Blue Angel Investors has a success ratio of 10% with its venture funding. Blue Angel requires a rate of return of 20% for its portfolio of lending, and the average length on its loan is five years. If you were to apply to Blue Angel for a $100,000 loan, what is the annual percentage rate you would be required to pay for this loan?
> George Carlin, a satiric humorist, recorded a 12-minute monologue called “Filthy Words.” He began by referring to his thoughts about “the words you couldn’t say on the public airwaves” and then proceeded to list those words, repeating them over and over
> Johns-Manville Corporation is a profitable company that makes a variety of building and other products. It was a major producer of asbestos, which was used for insulation in buildings and for a variety of other uses. It has been medically proven that exc
> Sun-Diamond Growers of California is a trade association that engages in marketing and lobbying activities on behalf of its 5,000 member-growers of raisins, figs, walnuts, prunes, and hazelnuts. Sun-Diamond gave Michael Epsy, U.S. secretary of agricultur
> Papa John’s International, Inc., is the third-largest pizza chain in the United States, with more than 2,050 locations. Papa John’s adopted a new slogan—“Better Ingredients. Better Pizza.”—and applied for and received a federal trademark for this slogan.
> Leslie Neadeau was the president of T.O.N.M. Oil & Gas Exploration Corporation (TONM). Charles Lazzaro was a registered securities broker employed by Bateman Eichler, Hill Richards, Inc. (Bateman Eichler). The stock of TONM was traded in the over-the-cou
> Continental Enterprises, Inc. (Continental), had 2,510,000 shares of stock issued and outstanding. Louis E. Wolfson and members of his immediate family and associates owned in excess of 40 percent of those shares. The balance was in the hands of approxim
> McDonald Investment Company was a corporation organized and incorporated in the state of Minnesota. The principal and only place of business from which the company conducted operations was Rush City, Minnesota. More than 80 percent of the company’s asset
> Dare To Be Great, Inc. (Dare), was a Florida corporation that was wholly owned by Glenn W. Turner Enterprises, Inc. Dare offered self-improvement courses aimed at improving self-motivation and sales ability. In return for an investment of money, the purc
> James O’Hagan was a partner in the law firm Dorsey & Whitney in Minneapolis, Minnesota. Grand Metropolitan PLC (Grand Met), a company based in London, England, hired Dorsey & Whitney to represent it in a secret tender offer for the stock of the Pillsbury
> Determine what the real interest rates are in the following countries, given their nominal interest rates and inflation rates: Canada: inflation is 4.5%, and the nominal risk-free interest rate is 6.0%. Switzerland: inflation is 1.25%, and the nominal ri
> The Wall Street Journal lists forward rates for Japanese yen. Say that the current listings are: 1-month forward rate (indirect) 103.17 3-month forward rate (indirect) 102.68 6-month forward rate (indirect) 101.88 First, is the anticipated inflation rat
> Scott currently owns 500 shares of Twelve Colonies, Incorporated. Twelve Colonies has a high-payout dividend policy, and this year will pay $2.00 cash dividend on its shares selling currently at $18.00. Scott wants a low dividend policy of 2% of the stoc
> Carmen owns 300,000 shares of Wiseguy Entertainment. Wiseguy has just declared a $0.20 per share dividend on a stock selling at $25.20. What must Carmen do if she wants no cash dividends at this time, $40,000 of dividends, or $80,000 worth of dividends?
> Erik owns 2,000,000 shares of Wiseguy Entertainment. Wiseguy just declared a cash dividend of $0.05 per share. The stock is currently selling for $5.00. If Erik wants an annual “dividend income” from his stock holdings of $50,000, $100,000, or $250,000,
> Go to a web source such as Yahoo.com and find the recent dividend payment history of Coca-Cola and predict the next dividend change in size and timing. (Note: We used data from 2008-2011) Coca-Cola Company Cash Dividend History Date of Dividend Amount
> Refer to Table 17.2 and predict the next dividend using a percent change pattern, a dollar change pattern, and your expectation given the actual pattern change. PepsiCo Quarterly Cash Dividend History Table 17.2 PepsiCo Quarterly Cash Dividend Hist
> Jenny plans to sell 200 shares of ExxonMobil stock. Exxon-Mobil has just declared a $0.45 cash dividend per share payable in 40 days to registered owners 20 days from now. If on the ex-date the price of ExxonMobil is $61.55 per share, show the total proc
> Using the information in Problem 1, determine what the stock price of Atlantis Manufacturing will be after the cash dividend announcement in a world of no taxes. Assume that the current price is $47.12 per share and that the price does not change between
> Western Railroad has a dividend reinvestment program for shareholders. Over the past five years, the company has had the following share prices and the following dividends. If you started with 100 shares of stock at $20 per share and participated fully i
> Stan is expanding his business and will sell common stock for the needed funds. If the current risk-free rate is 4% and the expected market return is 12%, what is the cost of equity for Stan if the beta of the stock is a. 0.75? b. 0.90? c. 1.05? d. 1.20?
> Eastern Railroad has a dividend reinvestment program for shareholders. Over the past five years, the company has had the following share prices and the following dividends. If you started with 100 shares of stock at $46 per share and participated fully i
> Northern Railroad has announced that it will buy back 1,000,000 of its 30,000,000 shares over the next year. If the stock is selling for $23.40, what is the equivalent cash dividend that the company could pay? If you owned 300 shares of stock, how many w
> Refer to Problem 10. Now assume that Kevin bought the stock at $17.00 per share and his tax rates are 30% on dividends and 15% on capital gains. If Kevin changes the dividend policy from a low-dividend-payout policy to a high-dividend-payout policy, how
> Refer to Problem 9. Assume that Scott is now taxed at 20% on dividend distribution and 20% on capital gains. Assume also that Scott originally paid $18 for these shares. If Scott only wants to receive $200 after tax, is his wealth impacted by changing th
> Kevin currently owns 800 shares of Cylon, Incorporated. Cylon has a low-payout dividend policy, and this year will pay $0.35 cash dividend on its shares selling currently at $21.00. Kevin wants a high-dividend policy of 6% of the stock price. What will K
> Beta, Gamma, and Delta companies are similar in every way except for their capital structures. Beta is an all-equity firm with $3,600,000 of value and 100,000 shares outstanding. Gamma is a leveraged firm with the same value as Beta but $1,080,000 in deb
> Alpha Company is looking at two different capital structures, one an all-equity firm, and the other a leveraged firm with $2,000,000 of debt financing at 8% interest. The all-equity firm will have $4,000,000 value and 400,000 shares outstanding. The leve
> Air Seattle has an annual EBIT of $1,000,000, and the WACC in the unlevered firm is 20%. The current tax rate is 35%. Air Seattle will have the same EBIT forever. If the company sells debt for $2,500,000 with a cost of debt of 20%, what is the value of e
> Using the information from Problems 12 and 14 on Roxy Broadcasting, determine the size of the tax shield with a corporate tax rate of 15%, 25%, 35%, and 45% if Roxy’s capital structure is 1/3 debt-to-equity. Determine the same if the capital structure is
> Using the information from Problems 11 and 13 on Air Seattle, determine the size of the tax shield with a corporate tax rate of 15%, 25%, 35%, and 45% if Air America’s capital structure is 50/50 debt-to-equity. Problem 11: Air Seattle is looking at chan
> 1. In the summer of 2011, a budget crisis in Greece sparked occasionally violent protest demonstrations in Athens. A few weeks later, a right wing extremist in Norway bombed government buildings in Oslo and then went on a shooting spree, killing sixty-ni
> Roxy Broadcasting in Problem 12 was originally an all-equity firm with a value of $25,000,000. Roxy now pays taxes at a 40% rate. What is the value of Roxy under the 1/3 debt to equity capital structure? Under the 3/1 capital structure?
> Air Seattle from Problem 11 has lost its not-for-profit status, and the corporate tax rate is now 35%. If the value of Air Seattle was $5,000,000 as an all-equity firm, what is the value of Air Seattle under a 50/50 debt-equity ratio? Assume that the $5,
> Winthrop Enterprises is a holding company (a firm that owns all or most of some other companies’ outstanding stock). Winthrop has four subsidiaries. Each subsidiary borrows capital from the parent company for projects. Ervin Company is successful with it
> Astro Investment Bank has the following bond deals under way: Determine the net proceeds of each bond and the cost of the bonds for each company in terms of yield. The bond yield in the table is the market yield before the commission is charged. Assume t
> In Problem 7, Loan A and Loan D borrow the same amount each year. However, Loan A borrows every month, and Loan D borrows every other month (note that the borrowing for Loan D for January equals the borrowing for Loan A for January and February). If As W
> As We Go Bank offers its customers a line of credit loan in which each month’s outstanding balance requires a 12% (APR). What are the monthly interest payments required on the following loans and total interest paid for the year on thes
> Right Bank offers EAR loans of 9.38% and requires a monthly payment on all loans. What is the APR for these monthly loans? What is the monthly payment for (a) a loan of $200,000 for six years, (b) a loan of $450,000 for twelve years, or (c) a loan of
> Left Bank has a standing rate of 8% (APR) for all bank loans, and requires monthly payments. What is a monthly payment if a loan is for (a) $100,000 for five years, (b) $250,000 for ten years, or (c) $1,000,000 for 25 years? What is the effective annu
> Criss-Cross has decided that it will need to raise more than $3,000,000 in commercial paper (see Problem 17). Criss-Cross must now raise $5,000,000, and the paper will have a maturity of 182 days. If this paper has a maturity value of $50,000 and is sell
> Criss-Cross Manufacturers will issue commercial paper for a short-term cash inflow. The paper is for 91 days, has a face value of $50,000, and is anticipated to sell at 96% of par value. Criss-Cross wants to raise $3,000,000, so what is the cost of this
> 1. The following is a partial list of comments made by staffers at the meeting. To help Frank make a decision, identify the dividend policy or theory they reflect and comment on the usefulness of each. a. “What difference does it make if we pay dividends
> Use the same information from Problem 15. What if the auction bids total only 2,640,000 shares, as follows: Bidder Quantity Bid XYZ Pension Fund 1,200,000 Clark Kent Investors 500,000 Central City Insurance 400,000 Arthur Curry 300,000
> Bruce Wayne is going public with his new business. Berkman Investment Bank will be his banker and is doing a best-efforts sale with a 4% commission fee. Wayne has been authorized 5,000,000 shares for this issue. He plans on keeping 1,000,000 shares for h
> Using the information in Problem 13, what is the break-even sales percentage for Lunar Vacations? What are the proceeds to Lunar Vacations and Astro Investment Bankers at the break-even sales percentage?
> Astro Investment Bankers offers Lunar Vacations the following options on its initial public sale of equity: (a) a best-efforts arrangement whereby Astro will keep 2.5% of the retail sales or (b) a firm-commitment arrangement of $10,000,000. Lunar plans
> Rawlings needs to raise $40,000,000 for its new manufacturing plant in Jamaica. Berkman Investment Bank will sell the bond for a commission of 2.5%. The market is currently yielding 7.5% on twenty-year zero-coupon bonds. If Rawlings wants to issue a zero
> Berkman Investment Bank has the following bond deals under way: Determine the net proceeds of each bond and the cost of the bonds for each company in terms of yield. The bond yield in the table is the market yield before the commission is charged. Assume
> Lunar Vacations needs to raise $6,000,000 for its new project (a golf course on the moon). Astro Investment Bank will sell the bond for a commission of 2.5%. The market is currently yielding 7.5% on twenty-year semiannual bonds. If Lunar wants to issue a
> Calculate the current ratio, quick ratio, and cash ratio for Tyler Toys for 2013 and 2014. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? Tyler Toys, Inc. Income Statement for Y
> Prepare common-size income statements for Wal-Mart and Starbucks using the January 2014 information for Walmart and your new pro forma September 2013 information for Starbucks provided in Problems 5 and 6. Which company is doing a better job of getting s
> 1. Why should GESS expect to pay a higher rate of interest if it borrows $4,000,000 rather than $2,000,000? 2. Estimate earnings per share for Plan A and Plan B at EBIT levels of $800,000, $1,000,000 and $1,200,000. 3. How do taxes impact your findings i
> Below are abbreviated income statements for Starbucks. The year ending September 30, 2013, included a large nonrecurring loss of $2,784 (million). Redo the 2013 income statement removing this nonrecurring loss from the SG&A + Other category and recal
> Below is an abbreviated income statement for Wal-Mart. Predict the net income for the period ending January 31, 2015, by determining the growth rates of sales, COGS, SG&A, and interest expense. Use a tax rate of 37%. Walmart Inc. Abbreviated Inco
> Construct the Barron Pizza Inc. balance sheet statement for December 31, 2015, with the following information: Retained earnings: …………………………………………………........ $43,743 Accounts payable: ………...………...………...………...………......... $74,633 Accounts receivable: ………
> Fill in the missing information on the annual Balance Sheets Statements for Barron Pizza Inc.
> Construct the Barron Pizza Inc. income statement for the year ending 2015 with the following information: Shares outstanding: ………...………...………...……...………...………... 16,740,000 Tax rate: ………...………...………...………...………...………...………...………...37.5% Interest expense:
> Go to a Web site such as Yahoo.com and find the financial statements of General Motors (GM) and Ford Motor Company (F). Compare these two companies using the following financial ratios: times interest earned, current ratio, asset turnover, financial leve
> Go to a Web site such as Yahoo.com and find the financial statements of Disney (DIS) and McDonald’s (MCD). Compare these two companies using the following financial ratios: times interest earned, current ratio, asset turnover, financial leverage, profit
> Go to a Web site such as Yahoo.com and find the sales, net income, total assets, and total equity of the following five actively traded companies: Microsoft (MSFT), Boeing (BA),Wal-Mart (WMT), Procter and Gamble (PG), and Waste Management (WMI). Use the
> For the following firms, find the return on equity using the three components of the DuPont identity: operating efficiency, as measured by the profit margin (net income/sales); asset management efficiency, as measured by asset turnover (sales/total asset
> Calculate the profit margin, return on assets, and return on equity for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? Tyler Toys, Inc. Income Sta
> 1.The 1-year Treasury bill rates for 2002 through 2006 are given below: Year 2002 2.00% 2003 1.24% 2004 1.89% 2005 3.62% 2006 4.94% How much interest did MR Venture Capital receive each year? What was the average interest rate
> Calculate the inventory turnover, days’ sales in inventory, receivables turnover, days’ sales in receivables, and total asset turnover ratios for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change i
> Calculate the debt ratio, times interest earned ratio, and cash coverage ratio for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? Tyler Toys, Inc.
> Fill in the missing numbers on the following annual income statements for Barron Pizza Inc.
> Myers and Associates, a famous law office in California, bills it clients on the first of each month. Clients pay in the following fashion: 40% pay at the end of the first month, 30% pay at the end of the second month, 20% pay at the end of the third mon
> Rian Company had a target of fifteen days for its payment (accounts payable) cycle. What would the ending balance in the accounts payable account need to be to reach this target (holding all other accounts the same)? 2014 Selected Income Statement I
> Calculate Rian Company’s average accounts payable cycle. 2014 Selected Income Statement Items for Rian Company Cash Sales ………... $298,000 Credit Sales ………... $672,000 Total Sales ……&hell
> Rian Company had a target of twenty days for the collection cycle for the year 2014. If total sales had remained at $970,000, how much of the sales revenue would have needed to be cash sales for the company to meet the collection goal? 2014 Selected I
> What is the average collection cycle for Rian Company? 2014 Selected Income Statement Items for Rian Company Cash Sales ………... $298,000 Credit Sales ……… $672,000 Total Sales ………... $970
> Find the average production cycle for Rian Company. 2014 Selected Income Statement Items for Rian Company Cash Sales ………... $298,000 Credit Sales ……… $672,000 Total Sales ………... $970,00
> Stewart and Company currently has a production cycle of forty days, a collection cycle of twenty days, and a payment cycle of fifteen days. What are Stewart’s current business operating cycle and cash conversion cycle? If Stewart and Company wants to red
> 1. Cranston’s Common Size Income Statements and Balance Sheets for 2013 and 2012 are given below. Prepare common size statements for 2014. 2. Complete the 2014 table of financial ratios for Cranston. 3. Use the common size statements and the ratio analys
> Working capital investment is 25% of the anticipated first year sales for Wally’s Waffle House. The first-year sales are currently projected at $4,300,000. The incremental cash flow (not including working capital investment) is Initial cash flow = $13,7
> Farbuck’s Tea Shops is thinking about opening another tea shop. The incremental cash flow for the first five years is as follows: Initial capital cost = $3,500,000 Operating cash flow for each year = $1,000,000 Recovery of capital assets after five year
> It turns out that the marketing manager in Problem 15 has underestimated the zen-zen market. The zen-zens are a smash, and current estimates are that the company will sell 8 million of them per year. Should the inventory manager simply double the EOQ ord
> Tinnendo Inc. believes it will sell 4 million zen-zens, an electronic game, this coming year (note that this figure is for annual sales). The inventory manager plans to order zen-zens forty times over the next year. The carrying cost is $0.03 per zen-zen
> As manager of Fly-by-Night Airlines, you decide to allow customers 90 days to pay their bills. To encourage early payment, though, you allow them to reduce their bills by 1.5% if paid within the first 30 days. At what implied effective annual interest ra
> Screendoor Inc. is a credit-screening consulting firm. Screendoor advises Tennindo Inc. (from Problem 11) that it can offer a credit-screening device that is 90% accurate and costs $5.00 per customer to apply. Using the data in Problem 11, determine whet
> Tennindo Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 4,000 cash-paying customers and makes a profit of $60 per unit. Tennindo wants to expand its customer base by allowing customers to buy on credit.
> Myers and Associates (from Problem 9) has hired a new accountant, who promises to increase the speed of payment by clients. The new collection times will be 60% at the end of the first month, 25% at the end of the second month, and 10% at the end of the
> Kolman Kampers has a production cycle of thirty-five days, a collection cycle of twenty-one days, and payment cycle of fourteen days. What are Kolman’s business operating cycle and cash conversion cycle? If Kolman reduces the production cycle by one week
> Given the income statement below for National Beverage Company for 2013, and the sales forecast from Problem 1, prepare a pro forma income statement for 2014. National Beverage Company Income Statement for 2013
> 1. Determine Cranston’s average production cycles for 2013 and 2014. 2. Determine Cranston’s average collection cycles for 2013 and 2014. Assume that all sales are credit sales. 3. Determine Cranston’s average payment cycles for 2013 and 2014. 4. Using y
> California Cement Company anticipates the following fourth-quarter sales for 2014: $1,800,000 (October), $1,600,000 (November), and $2,100,000 (December). It posted the following sales figures for the third quarter of 2014: $1,900,000 (July), $2,050,000
> National Beverage Company anticipates the following first-quarter sales for 2015: $1,800,000 (January), $1,600,000 (February), and $2,100,000 (March). It posted the following sales figures for the last quarter of 2014: $1,900,000 (October), $2,050,000 (N
> What is an economic order quantity? What cost does it attempt to minimize?
> For the prior three years, sales for California Cement Company have been $20,011,000 (2011), $21,167,000 (2012), and $22,923,000 (2013). CCC uses the prior two year’s average growth rate (i.e. the geometric mean) to predict the coming year’s sales. What
> In a pro forma income statement, why would a finance manager make changes in the prior year’s percentages for different line items? Give an example of a line item that you would expect to vary in percentage every year as sales forecasts grow.
> How can a company “encourage” its slow-paying customers to pay their outstanding bills?
> Why can excess cash be an opportunity cost for a company?
> What is the difference between a secured and an unsecured loan?
> Why should a company attempt to speed up its receivables and slow down its payables?
> Why should a company be concerned about a change in future exchange rates if it has already delivered and sold product in a foreign country?
> Why are currency exchange rates constantly changing over time?
> What are some of the production costs that are tied to the sales forecast?
> Is it better to calculate the net present value of a foreign project in the foreign currency or in the domestic currency?
> Does a stock split provide an increase in wealth for a shareholder? If yes how? If no why not?
> California Cement Company Balance Sheet for the Year Ending 2013 Current Assets Cash ………………………………… $1,447,000 Marketable Securities …………... 1,129,00
