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1. During 1998, the Senbet Discount Tire Company had gross sales of $1 million. The company’s cost of goods sold and selling expenses were $300,000 and $200,000, respectively. These figures do not include depreciation. Senbet also had notes payable of $1 million. These notes carried an interest rate of 10 percent. Depreciation was $100,000. Senbet’s tax rate in 1998 was 35 percent. a. What was Senbet’s net operating income? b. What were the company’s earnings before taxes? c. What was Senbet’s net income? d. What was Senbet’s operating cash flow? 2. Consider the following cash flows on two mutually exclusive projects that require an annual return of 15 percent. Working in the financial planning department for the Bahamas Recreation Corp., you are trying to compare different investment criteria to arrive at a sensible choice of these two projects. Year Fishing Ride Deepwater New Submarine 0 _$600,000 _$1,800,000 1 270,000 1,000,000 2 350,000 700,000 3 300,000 900,000 a. Based on the discounted payback period rule, which project should be chosen? b. If your decision rule is to accept the project with a greater IRR, which project should you choose? c. Since you are fully aware of the IRR rule’s scale problem, you calculate the incremental IRR for the cash flows. Based on your computation, which project should you choose? d. To be prudent, you compute the NPV for both projects. Which project should you choose? Is it consistent with the incremental IRR rule? 3. Calgary Industries, Inc., is considering a new project that costs $25 million. The project will generate after-tax (year-end) cash flows of $7 million for five years. The company has a debt-to-equity ratio of 0.75. The cost of equity is 15 percent and the cost of debt is 9 percent. The corporate tax rate is 35 percent. It appears that the project has the same risk as that of the overall company. Should Calgary take on the project? 4. Explain what are the corporation’s advantages and disadvantages of the corporation form?
Select an organization to which you have finish access or one about which much has been written. The best reports will be able to make on business or popular press articles.
The entire debt arising from the acquisition of general capital assets under a capital lease agreement should be reported as debt of the fund that accounts for the activities of the department or function using the leased asset.
You will live at least 35 more years. Ignoring taxes, should you purchase the annuity? Base your response entirely on financial grounds.
Chambers corporation ROE is 18 percent. Their dividend payout ratio s 80 percent. The last dividend, just paid, was $2.20. If dividends are expected to grow by the company's internal growth rate indefinitely,
Discuss and explain the interlocking connections among 3 primary financial statements and explain why conventional reporting of financial data does not provide complete information upon which financial decisions can be made.
Indicate additional information on inventory valuation which an unsecured lender to Columbia Pictures would wish to obtain also any analyses the lender would wish to conduct.
Use Black-Scholes-Merton model to find out the price of a 3-month European call on stock with strike price of= $40.
What are the earnings per share and price-earning ratio before new shares are sold via the rights offering?
Determine procedure you recommend for a multinational corporation in studying exposure to political risk? What actual strategies can be used to guard against such risk?
Describe why strengthening basis benefits a short hedge and hurts a long hedge.
You borrow $5,600 to purchase a car. The ters of loan call for monthly payments for 4 years at the 5.9% rate of interest. What is the amount of each payment?
ADRs are considered an effective way for firms to improve the liquidity of their stock.
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