1. You purchased ten shares of Dole, Inc. common stock for $80 per share. The stock pays no dividend. You plan to sell the shares in one year. The projected selling prices and probabilities are as follows:
$60 per share, 10%
$88 per share 60%
$95 per share 30%
What is the expected rate of return?
2. change in the value of New England Electric Inc. over the last two years is as follows:
Year one- 7%
Year two- 12%.
During the same time the S and P changed 6% in year one and 8% in year two.
Calculate the Beta for Chicago Steel Works? What does this mean?
3. bond: the purchase date was 01/01/2000, the maturity date is 01.01/2010, the coupon rate is 5%, the yield rate is 10%, the redemption at par is 100%, and the payment frequency is 1.
Prepare your answer in Excel, then copy and paste it in the solution window.
4. Discuss what the bond rating agencies do, and identify the rates for investment quality bonds and less-than investment quality bonds.
5. Acme Machine Shop, L.L.C. is considering the purchase of a new lathe for $500,000. It will have a life of 5 years. Annual cash inflows in each of the five years are projected to be $150,000. The clinic uses a 20% discount rate for all capital projects. Should they purchase the machine?
6. Treasure Valley Imaging is considering the purchase of a new piece of equipment that will cost $1,000,000. The projections show it should increase cash inflows by $125,000 in each of ten years. The discount rate is 10%. What is the internal rate of return? Should they fund this purchase?
7. Valley Planing Co. has fixed costs of $800,000 including depreciation of $100,000. The E.B.I.T.D.A. is $250,000. Calculate the cash flow operating leverage. What does this mean?
8. Ada Sand and Gravel LLC sells concrete for $35 per yard. The variable cost per yard is $25. Fixed costs are $500,000 including depreciation of $80,000. Compute the cash breakeven in yards.
Below is the long term and capital section of the balance sheet for the Seattle Distributing Co.
|
Category
|
Value
|
|
Notes Payable
|
$300,000
|
|
Bonds Payable
|
500,000
|
|
Preferred Stock
|
100,000
|
|
Common Stock
|
500,000
|
|
Retained Earnings
|
400,000
|
Interest of notes is 6%, bonds payable 4%, preferred stock dividends are 5% and the common shareholders opportunity cost is 10%. The tax rate is 25%.
Compute the average weighted cost of capital. You may want to calculate your answer using Excel, and paste the solution into the solution window.
12. Cost of goods sold is $2,500,000 and inventory is $600,000. Calculate the days on-hand.
Sales on account are $6,000,000, and accounts receivable are $2,000,000. Calculate the days outstanding.
13. Cost of goods sold is $2,500,000, and accounts payable are $450,000. Compute the days in accounts payable.
14. Using the information from the previous two questions, compute the cash conversion cycle