and expertise in the grocery channel to complement our expertise in other channels. The combined company will have two marketing groups: The Do-it-Yourselfers Group for Solvol,, Lava,, WD-40,, and 3-IN-ONE, and the Household Products Group for2000 Flushes, Carpet Fresh, and X-14. Our distribution infrastructure will expand, as well, to support our new household product platform and new brand and product launch opportunities, Increased research and development will allow the combined company to leverage our collective brands and thus create greater shareholder value in both dividends and stock price. Non-core competencies, such as the Global Household Brands manufacturing, will be sold to one of our key suppliers, maintaining the outsourcing business model we have successfully managed over the past 48 years.’On behalf of WD-40 Company management, I want to express my appreciation for your support and underscore our continued commitment to achieve faster and more profitable growth through strategic acquisitions such as this one. We will continue to build, defend and acquire; in so doing, we will make WD-40 Company a fortress of brands in every sense of the term.Sincerely yours,Gaity Ridge, President and CEOPost FIN201 Unit 7 Discussion Latest 2017 JuneUnit 7 DB: Flotation CostsDefine the term: Flotation Costs.Should we expect the flotation costs for debt to be significantly lower than those for equity? Why or why not? Please support your answer using supporting information from the chapters in this unit and the course. Do you agree with the positions taken by your classmates? Can you provide counterpoints or insight as to why they may want to reconsider their view of expected flotation costs?Post FIN201 Unit 1 Quiz Latest 2017 JuneAttempt 1The biggest disadvantage of the sole proprietorship is:unlimited liability.double taxation.total control.limited access to capital.The agency relationship in corporate finance refers to:when the corporate hires an advertising agency to market their new product or service.when the board of directors are elected to staggered terms.when the board of directors oversee the CEO.when the shareholders hire a manager to run their company.Income Statement Barnyard, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $505,000, Interest expense = $57,500, and Net income = $322,500. What is the 2008 Taxes reported on the income statement?$447,500$125,000There is not enough information to calculate 2008 Taxes.$182,500Balance Sheet You are evaluating the balance sheet for Cypress Corporation. From the balance sheet you find the following balances: Cash and marketable securities = $690,000, Accounts receivable = $890,000, Inventory = $590,000, Accrued wages and taxes = $131,000, Accounts payable = $209,000, and Notes payable = $1,090,000. What is Cypress’s net working capital?$1,430,000$2,170,000$3,600,000$740,000Which of the following is NOT a function of the board of directors?Design compensation contracts for the CEO.Provide reports to the auditors.Hire the CEO.Evaluate the CEO.Statement of Cash Flows In 2008, Upper Crust had cash flows from investing activities of ?$225,000 and cash flows from financing activities of ?$155,000. The balance in the firm’s cash account was $95,000 at the beginning of 2008 and $110,000 at the end of the year. What was Upper Crust’s cash flow from operations for 2008?$15,000$380,000$110,000$395,000When a firm alters its capital structure to include more or less debt (and, in turn, less or more equity), it impacts which of the following?The residual cash flows available for stock holdersThe number of shares of stock outstandingThe earnings per share (EPS)All of the choicesIncome Statement Bullseye, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $903,000, Interest expense = $89,500, and Net income = $574,500. What is the 2008 Taxes reported on the income statement?$239,000There is not enough information to calculate 2008 Taxes.$813,500$328,500The overall goal of the financial manager is to:maximize shareholder wealth.minimize total costs.maximize net income.maximize earnings per share.Attempt 21. The agency relationship in corporate finance refers to:when the shareholders hire a manager to run their company.when the board of directors oversee the CEO.when the board of directors are elected to staggered terms.when the corporate hires an advertising agency to market their new product or service.2. Which of the following is NOT a function of the board of directors?Provide reports to the auditors.Design compensation contracts for the CEO.Evaluate the CEO.Hire the CEO.3. The biggest disadvantage of the sole proprietorship is:total control.double taxation.limited access to capital.unlimited liability.4. Statement of Cash Flows In 2008, Upper Crust had cash flows from investing activities of ?$270,000 and cash flows from financing activities of ?$163,000. The balance in the firm’s cash account was $86,000 at the beginning of 2008 and $118,000 at the end of the year. What was Upper Crust’s cash flow from operations for 2008?$465,000$118,000$433,000$32,0005. Which financial statement reports the amounts of cash that the firm generated and distributed during a particular time period?Income statementBalance sheetStatement of cash FlowsStatement of retained Earnings6. Income Statement Bullseye, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $903,500, Interest expense = $88,000, and Net income = $574,500. What is the 2008 Taxes reported on the income statement?$329,000$815,500There is not enough information to calculate 2008 Taxes.$241,0007. When a firm alters its capital structure to include more or less debt (and, in turn, less or more equity), it impacts which of the following?The residual cash flows available for stock holdersThe number of shares of stock outstandingThe earnings per share (EPS)All of the choices8. Balance Sheet You are evaluating the balance sheet for Cypress Corporation. From the balance sheet you find the following balances: Cash and marketable securities = $520,000, Accounts receivable = $720,000, Inventory = $420,000, Accrued wages and taxes = $42,000, Accounts payable = $120,000, and Notes payable = $920,000. What is Cypress’s net working capital?$578,000$1,082,000$1,660,000$2,742,0009. Income Statement Barnyard, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $506,500, Interest expense = $48,000, and Net income = $327,000. What is the 2008 Taxes reported on the income statement?There is not enough information to calculate 2008 Taxes.$458,500$131,500$179,50010. Balance Sheet Jack and Jill Corporation’s year-end 2009 balance sheet lists current assets of $246,000, fixed assets of $796,000, current liabilities of $193,000, and long-term debt of $296,000. What is Jack and Jill’s total stockholders’ equity?$553,000$1,042,000$489,000There is not enough information to calculate total stockholder’s equity.Post FIN201 Unit 3 QuizWhat annual rate of return is earned on a $5,000 investment when it grows to $9,500 in five years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)How many years will it take $2 million to grow to $5 million with an annual interest rate of 7 percent?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)What is the value in year 15 of a $250 cash flow made in year 3 if interest rates are 11 percent?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)A loan is offered with monthly payments and a 10 percent APR. Whats the loans effective annual rate (EAR)?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)Future Value of an Annuity What is the future value of a $1,100 annuity payment over 9 years if the interest rates are 7 percent?$13,175.79$2,022.31$10,120.48$10,593.00If the present value of an ordinary, 6-year annuity is $8,500 and interest rates are 9.5 percent, whats the present value of the same annuity due?(Round your answer to 2 decimal places.)Which cash flow would you rather pay, $425 today or $500 in two years if interest rates are 10 percent?Pay $425 todayPay $500 in two yearsWhat annual rate of return is implied on a $2,500 loan taken next year when $3,500 must be repaid in year 4?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)A deposit of $350 earns the following interest rates:a.8 percent in the first year.b.6 percent in the second year.c.5.5 percent in the third year.What would be the third year future value?(Round your answer to 2 decimal places.)What is the future value of a $700 annuity payment over six years if interest rates are 10 percent?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)Post FIN201 Unit 5 QuizPortfolio Beta You have a portfolio with a beta of .92. What will be the new portfolio beta if you keep 70 percent of your money in the old portfolio and 30 percent in a stock with a beta of 1.52?1.101.002.441.22Average Return The past five monthly returns for PG Company are 2.00 percent, -3.0 percent, 5.00 percent, 4.5 percent, and 2.7 percent. What is the average monthly return?11.23%17.23%3.45%2.25%Portfolio Beta You own $1,900 of City Steel stock that has a beta of 1.67. You also own $6,700 of Rent-N-Co (beta = 1.97) and $5,700 of Lincoln Corporation (beta = 1.07). What is the beta of your portfolio (closest to)?1.571.003.524.71Portfolio Return Year-to-date, Company O had earned a -3.70 percent return. During the same time period, Company V earned 9.6 percent and Company M earned 7.85 percent. If you have a portfolio made up of 40 percent Company O, 30 percent Company V, and 30 percent Company M, what is your portfolio return?6.715%13.75%3.755%21.15%Expected Return Compute the expected return given these three economic states, their likelihoods, and the potential returns:Economic StateProbabilityReturnFast Growth.129%Slow Growth.814%Recession.1-29%14.3%14.0%11.2%17.0%Investment Return HillCom Corp stock was $75.30 per share at the end of last year. Since then, it paid a $2.80 per share dividend last year. The stock price is currently $78.30. If you owned 200 shares of HillCom, what was your percent return?7.70%3.72%7.41%3.58%Investment Return MedTech Corp stock was $51.65 per share at the end of last year. Since then, it paid a $1.15 per share dividend. The stock price is currently $63.20. If you owned 100 shares of MedTech, what was your percent return?20.09%24.59%18.20%22.27%Average Return The past five monthly returns for PG Company are 1.50 percent, -2.0 percent, 4.50 percent, 4.0 percent, and 2.2 percent. What is the average monthly return?10.23%14.23%2.85%2.05%CAPM Required Return A company has a beta of 1.06. If the market return is expected to be 11.1 percent and the risk-free rate is 3.55 percent, what is the company’s required return?11.55%15.32%11.77%15.10%Portfolio Weights An investor owns $17,000 of Adobe Systems stock, $20,000 of Dow Chemical, and $30,000 of Office Depot. What are the portfolio weights of each stock?Adobe System = 0.25, Dow Chemical = 0.30, Office Depot = 0.45Adobe System = 0.27, Dow Chemical = 0.33, Office Depot = 0.40Adobe System = 0.33, Dow Chemical = 0.33, Office Depot = 0.33Adobe System = 0.30, Dow Chemical = 0.25, Office Depot = 0.45Post FIN201 Unit 7 QuizSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 10 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.Time0123456Cash Flow-1,070100500700700300700Use the NPV decision rule to evaluate this project; should it be accepted or rejected?$1,019.57, accept$2,089.57, accept$926.88, accept$-303.12, rejectUse the PI decision rule to evaluate these projects; which one(s) should be accepted or rejected?accept A, reject Baccept both A and Breject A, accept Baccept neither A nor BCompute the NPV for Project X with the cash flows shown below if the appropriate cost of capital is 11 percent.Time:012345Cash flow:-140-1400230205180$143.91$205.35$410.04$129.65Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 11 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.Time:0123Project A Cash Flow-33,00023,00043,00014,000Project B Cash Flow-43,00023,00033,00063,000Use the discounted payback decision rule to evaluate these projects; which one(s) should be accepted or rejected?accept A, reject Baccept neither A nor Breject A, accept Baccept both A and BSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.Time0123456Cash Flow-820150490690690290690Use the PI decision rule to evaluate this project; should it be accepted or rejected?-140.00%, reject1.40%, accept1.40%, reject140.04%, accept$1,148.32/$820 = 1.4004 = 140.04% acceptSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 14 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.Time0123456Cash Flow-960160440640640240640Use the discounted payback decision rule to evaluate this project; should it be accepted or rejected?2.76 years, accept2.87 years, accept3.15 years, reject3.13 years, rejectSuppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.Time:0123Project A Cash Flow-20,00010,00030,0001,000Project B Cash Flow-30,00010,00020,00050,000Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?rev: 12_04_2012accept neither A nor Baccept both A and Breject A, accept Baccept A, reject BCompute the Discounted Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 13 percent and the maximum allowable discounted payback is 3 years.Time:012345Cash flow:-9704705104303301803.08 years, reject3.52 years, reject5.08 years, reject2.52 years, acceptCompute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent.Time:012345Cash flow:-82-820107825744.28%, accept8.00%, reject31.80%, accept26.08%, acceptSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.Time0123456Cash Flow-980180420620620220620Use the payback decision rule to evaluate this project; should it be accepted or rejected?4.00 years, reject2.61 years, reject1.29 years, accept0 years, acceptPost FIN201 Mid TermBuying Stock with a Market Order You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $96.18 and $96.26, respectively. You place a market buy-order for 200 shares that executes at these quoted prices. How much money did it cost to buy these shares?$16$19,236$19,252$38,488Value of a Preferred Stock If a preferred stock from Ecology and Environment, Inc. (EEI) pays $15.50 in annual dividends, and the required return on the preferred stock is 7.10 percent, what’s the value of the stock?$1.10$2.18$110.05$218.31Expected Return Circuit City Stores (CC) recently paid a $.18 dividend. The dividend is expected to grow at a 23.20 percent rate. At the current stock price of $8.16, what is the return shareholders are expecting?23.22%23.20%25.92%2.21%Selling Stock with a Limit Order You would like to sell 400 shares of Pfizer, Inc.(PFE). The current bid and ask quotes are $27.35 and $27.38, respectively. You place a limit sell-order at $27.37. If the trade executes, how much money do you receive from the buyer?$10,940$10,952$21,892$10,948Five Years Future Value What is the future value of $600 deposited for five years earning 5% interest rate annually?$166$766$600$1,366Liquidity and Asset Management Ratios Oasis Products, Inc. has current liabilities = $11.1 million, current ratio = 1.60 times, inventory turnover ratio = 12.1 times, average collection period = 21 days, and sales = $113 million. What is the value of their cash and marketable securities? (Consider a 365 days a year.)$9,338,843$1,919,787$18,519,056$17,760,000P/E Ratio and Stock Price International Business Machines (IBM) has earnings per share of $7.00 and a P/E ratio of 15.22. What is the stock price?$44.44$.46$106.54$2.17Debt Management Ratios Trina’s Trikes, Inc. reported a debt-to-equity ratio of 1.91 times at the end of 2008. If the firm’s total debt at year-end was $10.90 million, how much equity does Trina’s Trikes have?$20.82 million$10.90 million$1.91 million$5.71 millionDeterminants of Interest Rate for Individual Securities The Wall Street Journal reports that the rate on 3-year Treasury securities is 7.30 percent, and the 6-year Treasury rate is 7.55 percent. From discussions with your broker, you have determined that expected inflation premium is 2.80 percent next year, 3.05 percent in Year 2, and 3.25 percent in Year 3 and beyond. Further, you expect that real interest rates will be 3.65 percent annually for the foreseeable future. What is the maturity risk premium on the 6-year Treasury security?.65%.85%.40%1.10%Compounding with Different Interest Rates A deposit of $710 earns interest rates of 10.1 percent in the first year and 7.1 percent in the second year. What would be the second year future value?$1,542.12$832.12$837.21$782.35Future Value of an Annuity What is the future value of a $1,200 annuity payment over 10 years if the interest rates are 8 percent?$13,723.07$2,590.71$17,383.87$12,960.00Debt Management Ratios Tierre’s Ts, Inc. reported a debt to equity ratio of 4.1 times at the end of 2008. If the firm’s total assets at year-end were $14.9 million, how much of their assets are financed with equity?$61.09 m$2.92 m$11.98 m$3.63 mTime to Maturity A bond issued by a corporation on September 1, 1989 is scheduled to mature on September 1, 2058. If today is September 2, 2009, what is this bond’s time to maturity?20 years69 years49 years58 yearsPresent Value of a Perpetuity A perpetuity pays $200 per year and interest rates are 6.5 percent. How much would its value change if interest rates increased to 9.0 percent?$854.70 decrease$500.00 decrease$500.00 increase$854.70 increasePresent Value of an Annuity What is the present value of a $2,200 annuity payment over 8 years if interest rates are 12 percent?$11,722.15$888.54$10,928.81$5,447.12Free Cash Flow You are considering an investment in Crew Cut, Inc. and want to evaluate the firm’s free cash flow. From the income statement, you see that Crew Cut earned an EBIT of $23.18 million, paid taxes of $3.82 million, and its depreciation expense was $7.82 million. Crew Cut’s gross fixed assets increased by $10.18 million from 2007 to 2008. The firm’s current assets increased by $6.18 million and spontaneous current liabilities increased by $3.82 million. What is Crew Cut’s operating cash flow, investment in operating capital and free cash flow for 2008, respectively in millions?$23.18, $10.18, $13.00$27.18, $10.18, $17.00$27.18, $12.54, $14.64$23.18, $11.64, $11.54Interest-on-Interest Consider a $2,800 deposit earning 10 percent interest per year for 7 years. How much total interest is earned on interest (excluding interest earned on the original deposit)?$696.41$196.00$1,960.00$2,656.41Internal Growth Rate Last year Umbrellas Unlimited Corporation had an ROA of 10% and a dividend payout ratio of 50%. What is the internal growth rate?100%1%2.25%5.26%Future Value of an Annuity Due If the future value of an ordinary, 5-year annuity is $7,200 and interest rates are 8 percent, what’s the future value of the same annuity due?$6,666.67$7,200$7,776.02$7,560Determinants of Interest Rate for Individual Securities A particular security’s default risk premium is 4.00 percent. For all securities, the inflation risk premium is 2.75 percent and the real interest rate is 3.25 percent. The security’s liquidity risk premium is .95 percent and maturity risk premium is 1.25 percent.The security has no special covenants. What is the security’s equilibrium rate of return?11.25%12.20%2.44%8.20%Post FIN201 Final ExamPortfolio Weights An investor owns $21,000 of Adobe Systems stock, $23,000 of Dow Chemical, and $33,000 of Office Depot. What are the portfolio weights of each stock?Adobe System = 0.33, Dow Chemical = 0.33, Office Depot = 0.33Adobe System = 0.30, Dow Chemical = 0.27, Office Depot = 0.43Adobe System = 0.27, Dow Chemical = 0.33, Office Depot = 0.40Adobe System = 0.27, Dow Chemical = 0.30, Office Depot = 0.43Income Statement Bullseye, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $907,500, Interest expense = $84,000, and Net income = $580,500. What is the 2008 Taxes reported on the income statement?$243,000$823,500$327,000There is not enough information to calculate 2008 Taxes.Portfolio Beta You own $1,500 of City Steel stock that has a beta of 1.61. You also own $6,100 of Rent-N-Co (beta = 1.91) and $5,100 of Lincoln Corporation (beta = 1.01). What is the beta of your portfolio (closest to)?3.111.511.004.53Portfolio Beta You own $21,000 of City Steel stock that has a beta of 3.31. You also own $38,000 of Rent-N-Co (beta = 1.76) and $20,600 of Lincoln Corporation (beta = -.84). What is the beta of your portfolio?1.501.004.894.23Sports Corp has 10.5 million shares of common stock outstanding, 5.5 million shares of preferred stock outstanding, and 1.5 million bonds. If the common shares are selling for $25.5 per share, the preferred shares are selling for $13.0 per share, and the bonds are selling for 96.95 percent of par, what would be the weight used for equity in the computation of Sports’s WACC?60.00%14.93%33.33%17.55%Suppose you sell a fixed asset for $123,000 when it’s book value is $151,000. If your company’s marginal tax rate is 28%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?$130,840$28,000$20,160$151,000Debt Management Ratios Zoe’s Dog Toys, Inc. reported a debt to equity ratio of 1.70 times at the end of 2008. If the firm’s total assets at year-end were $49.9 million, how much of their assets are financed with equity?$18.48m$31.42m$29.35m$84.83mRequired Return If the risk-free rate is 8.7 percent and the market risk premium is 3.4 percent, what is the required return for the market?8.7%12.1%3.4%5.3%IVY has preferred stock selling for 97.8 percent of par that pays a 7.2 percent annual coupon. What would be IVY’s component cost of preferred stock?7.04%7.20%15.84%7.36%Income Statement Barnyard, Inc.’s 2008 income statement lists the following income and expenses: EBIT = $506,000, Interest expense = $59,000, and Net income = $324,000. What is the 2008 Taxes reported on the income statement?There is not enough information to calculate 2008 Taxes.$123,000$447,000$182,000Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.Time:0123Project A Cash Flow-36,00026,00046,00017,000Project B Cash Flow-46,00026,0004,00066,000Use the payback decision rule to evaluate these projects; which one(s) should be accepted or rejected?accept both A and Baccept A, reject Baccept neither A nor Breject A, accept BAverage Return The past five monthly returns for PG Company are 1.45 percent, -1.9 percent, 4.45 percent, 4.0 percent, and 2.2 percent. What is the average monthly return?2.79%10.13%2.03%13.93%You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $230,000. The truck falls into the MACRS 5-year class, and it will be sold after 5 years for $23,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,300. The truck will have no effect on revenues, but it is expected to save the firm $101,000 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 35 percent. What will the cash flows for this project be during year 2?$139,250$95,700$27,400$91,410Expected Return Compute the expected return given these three economic states, their likelihoods, and the potential returns:Economic StateProbabilityReturnFast Growth.131%Slow Growth.811%Recession.1-26%9.3%14.0%14.5%16.0%Portfolio Beta You own $1,100 of City Steel stock that has a beta of 1.53. You also own $5,300 of Rent-N-Co (beta = 1.83) and $4,300 of Lincoln Corporation (beta = .93). What is the beta of your portfolio (closest to)?1.442.604.291.00Investment Return MedTech Corp stock was $51.85 per share at the end of last year. Since then, it paid a $1.35 per share dividend. The stock price is currently $63.40. If you owned 200 shares of MedTech, what was your percent return?21.29%24.88%20.35%26.04%Portfolio Beta You own $1,900 of City Steel stock that has a beta of 1.69. You also own $6,900 of Rent-N-Co (beta = 1.99) and $5,900 of Lincoln Corporation (beta = 1.09). What is the beta of your portfolio (closest to)?3.674.771.591.00Asset Management and Profitability Ratios You have the following information on Universe It Ts, Inc.: sales to working capital = 12 times, profit margin = 25.2%, net income available to common stockholders = $3.2 million, and current liabilities = $1.2 million. What is the firm’s balance of current assets?$1.058m$5.962m$2.258m$1.267mInvestment Return HillCom Corp stock was $75.25 per share at the end of last year. Since then, it paid a $2.75 per share dividend last year. The stock price is currently $78.25. If you owned 100 shares of HillCom, what was your percent return?7.64%3.65%3.51%7.35%Required Return If the risk-free rate is 11.3 percent and the market risk premium is 6.6 percent, what is the required return for the market?6.6%4.7%11.3%17.9%Portfolio Weights An investor owns $21,000 of Adobe Systems stock, $24,000 of Dow Chemical, and $34,000 of Office Depot. What are the portfolio weights of each stock?Adobe System = 0.33, Dow Chemical = 0.33, Office Depot = 0.33Adobe System = 0.27, Dow Chemical = 0.33, Office Depot = 0.40Adobe System = 0.30, Dow Chemical = 0.27, Office Depot = 0.43Adobe System = 0.27, Dow Chemical = 0.30, Office Depot = 0.43Debt Management Ratios Trina’s Trikes, Inc. reported a debt-to-equity ratio of 1.97 times at the end of 2008. If the firm’s total debt at year-end was $10.30 million, how much equity does Trina’s Trikes have?$1.97 million$10.30 million$5.23 million$20.29 millionSuppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.Time:0123Project A Cash Flow-31,00021,00041,00012,000Project B Cash Flow-41,00021,00031,00061,000Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?rev: 12_04_2012reject A, accept Baccept both A and Baccept A, reject Baccept neither A nor BPortfolio Weights If you own 715 shares of Air Line Inc at $42.8, 330 shares of BuyRite at $56.05, and 430 shares of Motor City at $10.1, what are the portfolio weights of each stock?Air Line = .7150, BuyRite = .3300, MotorCity = .4300Air Line = .5729, BuyRite = .3462, MotorCity = .0809Air Line = .4847, BuyRite = .2237, MotorCity = .2915Air Line = .3333, BuyRite = .3333, MotorCity = .3333CAPM Required Return A company has a beta of .99. If the market return is expected to be 10.4 percent and the risk-free rate is 3.20 percent, what is the company’s required return?13.50%10.33%13.53%10.30%Asset Management Ratios Corn Products, Corp. ended the year 2008 with an average collection period of 34 days. The firm’s credit sales for 2008 were $10.5 million. What is the year-end 2008 balance in accounts receivable for Corn Products? (Consider a 365 days a year.)$0.3088 million$3.2381 million$357 million$0.9781 millionInvestment Return HillCom Corp stock was $75.90 per share at the end of last year. Since then, it paid a $3.40 per share dividend last year. The stock price is currently $78.90. If you owned 400 shares of HillCom, what was your percent return?4.31%4.48%8.11%8.43%You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $220,000. The truck falls into the MACRS 3-year class, and it will be sold after 3 years for $22,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,200. The truck will have no effect on revenues, but it is expected to save the firm $100,000 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 40 percent. What will the cash flows for this project be during year 2?$99,116$157,790$94,800$2,210FlavR Co stock has a beta of 2.05, the current risk-free rate is 2.05 percent, and the expected return on the market is 9.05 percent. What is FlavR Co’s cost of equity?16.40%20.60%13.15%11.10%Compute the NPV for Project X with the cash flows shown below if the appropriate cost of capital is 12 percent.Time:012345Cash flow:-170-1700290265240$511.01$168.95$286.05$189.23Portfolio Beta You have a portfolio with a beta of 2.40. What will be the new portfolio beta if you keep 10 percent of your money in the old portfolio and 90 percent in a stock with a beta of 2.65?1.005.052.6252.525Portfolio Beta You have a portfolio with a beta of 1.09. What will be the new portfolio beta if you keep 30 percent of your money in the old portfolio and 70 percent in a stock with a beta of 1.69?1.392.781.001.51Time to Maturity A bond issued by a corporation on June 15, 2007 is scheduled to mature on June 15, 2027. If today is December 16, 2008, what is this bond’s time to maturity?20 years18 years, 6 months18 years1 year, 6 monthsExpected Return If a company’s current stock price is $26.00 and it is likely to pay a $1.75 dividend next year. Since analysts estimate the company will have a 14% growth rate, what is its expected return?6.73%20.73%2.00%14.00%Post FIN201 Pre Built Problems Ch 91.FedEx Corp. stock ended the previous year at $108.19 per share. It paid a $0.50 per share dividend last year. It ended last year at $111.49.If you owned 340 shares of FedEx, what was your dollar return and percent return?(Round your percent return answer to 2 decimal places.)2.A Treasury bond that you own at the beginning of the year is worth $1,095. During the year, it pays $47 in interest payments and ends the year valued at $1,105.What was your dollar return and percent return?(Round your percent return answer to 2 decimal places.)3.Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 12 percent and standard deviation of 38 percent. The average return and standard deviation of Idol Staff are 15 percent and 26 percent; and of Poker-R-Us are 9 percent and 30 percent.4.An investor owns $11,000 of Adobe Systems stock, $12,000 of Dow Chemical, and $12,000 of Office Depot. What are the portfolio weights of each stock?(Round your answers to 4 decimal places.)5.Year-to-date, Yum Brands had earned a 3.30 percent return. During the same time period, Raytheon earned 4.38 percent and Coca-Cola earned ?0.49 percent.If you have a portfolio made up of 30 percent Yum Brands, 20 percent Raytheon, and 50 percent Coca-Cola, what is your portfolio return?(Round your answer to 2 decimal places.)6.The past five monthly returns for Kohls are 3.94 percent, 4.62 percent, ?2.08 percent, 9.45 percent, and ?2.96 percent. What is the average monthly return?(Round your answer to 3 decimal places.)7.The past five monthly returns for PG&E are ?3.51 percent, 4.73 percent, 4.11 percent, 6.98 percent, and 3.92 percent. Compute the standard deviation of PG&Es monthly returns.(Do not round intermediate calculations. Round your final answer to 2 decimal places.)8.Table 9.2 Average Returns for BondsBonds1950 to 1959Average0.0%1960 to 1969Average1.71970 to 1979Average5.21980 to 1989Average13.51990 to 1999Average9.82000 to 2009Average8.5Table 9.4 Annual Standard Deviation for BondsBonds1950 to 19594.5%1960 to 19696.41970 to 19796.71980 to 198915.51990 to 199912.72000 to 200910.3Use the tables above to calculate the coefficient of variation of the risk-return relationship of the bond market during each decade since 1950.(Round your answers to 2 decimal places.)Post FIN201 Pre Built Problems Ch 121.Suppose you sell a fixed asset for $111,000 when its book value is $131,000. If your companys marginal tax rate is 40 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?2.You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $15,500 to purchase and which will have OCF of $1,500 annually throughout the vehicles expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $22,000 to purchase and which will have OCF of $800 annually throughout that vehicles expected 4-year life. Both cars will be worthless at the end of their life. You intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future.If the business has a cost of capital of 12 percent, calculate the EAC.(Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)Which one should you choose?3.You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $58,500, has a 5-year life, and has an annual OCF (after tax) of $10,300 per year. The Keebler CookieMunster costs $91,500, has a 7-year life, and has an annual OCF (after tax) of $8,300 per year.If your discount rate is 12 percent, what is each machines EAC?(Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)4.Your firm needs a computerized machine tool lathe which costs $54,000 and requires $12,400 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 35 percent and a discount rate of 11 percent.If the lathe can be sold for $5,400 at the end of year 3, what is the after-tax salvage value?(Round your answer to 2 decimal places.)5.You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $60,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $19,800. Use of the truck will require an increase in NWC (spare parts inventory) of $1,800. The truck will have no effect on revenues, but it is expected to save the firm $20,400 per year in before-tax operating costs, mainly labor. The firms marginal tax rate is 34 percent.What will the cash flows for this project be?(Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)6.You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $380 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $215 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $159,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $33,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 39 percent and the required return on the project is 10 percent. (Use SL depreciation table)What will the cash flows for this project be?(Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your final answers to 2 decimal places.)Post FIN201 Unit 8 Application Report Latest 2017 JuneCompose a 4-6 page report, double-spaced, on the following topic. Be sure to illustrate your report with relevant financial numbers and data, and to explain the significance of this data. APA format is expected (include a cover page, outline, body of the report/paper, and a properly formatted works cited page (no abstract is needed for this assignment)).** DUE: Friday, June 23rd 11:59PM EST **BACKGROUND INFORMATION: During the Carter administration, long-term US Treasury yields exceeded 15%, and short-term T-Bills yielded near 20%. After Reagan’s inauguration, interest rates began to fall as Fed Chairman Volcker’s restrictive monetary policy succeeded in containing inflation. Over the past 30 years, US rates have steadily declined: T-Bills are hovering under 1% and the long bond is yielding about 4%.Lately, though, rising oil prices have incited inflationary forces. China and other developing nations have increased their consumption for oil, metals, materials, and food. Thus, both foreign and domestic factors have spurred demand and are contributing to rising prices on a global scale. In addition to this commodity-induced inflation, US consumers are faced with rising costs for essential services such as healthcare and education.The Chairwoman of the Federal Reserve, Janet Yellen, is faced with a dilemma. Should the Fed increase rates to contain inflation; or, should the Fed keep rates very low to spur the US economy which is beset by a collapse in home values, an extensive banking crisis, and a faltering stock market ?YOUR ASSIGNMENT: Given this economic background…Compose a 4-6 page report, double-spaced, on the following topic: If the Fed decides to raise interest rates next year, what effect would rising rates have upon the following: (1) Consumer financing for big-ticket items such as autos and homes; (2) the present and future values of annuities; (3) the NPV calculation; (4) the WACC; (5) corporate earnings ?Be sure to illustrate your report with relevant financial numbers. Hint: for topic (3), above, one approach you might adopt is to cite the NPV calculation from previous case problems, then to contrast it against a new calculation performed with a higher interest rate. Cite the numeric effect upon the NPV, and then explain its rationale and its significance. This is the kind of “numeric illustration” that you should provide for each of the five topic sections.