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Devry FINE 515 Full Course Latest
Devry FINE 515 Full Course Latest [ all discussion all prob sets all quizes midterm and course proj ]
Devry FINE 515 Week 1 Discussion 1 & 2 Latest
Discussion 1
Much of the analysis done by financial managers is based on numbers that are different from what would seem to the corresponding numbers presented in the financial statements. This difference is not due to any kind of cooking the books or other attempts to mislead anyone. One example is the use of market value rather than historical cost in the valuation of assets. What are some other examples of the differences between financial management and financial accounting?
Discussion 2
In this discussion, we will be working with the variety of financial analysis tools available to us. Let’s start with the DuPont Identity introduced in Chapter 2 of the text. For your initial post, locate the financial statements for two firms in one industry. Calculate all four terms of the DuPont Identity and present the results but do not analyze the results. For an additional post, analyze the results that another student has posted. If you were the appropriate financial manager of one of the firms that you analyzed, what would be your observations and recommendations?
Devry FINE 515 Week 2 Discussion 1 & 2 Latest
Discussion 1
- This week, the lecture provided some examples of TVM problem scenarios. For your first post, provide a story problem that can be solved using one or more of the TVM calculations.
- Your second post can be a description of how the problem posed by another student can be solved. Your professor may provide an example.
Discussion 2
What are some of the assumptions behind the TVM calculations? How do these assumptions limit our application of these calculations?
Devry FINE 515 Week 3 Discussion 1 & 2 Latest
Discussion 1
Describe a potential capital expenditure project from the industry in which you now work or an industry in which you are interested.What is the project? Describe and provide an approximate value of the initial cash flow. Describe and provide an approximate value of the annual cash flows. Provide an estimation of the life of the project, as well as the exit costs.
Discussion 2
Our textbook and lecture discuss some considerations that should be taken into account when doing capital budgeting. How will these considerations affect the project you described in the other topic? Incremental earnings, interest expenses, taxes, opportunity costs, externalities, sunk costs, cannibalization or erosion, depreciation, and salvage value; as well as others.
Devry FINE 515 Week 4 Discussion 1 & 2 Latest
Discussion 1
Select a stock in which you are interested. Calculate its per share value using the DDM or another method discussed in Chapter 9.Then find the current market value of a share of the stock. Compare that two. Can you explain the similarity or difference?
Discssion 2
Do some research, probably on the Web, and find some bonds with differing yields to maturity (YTM). How do you explain the difference? Both the lecture and the textbook discuss some factors that may lead to this difference.
Devry FINE 515 Week 5 Discussion 1 & 2 Latest
Discussion 1
The Weighted Average Cost of Capital (WACC) for a firm can be calculated or found through research. Select two firms in the same industry. The industry may be that in which you currently work or it may be an industry in which you are interested. Calculate or find the WACC for the two firms. How do the WACCs compare? Are the WACCs what you would expect? What causes the differences between the two firms’ WACCs?
Discussion 2
Our second discussion topic concerns the calculation of stock values using the Capital Asset Pricing Model (CAPM). We will start with a discussion of risk and work towards practical application of the model. The textbook provides a list of betas for a selection of stocks. Choose a few firms from that list and discuss whether the betas are what you would expect. Be sure to explain why or why not.
Devry FINE 515 Week 6 Discussion 1 & 2 Latest
Discussion 1
Do some research and find some historical or current real life examples of agency problems. Will the measures discussed in the text help to prevent problems like your examples in the future? What else would you advise? You may provide examples of agency problems from your own experience. If you do that, be careful to provide enough anonymity that you won’t get in trouble.
Discussion 2
Does the financial manager have a greater responsibility or a lesser responsibility for maintaining ethical corporate governance? Why or why not? What is or will be your approach to ethical corporate governance now or in the future?
Devry FINE 515 Week 7 Discussion 1 & 2 Latest
Discussion 1
Do some research on two firms in your industry or an industry in which you are interested. Can you get an idea of their working capital management policies from publicly available information? How do the two companies differ in their apparent working capital management policies? Which policy do you think is better and why?
Discussion 2
Consider the company you work for or a company in which you are interested. Also, do some research to find some current cost estimates for various means of financing working capital. What would be your recommendation to the company for financing its working capital needs? If the information is publicly available, or if you have access to it AND have permission to discuss it, how does your recommendation compare what the firm is actually doing?
Devry FINE 515 Week 1 Quiz Latest
week 1
1.
Question :
(TCO G) Pick one of the ratios discussed in the lecture or the text and provide an example of how that ratio might fluctuate seasonally.
Points Received:
5 of 5
Comments:
Question 2.
Question :
(TCO G) As of December 31, 20XX, David Corp’s accounts payable were $4,000,000. Its accounts receivable were $2,200,000, and its sales for 20XX were $32,000,000. What was its days sales outstanding?
Question 3.
Question :
(TCO G) As of December 31, 2015, Michael Corp’s current assets were $2,000,000. Its current liabilities were $2,000,000. Its sales for 2015 were $50,000,000. As of December 31, 2016, Michael Corp’s current assets were $3,000,000. Its current liabilities were $3,000,000. Its sales for 2016 were $65,000,000. Management has asked you to comment on these numbers.
Devry FINE 515 Week 2 Quiz Latest
week 2
1.
Question :
(TCO B) Your daughter has just given birth to your first grandchild. You decide to start a college fund for the child. You want the fund to have $300,000 in it when the child turns 18. You think you can get a return of 10% per year on your investment. How much should you deposit in the fund?
Ignore taxes. Show your work. If you use Excel, show the formula with the parameters, and the answer. If you use a formula, provide the standard formula, the formula with terms substituted, and the answer. If you use a calculator, show the inputs and the answer.
Points Received:
5 of 5
Comments:
Question 2.
Question :
(TCO B) You have a student loan of $75,000. The interest rate is 8.6% per year. You have been out of school for 6 months and are ready to start making payments. You want to use the maximum allowed of 10 years to pay off the loan by making equal monthly payments. How much are the monthly payments?
Ignore taxes. Show your work. If you use Excel, show the formula with the parameters, and the answer. If you use a formula, provide the standard formula, the formula with terms substituted, and the answer. If you use a calculator, show the inputs and the answer.
Points Received:
5 of 5
Comments:
Question 3.
Question :
(TCO B) Your cousin wants to buy a car but he really can’t afford it. He needs a loan of $22,000. The finance manager at the dealership offers him something like a loan in which your cousin will get the $22,000 and will pay $413 per month for the next 60 months with an additional payment of $3,000 (which the car will surely be worth!) in the 60th
month. What interest rate is your cousin really going to pay?
Ignore taxes. Show your work. If you use Excel, show the formula with the parameters, and the answer. If you use a formula, provide the standard formula, the formula with terms substituted, and the answer. If you use a calculator, show the inputs and the answer.
Devry FINE 515 Week 5 Quiz Latest
- 1.Question : (TCO C) Company A has a beta of 2.77.Company B has a beta of .73. Company C has a beta of .90. The risk free rate is 6% and the market risk premium is 4%. What is the expected return of investing in Company A? Show your work.
Question 2. Question : (TCO C) Your stock portfolio consists of only two stocks. You have $115,000 in Company A and $125,000 in Company B. Company A has an actual return of -8% and Company B has a return of 12%. What is the return on your portfolio? Show your work.
Question 3. Question : (TCO E) A company has a capital structure of 50% debt and 50% equity. The YTM on the company’s bonds is 8%, and the company’s effective tax rate is 40%. The cost of equity is 13%. What is the company’s WACC? Show your work.
Devry FINE 515 Week 1 Problem set Latest
week 1
Week 1 Problem Set
Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_1_Problem_Set.docx, where flastname is your first initial and you last name, and submit it to the appropriate dropbox.
Chapter 1 (page 19)
1.
What is the most important difference between a corporation and all other organizational forms?
2.
What does the phrase limited liability mean in a corporate context?
3.
Which organizational forms give their owners limited liability?
4.
What are the main advantages and disadvantages of organizing a firm as a corporation?
5.
Explain the difference between an S corporation and a C corporation.
Chapter 2
The following is provided for use in answering the next set of questions. You may also find table 2.5 on page 53 of your text and all questions on pages 56–57.
TABLE 2.5 2009–2013 Financial Statement Data and Stock Price Data for Mydeco Corp.
Mydeco Corp. 2009–2013 | (All data as of fiscal year end; in $ million) | ||||
Income Statement | 2009 | 2010 | 2011 | 2012 | 2013 |
Revenue
Cost of Goods Sold |
404.3
(188.3) |
363.8
(173.8) |
424.6
(206.2) |
510.7
(246.8) |
604.1
(293.4) |
Gross Profit
Sales and Marketing Administration Depreciation and Amortization |
216.0
(66.7) (60.6) (27.3) |
190.0
(66.4) (59.1) (27.0) |
218.4
(82.8) (59.4) (34.3) |
263.9
(102.1) (66.4) (38.4) |
310.7
(120.8) (78.5) (38.6) |
EBIT
Interest Income (Expense) |
61.4
(33.7) |
37.5
(32.9) |
41.9
(32.2) |
57.0
(37.4) |
72.8
(39.4) |
Pretax Income
Income Tax |
27.7
(9.7) |
4.6
(1.6) |
9.7
(3.4) |
19.6
(6.9) |
33.4
(11.7) |
Net Income
Shares outstanding (millions) Earnings per share |
18.0
55.0 $0.33 |
3.0
55.0 $0.05 |
6.3
55.0 $0.11 |
12.7
55.0 $0.23 |
21.7
55.0 $0.39 |
Balance Sheet | 2009 | 2010 | 2011 | 2012 | 2013 |
Assets
Cash Accounts Receivable Inventory |
48.8
88.6 33.7 |
68.9
69.8 30.9 |
86.3
69.8 28.4 |
77.5
76.9 31.7 |
85.0
86.1 35.3 |
Total Current Assets
Net Property, Plant, and Equip. Goodwill and Intangibles |
171.1
245.3 361.7 |
169.6
169.6 243.3 |
184.5
309 361.7 |
186.1
345.6 361.7 |
206.4
347.0 361.7 |
Total Assets
Liabilities and Stockholders’ Equity Accounts Payable Accrued Compensation |
778.1
18.7 6.7 |
774.6
17.9 6.4 |
855.2
22.0 7.0 |
893.4
26.8 8.1 |
915.1
31.7 9.7 |
Total Current Liabilities
Long-term Debt |
25.4
500.0 |
24.3
500.0 |
29.0
575.0 |
34.9
600.0 |
41.4
600.0 |
Total Liabilities
Stockholders’ Equity |
525.4
252.7 |
524.3
250.3 |
604.0
251.2 |
634.9
258.5 |
641.4
273.7 |
Total Liabilities and Stockholders’ Equity | 778.1 | 774.6 | 855.2 | 893.4 | 915.1 |
Statement of Cash Flows | 2009 | 2010 | 2011 | 2012 | 2013 |
Net Income
Depreciation and Amortization Chg. in Accounts Receivable Chg. in Inventory Chg. in Payables and Accrued Comp. |
18.0
27.3 3.9 (2.9) 2.2 |
3.0
27.0 18.8 2.8 (1.1) |
6.3
34.3 (0.0) 2.5 4.7 |
12.7
38.4 (7.1) (3.3) 5.9 |
21.7
38.6 (9.2) (3.6) 6.5 |
Cash from Operations
Capital Expenditures |
48.5
(25.0) |
50.5
(25.0) |
47.8
(100.0) |
46.6
(75.0) |
54.0
(40.0) |
Cash from Investing Activities
Dividends Paid Sale (or purchase) of stock Debt Issuance (Pay Down) |
(25.0)
(5.4) — — |
(25.0)
(5.4) — — |
(100.0)
(5.4) — 75.0 |
(75.0)
(5.4) — 25.0 |
(40.0)
(6.5) — — |
Cash from Financing Activities | (5.4) | (5.4) | 69.6 | 19.6 | (6.5) |
Change in Cash | 18.1 | 20.1 | 17.4 | (8.8) | 7.5 |
Mydeco Stock Price | $7.92 | $3.30 | $5.25 | $8.71 | $10.89 |
29.
In fiscal year 2011, Starbucks Corporation (SBUX) had revenue of $11.70 billion, gross profit of $6.75 billion, and net income of $1.25 billion. Peet’s Coffee and Tea (PEET) had revenue of $372 million, gross profit of $72.7 million, and net income of $17.8 million.
- a. Compare the gross margins for Starbucks and Peet’s.
- b. Compare the net profit margins for Starbucks and Peet’s.
- c. Which firm was more profitable in 2011?
31.
SeeTable 2.5showing financial statement data and stock price data for Mydeco Corp.
- a.How did Mydeco’s accounts receivable days change over this period?
- b.How did Mydeco’s inventory days change over this period?
- c.Based on your analysis, has Mydeco improved its management of its working capital during this time period?
32.
SeeTable 2.5showing financial statement data and stock price data for Mydeco Corp.
- a.Compare Mydeco’s accounts payable days in 2009 and 2013.
- b.Did this change in accounts payable days improve or worsen Mydeco’s cash position in 2013?
33.
SeeTable 2.5showing financial statement data and stock price data for Mydeco Corp.
- a. By how much did Mydeco increase its debt from 2009 to 2013?
- b. What was Mydeco’s EBITDA/Interest coverage ratio in 2009 and 2013? Did its coverage ratio ever fall below 2?
- c. Overall, did Mydeco’s ability to meet its interest payments improve or decline over this period?
42.
For fiscal year 2011, Starbucks Corporation (SBUX) had total revenues of $11.70 billion, net income of $1.25 billion, total assets of $7.36 billion, and total shareholder’s equity of $4.38 billion.
- a. Calculate the Starbucks’ ROE directly, and using the DuPont Identity.
- b. Comparing with the data for Peet’s in Problem 41, use the DuPont Identity to understand the difference between the two firms’ ROEs.
Berk, J., & DeMarzo, P. (2014). Corporate Finance. Boston, MA: Pearson.
Devry FINE 515 Week 2 Problem set Latest
week 2
Week 2 Problem Set
Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_2_Problem_Set.docx, where flastname is your first initial and you last name, and submit it to the appropriate dropbox.
Chapter 4 (pages 132–136):
- 3.Calculate the future value of $2000 in
- a.five years at an interest rate of 5% per year;
- b.ten years at an interest rate of 5% per year; and
- c.five years at an interest rate of 10% per year.
- d.Why is the amount of interest earned in part (a) less than half the amount of interest earned in part (b)?
4.What is the present value of $10,000 received
- a.twelve years from today when the interest rate is 4% per year;
- b.twenty years from today when the interest rate is 8% per year; and
- c.six years from today when the interest rate is 2% per year?
5.Your brother has offered to give you either $5,000 today or $10,000 in 10 years. If the interest rate is 7% per year, which option is preferable?
6.Consider the following alternatives.
- i.$100 received in 1 year
- ii.$200 received in 5 years
iii. $300 received in 10 years
- a.Rank the alternatives from most valuable to least valuable if the interest rate is 10% per year.
- b.What is your ranking if the interest rate is only 5% per year?
- c.What is your ranking if the interest rate is 20% per year?
8.Your daughter is currently 8 years old. You anticipate that she will be going to college in 10 years. You would like to have $100,000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate of 3% per year, how much money do you need to put into the account today to ensure that you will have $100,000 in 10 years?
9.You are thinking of retiring. Your retirement plan will pay you either $250,000 immediately on retirement or $350,000 5 years after the date of your retirement. Which alternative should you choose if the interest rate is
- a.0% per year;
- b.8% per year; and
- c.20% per year?
14.You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 1 year from now, $1,500 2 years from now, and $10,000 10 years from now.
- a.What is the NPV of the opportunity if the interest rate is 6% per year? Should you take the opportunity?
- b.What is the NPV of the opportunity if the interest rate is 2% per year? Should you take it now?
36.You are thinking of purchasing a house. The house costs $350,000. You have $50,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 7% per year. What will your annual payment be if you sign up for this mortgage?
37.You would like to buy the house and take the mortgage described in Problem 36. You can afford to pay only $23,500 per year. The bank agrees to allow you to pay this amount each year, yet still borrow $300,000. At the end of the mortgage (in 30 years), you must make a balloonpayment; that is, you must repay the remaining balance on the mortgage. How much will this balloon payment be?
38.You have just made an offer on a new home and are seeking a mortgage. You need to borrow $600,000.
- a.The bank offers a 30-year mortgage with fixed monthly payments and an interest rate of 0.5% per month.What is the amount of your monthly payment if you take this loan?
- b.Alternatively, you can get a 15-year mortgage with fixed monthly payments and an interest rate of 0.4% per month.How much would your monthly payments be if you take this loan instead?
*A.1. This problem is from the Appendix to Chapter 4.
Your grandmother bought an annuity from Rock Solid Life Insurance Company for $200,000 when she retired. In exchange for the $200,000, Rock Solid will pay her $25,000 per year until she dies. The interest rate is 5%. How long must she live after the day she retired to come out ahead (that is, to get more in value than what she paid in)?
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Week 2 Problem Set
Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_2_Problem_Set.docx, where flastname is your first initial and you last name, and submit it to the appropriate dropbox.
Chapter 4 (pages 132–136):
- 3.Calculate the future value of $2000 in
- a.five years at an interest rate of 5% per year;
- b.ten years at an interest rate of 5% per year; and
- c.five years at an interest rate of 10% per year.
- d.Why is the amount of interest earned in part (a) less than half the amount of interest earned in part (b)?
4.What is the present value of $10,000 received
- a.twelve years from today when the interest rate is 4% per year;
- b.twenty years from today when the interest rate is 8% per year; and
- c.six years from today when the interest rate is 2% per year?
5.Your brother has offered to give you either $5,000 today or $10,000 in 10 years. If the interest rate is 7% per year, which option is preferable?
6.Consider the following alternatives.
- i.$100 received in 1 year
- ii.$200 received in 5 years
iii. $300 received in 10 years
- a.Rank the alternatives from most valuable to least valuable if the interest rate is 10% per year.
- b.What is your ranking if the interest rate is only 5% per year?
- c.What is your ranking if the interest rate is 20% per year?
8.Your daughter is currently 8 years old. You anticipate that she will be going to college in 10 years. You would like to have $100,000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate of 3% per year, how much money do you need to put into the account today to ensure that you will have $100,000 in 10 years?
9.You are thinking of retiring. Your retirement plan will pay you either $250,000 immediately on retirement or $350,000 5 years after the date of your retirement. Which alternative should you choose if the interest rate is
- a.0% per year;
- b.8% per year; and
- c.20% per year?
14.You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 1 year from now, $1,500 2 years from now, and $10,000 10 years from now.
- a.What is the NPV of the opportunity if the interest rate is 6% per year? Should you take the opportunity?
- b.What is the NPV of the opportunity if the interest rate is 2% per year? Should you take it now?
36.You are thinking of purchasing a house. The house costs $350,000. You have $50,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 7% per year. What will your annual payment be if you sign up for this mortgage?
37.You would like to buy the house and take the mortgage described in Problem 36. You can afford to pay only $23,500 per year. The bank agrees to allow you to pay this amount each year, yet still borrow $300,000. At the end of the mortgage (in 30 years), you must make a balloonpayment; that is, you must repay the remaining balance on the mortgage. How much will this balloon payment be?
38.You have just made an offer on a new home and are seeking a mortgage. You need to borrow $600,000.
- a.The bank offers a 30-year mortgage with fixed monthly payments and an interest rate of 0.5% per month.What is the amount of your monthly payment if you take this loan?
- b.Alternatively, you can get a 15-year mortgage with fixed monthly payments and an interest rate of 0.4% per month.How much would your monthly payments be if you take this loan instead?
*A.1. This problem is from the Appendix to Chapter 4.
Your grandmother bought an annuity from Rock Solid Life Insurance Company for $200,000 when she retired. In exchange for the $200,000, Rock Solid will pay her $25,000 per year until she dies. The interest rate is 5%. How long must she live after the day she retired to come out ahead (that is, to get more in value than what she paid in)?
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Devry FINE 515 Week 3 Problem set Latest
week 3
Week 3 Problem Set
Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_3_Problem_Set.docx, where flastname is your first initial and you last name, and submit it to the appropriate dropbox.
Chapter 7 (pages 225–228):
1.
Your brother wants to borrow $10,000 from you. He has offered to pay you back $12,000 in a year. If the cost of capital of this investment opportunity is 10%, what is its NPV? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.
8.
You are considering an investment in a clothes distributor. The company needs $100,000 today and expects to repay you $120,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your cost of capital is 20%. What does the IRR rule say about whether you should invest?
19.
You are a real estate agent thinking of placing a sign advertising your services at a local bus stop. The sign will cost $5,000 and will be posted for one year. You expect that it will generate additional revenue of $500 per month. What is the payback period?
21.
You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $10 million. Investment A will generate $2 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.5 million at the end of the first year and its revenues will grow at 2% per year for every year after that.
- a. Which investment has the higher IRR?
- b. Which investment has the higher NPV when the cost of capital is 7%?
- c. In this case, for what values of the cost of capital does picking the higher IRR give the correct answer as to which investment is the best opportunity?
Chapter 8 (260–262)
1.
Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $20 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 40% will come from customers who switch to the new, healthier pizza instead of buying the original version.
- a.Assume customers will spend the same amount on either version.What level of incremental sales is associated with introducing the new pizza?
- b.Suppose that 50% of the customers who will switch from Pisa Pizza’s original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza.What level of incremental sales is associated with introducing the new pizza in this case?
6.
Cellular Access, Inc. is a cellular telephone service provider that reported net income of $250 million for the most recent fiscal year. The firm had depreciation expenses of $100 million, capital expenditures of $200 million, and no interest expenses.Working capital increased by $10 million. Calculate the free cash flow for Cellular Access for the most recent fiscal year.
12.
A bicycle manufacturer currently produces 300,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.50 per chain. The necessary machinery would cost $250,000 and would be obsolete after 10 years. This investment could be depreciated to zero for tax purposes using a 10-year straight-line depreciation schedule. The plant manager estimates that the operation would require $50,000 of inventory and other working capital upfront (year 0), but argues that this sum can be ignored because it is recoverable at the end of the 10 years. Expected proceeds from scrapping the machinery after 10 years are $20,000.
If the company pays tax at a rate of 35% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the chains in-house instead of purchasing them from the supplier?
Devry FINE 515 Week 4 Problem set Latest
week 4
Week 4 Problem Set
Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_4_Problem_Set.docx, where flastname is your first initial and your last name, and submit it to the appropriate dropbox.
Bonds-1.Interest on a certain issue of bonds is paid annually with a coupon rate of 8%. The bonds have a par value of $1,000. The yield to maturity is 9%. What is the current market piece of these bonds? The bonds will mature in 5 years.
Bonds-2.A certain bond has 12 years left to maturity. Interest is paid annually at a coupon rate of 10%. The bonds are currently selling for $850. What is their YTM?
Bonds-3. A certain bond pays a semiannual coupon rate at a 10% annual rate. The bond has a par value of $1,000.There are eight years to maturity. The yield to maturity is 9%. What is the current price of the bond?
Bonds-4.A particular corporate bond has a par value of $1,000. Coupon payments are $40 and are paid twice a year.Seven years are left on the life of the bond.The YTM is 9%. What is the price of the bond?
Bond-5.A given bond has 5 years to maturity. It has a face value of $1,000. It has a YTM of 5% and the coupons are paid semiannually at a 10% annual rate. What does the bond currently sell for?
Bond-6.A given bond has five years left to maturity. Interest is paid annually and the annual coupon rate is 9%. The par value of the bond is $1,000. The bond currently sells for $1,000. What is the yield to maturity?
Chapter 9 (pages 303–203):
1.
Assume Evco, Inc., has a current price of $50 and will pay a $2 dividend in 1 year, and its equity cost of capital is 15%. What price must you expect it to sell for right after paying the dividend in 1 year in order to justify its current price?
5.
NoGrowth Corporation currently pays a dividend of $2 per year, and it will continue to pay this dividend forever. What is the price per share if its equity cost of capital is 15% per year?
6.
Summit Systems will pay a dividend of $1.50 this year. If you expect Summit’s dividend to grow by 6% per year, what is its price per share if its equity cost of capital is 11%?
7.
Dorpac Corporation has a dividend yield of 1.5%. Dorpac’s equity cost of capital is 8%, and its dividends are expected to grow at a constant rate.
- a.What is the expected growth rate of Dorpac’s dividends?
- b.What is the expected growth rate of Dorpac’s share price?
12.
Procter & Gamble will pay an annual dividend of $0.65 1 year from now. Analysts expect this dividend to grow at 12% per year thereafter until the fifth year. After then, growth will level off at 2% per year. According to the dividend-discount model, what is the value of a share of Procter & Gamble stock if the firm’s equity cost of capital is 8%?
Devry FINE 515 Week 5 Problem set Latest
week 5
Week 5 Problem Set
Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_5_Problem_Set.docx, where flastname is your first initial and you last name, and submit it to the appropriate dropbox.
Chapter 10 (pages 345–348):
4.
You bought a stock one year ago for $50 per share and sold it today for $55 per share. It paid a $1 per share dividend today.
- a.What was your realized return?
- b.How much of the return came from dividend yield and how much came from capital gain?
20.
Consider two local banks. Bank A has 100 loans outstanding, each for $1 million, that it expects will be repaid today. Each loan has a 5% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $100 million outstanding, which it also expects will be repaid today. It also has a 5% probability of not being repaid. Explain the difference between the type of risk each bank faces. Which bank faces less risk? Why?
22.
Consider the following two, completely separate, economies. The expected return and volatility of all stocks in both economies is the same. In the first economy, all stocks move together—in good times all prices rise together and in bad times they all fall together. In the second economy, stock returns are independent—one stock increasing in price has no effect on the prices of other stocks. Assuming you are risk-averse and you could choose one of the two economies in which to invest, which one would you choose? Explain.
30.
What does the beta of a stock measure?
TABLE 10.6 Betas with Respect to the S&P 500 for Individual Stocks (based on monthly data for 2007–2012)
<td.com/”>salesforce.com
Company | Ticker | Industry | Equity Beta |
General Mills | GIS | Packaged Foods | 0.20 |
Consolidated Edison | ED | Utilities | 0.28 |
The Hershey Company | HSY | Packaged Foods | 0.28 |
Abbott Laboratories | ABT | Pharmaceuticals | 0.31 |
Newmont Mining | NEM | Gold | 0.32 |
Wal-Mart Stores | WMT | Superstores | 0.35 |
Clorox | CLX | Household Products | 0.39 |
Kroger | KR | Food Retail | 0.42 |
Altria Group | MO | Tobacco | 0.43 |
Amgen | AMGN | Biotechnology | 0.44 |
McDonald’s | MCD | ||
Procter & Gamble | PG | Household Products | 0.47 |
Pepsico | PEP | Soft Drinks | 0.51 |
Coca-Cola | KO | Soft Drinks | 0.54 |
Johnson & Johnson | JNJ | Pharmaceuticals | 0.59 |
PetSmart | PETM | Specialty Stores | 0.75 |
Molson Coors Brewing | TAP | Brewers | 0.78 |
Nike | NKE | Footwear | 0.91 |
Microsoft | MSFT | Systems Software | 1.01 |
Southwest Airlines | LUV | Airlines | 1.09 |
Intel | INTC | Semiconductors | 1.09 |
Whole Foods Market | WFM | Food Retail | 1.10 |
Foot Locker | FL | Apparel Retail | 1.11 |
Oracle | ORCL | Systems Software | 1.12 |
.com/”>Amazon.com | AMZN | Internet Retail | 1.13 |
GOOG | Internet Software and Services | 1.14 | |
Starbucks | SBUX | Restaurants | 1.20 |
Walt Disney | DIS | Movies and Entertainment | 1.21 |
Cisco Systems | CSCO | Communications Equipment | 1.23 |
Apple | AAPL | Computer Hardware | 1.26 |
PulteGroup | PHM | Homebuilding | 1.28 |
Dell | DELL | Computer Hardware | 1.41 |
CRM | Application Software | 1.47 | |
.homeworkminutes.com/question/view/120567/Devry-Fin515-Week-5-Problem-Set-Latest-2015-october#”>MarriottInternational | MAR | .homeworkminutes.com/question/view/120567/Devry-Fin515-Week-5-Problem-Set-Latest-2015-october#”>Hotelsand Resorts | 1.48 |
eBay | EBAY | Internet Software and Services | 1.48 |
Coach | COH | Apparel and Luxury Goods | 1.60 |
Macy’s | M | ||
Juniper Networks | JNPR | Communications Equipment | 1.71 |
Williams-Sonoma | WSM | Home Furnishing Retail | 1.72 |
Tiffany & Co. | TIF | Apparel and Luxury Goods | 1.80 |
Caterpillar | CAT | Construction Machinery | 1.85 |
Ethan Allen Interiors | ETH | Home Furnishings | 1.95 |
Autodesk | ADSK | Application Software | 2.14 |
Harley-Davidson | HOG | Motorcycle Manufacturers | 2.23 |
Advanced Micro Devices | AMD | Semiconductors | 2.24 |
Ford Motor | F | Automobile Manufacturers | 2.38 |
Sotheby’s | BID | Auction Services | 2.39 |
Wynn Resorts Ltd. | WYNN | Casinos and Gaming | 2.41 |
United States Steel | X | Steel | 2.52 |
Saks | SKS | Department Stores | 2.57 |
Source: CapitalIQ
35.
Suppose the market risk premium is 5% and the risk-free interest rate is 4%. Using the data in Table 10.6 (also shown above), calculate the expected return of investing in
- a.Starbucks’ stock.
- b.Hershey’s stock.
- c.Autodesk’s stock.
Chapter 11 (pages 390–396):
2.
You own three stocks: 600 shares of Apple Computer, 10,000 shares of Cisco Systems, and 5,000 shares of Colgate-Palmolive. The current share prices and expected returns of Apple, Cisco, and Colgate-Palmolive are, respectively, $500, $20, $100 and 12%, 10%, 8%.
- a.What are the portfolio weights of the three stocks in your portfolio?
- b.What is the expected return of your portfolio?
- c.Suppose the price of Apple stock goes up by $25, Cisco rises by $5, and Colgate-Palmolive falls by $13.What are the new portfolio weights?
- d.Assuming the stocks’ expected returns remain the same, what is the expected return of the portfolio at the new prices?
50.
Suppose Autodesk stock has a beta of 2.16, whereas Costco stock has a beta of 0.69. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, what is the expected return of a portfolio that consists of 60% Autodesk stock and 40% Costco stock, according to the CAPM?
Chapter 12 (page 431):
26.
Unida Systems has 40 million shares outstanding trading for $10 per share. In addition, Unida has $100 million in outstanding debt. Suppose Unida’s equity cost of capital is 15%, its debt cost of capital is 8%, and the corporate tax rate is 40%.
- a.What is Unida’s unlevered cost of capital?
- b.What is Unida’s after-tax debt cost of capital?
- c.What is Unida’s weighted average cost of capital?
27.
You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of 9%. However, the new business will be 25% debt financed, and you anticipate its debt cost of capital will be 6%. If its corporate tax rate is 40%, what is your estimate of its WACC?
Devry FINE 515 Week 6 Problem set Latest
Week 6
Problem Set
Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_6_Problem_Set.docx (where flastname is your first initial and your last name), and submit it to the appropriate Dropbox.
Chapter 29 (pages 983-984):
1.What inherent characteristic of corporations creates the need for a system of checks on manager behavior?
2.What are some examples of agency problems?
3.What are the advantages and disadvantages of the corporate organizational structure?
4.What is the role of the board of directors in corporate governance?
Devry FINE 515 Week 7 Problem set Latest
week 7
Week 7 Problem Set
Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_7_Problem_Set.docx (where flastname is your first initial and your last name), and submit it to the appropriate Dropbox.
Chapter 26 (page 903):
1.Answer the following questions:
- a.What is the difference between a firm’s cash cycle and its operating cycle?
- b.How will a firm’s cash cycle be affected if a firm increases its inventory, all else being equal?
- c.How will a firm’s cash cycle be affected if a firm begins to take the discounts offered by its suppliers, all else being equal?
4.The Greek Connection had sales of $32 million in 2012, and a cost of goods sold of $20 million. A simplified balance sheet for the firm appears below:
THE GREEK CONNECTION
Balance Sheet As of December 31, 2012 (in $ thousand) |
|||
Assets | Liabilities and Equity | ||
Cash
Accounts receivable Inventory |
$ 2,000
3,950 1,300 |
Accounts payable
Notes payable Accruals |
$ 1,500
1,000 1,220 |
Total current assets | $ 7,250 | Total current liabilities
Long-term debt |
$ 3,720
3,000 |
Net plant, property,
and equipment |
$ 8,500 | Total liabilities
Common equity |
$ 6,720
9,030 |
Total assets | $ 15,750 | Total liabilities and equity | $ 15,750 |
- a.Calculate The Greek Connection’s net working capital in 2012.
- b.Calculate the cash conversion cycle of The Greek Connection in 2012.
- c.The industry average accounts receivable days is 30 days.What would the cash conversion cycle for The Greek Connection have been in 2012 if it had matched the industry average for accounts receivable days?
5.Assume the credit terms offered to your firm by your suppliers are 3/5, Net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30.
Chapter 27 (page 925):
- 1.Which of the following companies are likely to have high short-term financing needs? Why?
- a.A clothing retailer
- b.A professional sports team
- c.An electric utility
- d.A company that operates toll roads
- e.A restaurant chain
- 2.Sailboats Etc.is a retail company specializing in sailboats and other sailing-related equipment. The following table contains financial forecasts as well as current (month 0) working capital levels. During which months are the firm’s seasonal working capital needs the greatest? When does it have surplus cash?
Month | ||||||||
($000) | 0 | 1 | 2 | 3 | 4 | 5 | 6 | |
Net Income | $10 | $12 | $15 | $25 | $30 | $18 | ||
Depreciation | 2 | 3 | 3 | 4 | 5 | 4 | ||
Capital Expenditures | 1 | 0 | 0 | 1 | 0 | 0 | ||
Levels of Working Capital | ||||||||
Accounts Receivable | $2 | 3 | 4 | 5 | 7 | 10 | 6 | |
Inventory | 3 | 2 | 4 | 5 | 5 | 4 | 2 | |
Accounts Payable | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
Devry FINE 515 Course Project Latest
First Course Project
The purpose of this project is to help you develop skills not only in performing the calculations behind financial analysis but interpreting the numbers as well.
You are to pick a company. You should pick one either from the industry in which you are currently working or an industry in which you are interested. You could also pick a division of a company. It is imperative to use that sufficient data about your company and that it is available. One way to do this is to pick a publicly held company. If you pick a privately held company or a division of a company, make sure that the data necessary to do a significant financial analysis is available.
If you use data that is not publicly available, be sure to talk to your manager and to make absolutely sure that revealing that data is not a problem.
You will also need to find a standard against which to compare your findings. This could be a different company in the same industry. This could also be the same company at a different time. Additionally, average or benchmark numbers are available for several industries. If you decide to use a different company in the same industry or the same company at a different time, make sure that there are enough differences between the two to make an analysis meaningful.
After you have selected a company, put yourself in the place of an analyst who has been asked to perform an analysis of the company and provide a recommendation to management.
Use ratio analysis, common size analysis, or other techniques to determine areas in which the company is doing well as well as areas that management should look at. Then, present your analysis and recommendations in the form of a paper.
A good place to start would be to perform a complete DuPont analysis of the company and compare it to the standard. The DuPont analysis might provide guidance as to what particular areas of the company should be examined next and what ratios should be calculated. If the DuPont analysis does not reveal anything useful, you might wish to calculate several of the ratios that are available to you.
Deliverable
The completed paper should be about 1,000 words long. In the paper, you do not have to explain the ratios in depth. You may assume that the reader has a basic understanding of finance and knows what ratio analysis is, although he or she might not be able to list all the ratios and how to calculate them from memory. The reader is not going to want a lot of background about financial analysis. He or she really wants information that he or she can apply to the given situation, which is the company that you have selected.
If you like, you can write the paper in the form of a memo to management. You do not have to cite your source for how to calculate the ratios. You do need to provide a reference to where you got that data not only for your subject company but for the other company or standard to which you compared your company.
- The spirit of this assignment is for you to calculate and interpret the results.The purpose is not for you to find calculations and interpretations that have been done by someone else.
- The paper is expected to conform to the standards for graduate school writing.
- The purpose of your analysis is internal evaluation.Refrain from using stock market valuation ratios.
When you have completed the project, place it in one Word document and place that document in the appropriate dropbox.
Second Project
The purpose of this project is for you to have some practice working with financial concepts in the real world. This will involve integrating some material from throughout the course. The project will also involve the development of your own approach to doing the work. The project does not provide a step-by-step procedure for you to follow.
Your task is to determine the WACC for a given firm using what you know about WACC as well as data you can find through research. Your deliverable is to be a brief report in which you state your determination of WACC, describe and justify how you determined the number, and provide relevant information as to the sources of your data.
With the help of your professor, you have selected a company for which to research and find the WACC. Your research is to be independent from any information you may find at thatswacc.com or similar sites although you might want to use such sites to provide a reasonableness check on the WACC you calculate.
Assumptions
As you recall, the formula for WACC is
r_{WACC} = (E/E D) r_{E} D/(E D) r_{D}(1-T_{C})
The formula for the required return on a given equity investment is
r_{i}= r_{f} ?_{i} * (R_{Mkt}-r_{f})
R_{Mkt}-r_{f}is the Market Risk Premium. For this project, you may assume the Market Risk Premium is 4% unless you can develop a better number.
r_{f}is the risk free rate. The YTM on 10 year US Treasury securities is a good approximation.
You may assume a corporate tax rate of 40%.
One good source for financial data for companies as well as data about their equity is.yahoo.com/”>http://finance.yahoo.com.By looking around this site, you should be able to find the market capitalization (E) as well as the ? for any publicly traded company.
There are not many places left where data about corporate bonds is still available. One of them is.morningstar.com/BondCenter”>http://finra-markets.morningstar.com/BondCenter. To find data for a particular company’s bonds, find the Quick Search feature, then be sure to specify corporate bonds and type in the name of the issuing company.This should give you a list of all of the company’s outstanding bond issues. Clicking on the symbol for a given bond issue will lead you to the current amount outstanding and the yield to maturity. You are interested in both. The total of all bonds outstanding is D in the above formula.
If you like, you can use the YTM on a bond issue that is not callable as the pre-tax cost of debt for the company.
Deliverable
Write a two or three page report that contains the following elements:
- 1.Your calculated WACC.
- 2.How data was used to calculate WACC.This would be the formula and the formula with your values substituted.
- 3.Sources for your data.
- 4.A discussion of how much confidence you have in your answer.What were the limiting assumptions that you made, if any.
Devry FINE 515 Midterm Latest
midterm
(TCO G) The DuPont Identity expresses the firm’s ROE in terms of
Question 3. Question : (TCO B) If today you put $10,000 into an account paying 10% annually, how much will there be in the account after 5 years? Show your work.
Question 4. Question : (TCO B) You take out a 5 year car loan for $20,000. The loan has a 5% annual interest rate. The payments are made monthly. What are the monthly payments? Show your work.
Question 5. Question : (TCO B) You currently have $10,000 in your retirement account. If you deposit $500 per month and the account pays 5% interest, how much will be in the account in 10 years? Show your work.
Question 6. Question : (TCO B) A homebuyer is taking out a mortgage with a balloon payment. The loan amount is $100,000 and the annual interest rate is 5%. The homebuyer will make equal monthly payments for 5 years except the last payment will include an additional payment of $20,000. How much will the equal monthly payments be? Show your work.
Question 7. Question : (TCO F) A project requires an initial cash outlay of $95,000 and has expected cash inflows of $20,000 annually for 9 years. The cost of capital is 10%. What is the project’s NPV? Show your work.
Question 8. Question : (TCO F) A project requires an initial cash outlay of $60,000 and has expected cash inflows of $15,000 annually for 8 years. The cost of capital is 10%. What is the project’s payback period? Show your work.
Question 9. Question : (TCO F) A project requires an initial cash outlay of $95,000 and has expected cash inflows of $20,000 annually for 9 years. The cost of capital is 10%. What is the project’s IRR? Show your work.
Question 10. Question : (TCO F) A project requires an initial cash outlay of $95,000 and has expected cash inflows of $20,000 annually for 9 years. The cost of capital is 10%. What is the project’s discounted payback period? Show your work.
Question 11. Question : (TCO F) Company A has the opportunity to do any, none, or all of the projects for which the net cash flows per year are shown below. The projects are not mutually exclusive. The company has a cost of capital of 15%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work. Explain your answer thoroughly.
A B C
0 -300 -100 -300
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Devry FINE 515 Full Course Latest
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