NPV A project has an initial cost of $65,000, expected net cash inflows of $10,000 per year for 11 years, and a cost of capital of 9%. What is the project's NPV? ( Hint: Begin by constructing a...

NPV

A project has an initial cost of $65,000, expected net cash inflows of $10,000 per year for 11 years, and a cost of capital of 9%. What is the project's NPV? (Hint:Begin by constructing a timeline.) Do not round intermediate calculations. Round your answer to the nearest cent.

$ ____

Stock Repurchase

A firm has 5 million shares outstanding with a market price of $35 per share. The firm has $35 million in extra cash (short-term investments) that it plans to use in a stock repurchase; the firm has no other financial investments or any debt. What is the firm's value of operations after the repurchase? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.

$ ____ million

How many shares will remain after the repurchase? Round your answer to the nearest whole number.

____ shares

Stock Split

JPix management is considering a stock split. JPix currently sells for $78 per share and a 3-for-1 stock split is contemplated. What will be the company's stock price following the stock split, assuming that the split has no effect on the total market value of JPix's equity? Round your answer to the nearest dollar.

$ ____

External Equity Financing

Gardial GreenLights, a manufacturer of energy-efficient lighting solutions, has had such success with its new products that it is planning to substantially expand its manufacturing capacity with a $20 million investment in new machinery. Gardial plans to maintain its current 30% debt-to-total-assets ratio for its capital structure and to maintain its dividend policy in which at the end of each year it distributes 50% of the year's net income. This year's net income was $8 million. How much external equity must Gardial seek now to expand as planned? Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places.

$ ____ million

Stock Split

Suppose you own 5,000 common shares of Laurence Incorporated. The EPS is $10.00, the DPS is $3.00, and the stock sells for $65 per share. Laurence announces a 2-for-1 split. Immediately after the split, how many shares will you have? Round your answer to the nearest whole number.

____ shares

What will the adjusted EPS and DPS be? Round your answers to the nearest cent.

EPS: $ ____

DPS: $ ____

What would you expect the stock price to be? Round your answer to the nearest cent.

$ ____

Stock Split

Fauver Enterprises declared a 5-for-1 stock split last year, and this year its dividend is $0.60 per share. This total dividend payout represents a 12% increase over last year's pre-split total dividend payout. What was last year's dividend per share? Round your answer to the nearest cent.

$ ____

Break-Even Quantity

Shapland Inc. has fixed operating costs of $350,000 and variable costs of $50 per unit. If it sells the product for $85 per unit, what is the break-even quantity? Round your answer to the nearest whole number.

____ units

Unlevered Beta

Counts Accounting’s beta is 1.1 and its tax rate is 25%. If it is financed with 29% debt, what is its unlevered beta? Do not round intermediate calculations. Round your answer to two decimal places.

______

Premium for Financial Risk

Ethier Enterprise has an unlevered beta of 1.5. Ethier is financed with 50% debt and has a levered beta of 2.4. If the risk-free rate is 4.5% and the market risk premium is 5%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk? Round your answer to one decimal place.

____ %

Value of Equity after Recapitalization

Nichols Corporation's value of operations is equal to $800 million after a recapitalization (the firm had no debt before the recap). It raised $200 million in new debt and used this to buy back stock. Nichols had no short-term investments before or after the recap. After the recap, w_d= 25%. What is S (the value of equity after the recap)? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.

$ ____ million

Stock Price after Recapitalization

Lee Manufacturing's value of operations is equal to $900 million after a recapitalization. (The firm had no debt before the recap.) Lee raised $300 million in new debt and used this to buy back stock. Lee had no short-term investments before or after the recap. After the recap, w_d= 1/3. The firm had 38 million shares before the recap. What is P (the stock price after the recap)? Do not round intermediate calculations. Round your answer to the nearest cent.

$ ____

Shares Remaining After Recapitalization

Dye Trucking raised $300 million in new debt and used this to buy back stock. After the recap, Dye's stock price is $7.50. If Dye had 60 million shares of stock before the recap, how many shares does it have after the recap? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.

____ million shares

Receivables Investment

Medwig Corporation has a DSO of 39 days. The company averages $9,750 in sales each day (all customers take credit). What is the company's average accounts receivable? Assume a 365-day year. Round your answer to the nearest dollar.

$ ____

Accounts Payable

A chain of appliance stores, APP Corporation, purchases inventory with a net price of $450,000 each day. The company purchases the inventory under the credit terms of 1/15, net 35. APP always takes the discount but takes the full 15 days to pay its bills. What is the average accounts payable for APP? Round your answer to the nearest dollar.

$ ____

Receivables Investment

Snider Industries sells on terms of 2/10, net 45. Total sales for the year are $700,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 50 days after their purchases. Assume a 365-day year.

1. What are the day's sales outstanding? Do not round intermediate calculations. Round your answer to the nearest whole number.

____ days

2. What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest dollar.

$ ____

3. What would happen to average receivables if Snider toughened its collection policy with the result that all non-discount customers paid on the 45th day? Do not round intermediate calculations. Round your answer to the nearest dollar.

$ ____

Cost of Trade Credit

Calculate the nominal annual cost of trade credit under each of the following terms. Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places.

1. 1/15, net 20.

____ %

2. 2/10, net 55.

____ %

3. 3/10, net 45.

____ %

4. 2/10, net 45.

____%

5. 2/15, net 35.

____ %

Cross Rates

At today's spot exchange rates 1 U.S. dollar can be exchanged for 11 Mexican pesos or for 111.3 Japanese yen. You have pesos that you would like to exchange for yen. What is the cross rate between the yen and the peso; that is, how many yen would you receive for every peso exchanged? Do not round intermediate calculations. Round your answer to two decimal places.

____ yen per peso

Purchasing Power Parity

A computer costs $530 in the United States. The same model costs €555 in France. If purchasing power parity holds, what is the spot exchange rate between the euro and the dollar? Do not round intermediate calculations. Round your answer to two decimal places.

1 euro = $ ____

Purchasing Power Parity

In the spot market, 11.0 pesos can be exchanged for 1 U.S. dollar. A pair of headphones costs $20 in the United States. If purchasing power parity holds, what should be the price of the same headphones in Mexico? Do not round intermediate calculations. Round your answer to two decimal places.

____ pesos

Capital Budgeting Analysis

Section 3, Part 2

Create a valuation spreadsheet for project B. Use the spreadsheet template provided to structure your valuation analysis. Evaluate the project according to the following valuation methods:

>Net Present Value of Discounted CashFlow(use WACC number for discount rate)

>Internal Rate of Return

>PaybackPeriod

>ProfitabilityIndex(use WACC number for discount rate)Provide a synopsis evaluation of each project and provide a clear recommendation of which project management will accept for its capital expenditures budget based on textbook decision rules.

Section 4

Create a second valuation spreadsheet of the project. This should measure the sensitivity of the project as reflected by a 10% reduction in price. Evaluate the project according to the following valuation method:

>Net Present Value of Discounted CashFlow(use WACC number for discount rate)

Provide a synopsis evaluation of each spreadsheet and provide a clear recommendation of which project management will accept for its capital expenditures budget based on textbook decision rules.

Section 5

Create a third valuation spreadsheet of the projectprovided by your instructor. This should measure the sensitivity of the project as reflected by a 10% reduction in sales volume. Evaluate the project according to the following valuation method:

>Net Present Value of Discounted CashFlow(use WACC number for discount rate)

Provide a synopsis evaluation of each spreadsheet and provide a clear recommendation of which project management will accept for its capital expenditures budget based on textbook decision rules.

Project B:

This project requires an initial investment of $2,000,000 in equipment which will cost an additional$100,000 to install. The firm will use the attached MACRS depreciation schedule to expense this equipment. Once the equipment is installed, the company will need to increase net working capital by$70,000. The project will last 6 years at which time the market value for the equipment will be $50,000. The project will project a product with a sales price of $40.00 per unit and the variable cost per unit will be$15.00. The fixed costs would be $150,000 per year. Because this project is not close to current products sold by the business, management wants to adjust the risk profile of this analysis by imposing a 2-percentage point increase over the firm’s WACC.