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Your consulting firm was recently hired to improve the performance of Shin-Soenen Inc - $3.29

4. Your consulting firm was recently hired to improve the performance of Shin-Soenen Inc, which is highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you want to determine the firm’s cash conversion cycle. Using the following information and a 365-day year, what is the firm’s present cash conversion cycle?

Average inventory = $75,000

Annual sales = $600,000

Annual cost of goods sold = $360,000

Average accounts receivable = $160,000

Average accounts payable = $25,000

a. 120.6 days

b. 126.9 days

c. 133.6 days

d. 140.6 days

e. 148.0 days

Your boss, Sally Maloney, treasurer of Fred Clark Enterprises (FCE), asked you to help her estimate - $3.29

5. Your boss, Sally Maloney, treasurer of Fred Clark Enterprises (FCE), asked you to help her estimate the intrinsic value of the company's stock. FCE just paid a dividend of $1.00, and the stock now sells for $15.00 per share. Sally asked a number of security analysts what they believe FCE's future dividends will be, based on their analysis of the company. The consensus is that the dividend will be increased by 10% during Years 1 to 3, and it will be increased at a rate of 5% per year in Year 4 and thereafter. Sally asked you to use that information to estimate the required rate of return on the stock, rs, and she provided you with the following template for use in the analysis.

Sally told you that the growth rates in the template were just put in as a trial, and that you must replace them with the analysts' forecasted rates to get the correct forecasted dividends and then the estimated TV. She also notes that the estimated value for rs, at the top of the template, is also just a guess, and you must replace it with a value that will cause the Calculated Price shown at the bottom to equal the Actual Market Price. She suggests that, after you have put in the correct dividends, you can manually calculate the price, using a series of guesses as to the Estimated rs. The value of rs that causes the calculated price to equal the actual price is the correct one. She notes, though, that this trial-and-error process would be quite tedious, and that the correct rs could be found much faster with a simple Excel model, especially if you use Goal Seek. What is the value of rs?

a. 11.84%

b. 12.21%

c. 12.58%

d. 12.97%

e. 13.36%

 

You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The company i - $9.50

Course Project Part II

Introduction

You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The company is considering a capital investment in a new machine and you are in charge of making a recommendation on the purchase based on (1) a given rate of return of 15% (Task 4) and (2) the firm’s cost of capital (Task 5).

Task 4. Capital Budgeting for a New Machine

A few months have now passed and AirJet Best Parts, Inc. is considering the purchase on a new machine that will increase the production of a special component significantly. The anticipated cash flows for the project are as follows:

Year 1             $1,100,000

Year 2             $1,450,000

Year 3             $1,300,000

Year 4             $950,000

You have now been tasked with providing a recommendation for the project based on the results of a Net Present Value Analysis. Assuming that the required rate of return is 15% and the initial cost of the machine is $3,000,000.

1-      What is the project’s IRR? (10 pts)

2-      What is the project’s NPV? (15 pts)

3-Should the company accept this project and why (or why not)? (5 pts)

4-Explain how depreciation will affect the present value of the project.  (10 pts)

5-Provide examples of at least one of the following as it relates to the project: (5 pts each)

  1. Sunk Cost
  2. Opportunity cost
  3. Erosion

6-Explain how you would conduct a scenario and sensitivity analysis of the project. What would be some project-specific risks and market risks related to this project? (20 pts)

Task 5: Cost of Capital

AirJet Best Parts Inc. is now considering that the appropriate discount rate for the new machine should be the cost of capital and would like to determine it. You will assist in the process of obtaining this rate.

  1. Compute the cost of debt. Assume AirJet Best Parts Inc. is considering issuing new bonds. Select current bonds from one of the main competitors as a benchmark. Key competitors include Raytheon, Boeing, Lockheed Martin, and the Northrop Grumman Corporation.

    1. What is the YTM of the competitor’s bond? You may use a number of sources, but we recommend Morningstar. Find the YTM of one 15 or 20 year bond with the highest possible creditworthiness. You may assume that new bonds issued by AirJet Best Parts, Inc. are of similar risk and will require the same return. (5 pts)

    2. What is the after-tax cost of debt if the tax rate is 34%? (5 pts)

    3. Explain what other methods you could have used to find the cost of debt for AirJet Best Parts Inc.(10 pts)

    4. Explain why you should use the YTM and not the coupon rate as the required return for debt. (5 pts)

    5. Compute the cost of common equity using the CAPM model. For beta, use the average beta of three selected competitors. You may obtain the betas from Yahoo Finance. Assume the risk free rate to be 3% and the market risk premium to be 4%.

      1. What is the cost of common equity? (5 pts)

      2. Explain the advantages and disadvantages to use the CAPM model as the method to compute the cost of common equity. Compare and contrast this method with the dividend growth model approach. (10 pts)

      3. Compute the cost of preferred equity assuming the dividend paid for preferred stock is $2.93 and the current value of the stock is $50 per share.

        1. What is the cost of preferred equity? (5 pts)

        2. Is there any other method to compute this cost? Explain. (5 pts)

        3. Assuming that the market value weights of these capital sources are 30% bonds, 60% common equity and 10% preferred equity, what is the weighted cost of capital of the firm? (10 pts)

        4. Should the firm use this WACC for all projects? Explain and provide examples as appropriate. (10 pts)

        5. Recompute the net present value of the project based on the cost of capital you found. Do you still believe that your earlier recommendation for accepting or rejecting the project was adequate? Why or why not? (5 pts)

You are renowned business guru and motivational speaker Mai Biz. You have been contracted by a prest - $5.29

ECO 415 Week 4 Hello, I'm Your Motivational Speaker

Individual Hello, I’m Your Motivational Speaker

You are renowned business guru and motivational speaker Mai Biz. You have been contracted by a prestigious national business organization to deliver a two part seminar on a couple of today’s hottest business topics: competitive advantage and international business.

Create a full 1,750- to 2,100-word transcript of your planned speech to meet the organization’s request.

Address the following questions for each topic:

Topic 1: Achieving Competitive Advantage

How does the creation of value lead to competitive advantage?

How may a firm achieve competitive advantage? Consider strategies of cost leadership, benefit leadership, and degrees of focus.

How does the price elasticity of demand affect a firm’s strategic positioning for competitive advantage?

What factors and strategies allow a firm to sustain competitive advantage? Cite at least one real life example of success and one real life example of failure in your explanation.

Topic 2: International Business

What additional risks do multinational corporations face, and what additional opportunities do they enjoy when compared with domestic firms?

What strategies may a multinational corporation use to best take advantage of the opportunities discussed above?

What strategies may a multinational corporation use to best mitigate the risks discussed above?

How does achieving competitive advantage at an international level differ from achieving competitive advantage at a domestic level? How may a firm strategically position itself for international competitive advantage? Cite at least one example or strategy specific to international business.

You are on the staff of Camden Inc. The CFO believes project acceptance should be based on the NPV, - $3.29

4. You are on the staff of Camden Inc. The CFO believes project acceptance should be based on the NPV, but Steve Camden, the president, insists that no project should be accepted unless its IRR exceeds the project’s risk-adjusted WACC. Now you must make a recommendation on a project that has a cost of $15,000 and two cash flows: $110,000 at the end of Year 1 and -$100,000 at the end of Year 2. The president and the CFO both agree that the appropriate WACC for this project is 10%. At 10%, the NPV is $2,355.37, but you find two IRRs, one at 6.33% and one at 527%, and a MIRR of 11.32%. Which of the following statements best describes your optimal recommendation, i.e., the analysis and recommendation that is best for the company and least likely to get you in trouble with either the CFO or the president?

a. You should recommend that the project be rejected because its NPV is negative and its IRR is less than the WACC.

b. You should recommend that the project be rejected because, although its NPV is positive, it has an IRR that is less than the WACC.

c. You should recommend that the project be accepted because (1) its NPV is positive and (2) although it has two IRRs, in this case it would be better to focus on the MIRR, which exceeds the WACC. You should explain this to the president and tell him that the firm’s value will increase if the project is accepted.

d. You should recommend that the project be rejected. Although its NPV is positive it has two IRRs, one of which is less than the WACC, which indicates that the firm’s value will decline if the project is accepted.

e. You should recommend that the project be rejected because, although its NPV is positive, its MIRR is less than the WACC, and that indicates that the firm’s value will decline if it is accepted.

 

XECO 212 Week 9 - $9.95

Week 9

Final Project: A New House – Decision

  • Review the final project criteria in Appendix A.
  • Write a 1,750- to 2,450-word word paper in which you decide whether to purchase a house.
    • Discuss which principles of economics directly relate to your purchasing decision.
    • Compare the marginal benefits and the marginal costs associated with your purchasing decision.
    • Explain how the strength of the economy as a whole affected the marginal benefits and the marginal costs associated with that decision.
    • Consider the roles of the domestic economy and international trade in your assessment of the strength of the economy.
    • Determine what situations or conditions could have led you to make a different decision.
  • Assume for this project that purchasing a new home is a major decision requiring a substantial financial outlay where the wrong decision has long-term financial consequences.
  • Use three to five references in your paper.
  • Format your paper according to APA guidelines.
  • Post your paper as an attachment.

Week 9 Capstone DQ

  • In your own words, using the 10 Principles of Economics outlined in Ch. 1 of Mankiw’s Principles of Economics, prepare a 200- to 300-word response to the following questions: How can each of the 10 principles be applied in an example or experience with which you are familiar? How do you intend to use your newfound knowledge in future economic decisions?

XECO 212 Week 8 - $9.95

Week 8

CheckPoint: International Trade Debate

  • Post a 250- to 300-word response to the following debate topic: The United States must place high tariffs and use quotas to restrict trade with foreign countries.
  • Consider the following issues:
  • The strength of the dollar on domestic and global economies
  • Benefits from tariffs or quotas
  • Losses from tariffs or quotas

Assignment: International Trade Simulation

  • Complete the International Trade Simulation.
  • Write a 1,050- to 1,250-word report advising the President of Rodamia making recommendations for international trade. Address the following:
  • List at least one advantage and one limitation of international trade you encountered in the simulation.
  • Define absolute and comparative advantage in your own words.
  • Explain how absolute and comparative advantages were used in your simulation.
  • Describe the influences affecting foreign exchange rates.
  • Format your report according to APA guidelines.
  • Post your assignment as an attachment.

 

XECO 212 Week 7 - $9.95

Week 7

CheckPoint: A New House – Economy

The difficulties of the economy affect many of the decisions you make as a consumer. No more so than when you are buying a house. The health of the economy is a factor you must consider when buying a house. Sometimes the economy favors sellers and at other times it favors buyers. This CheckPoint helps you refine your decision to buy a house; it prepares you to explain in your final project how the strength of the economy, government spending, and taxes affect the marginal costs and benefits of your decision.

  • Consider the role of government bodies that affect the strength of the economy.
  • Assume for this CheckPoint that purchasing a new home is a major decision requiring a substantial financial outlay where the wrong decision has long-term financial consequences.
  • Submit a 250- to 300-word response addressing the following points:
  • Explain how the strength of the economy as a whole could affect the marginal benefits and the marginal costs associated with a decision to purchase a home.
  • How does the removal of the tax deduction on mortgage interest affect the housing market?

Week 7 DQs

  • Post your response to the following: How does the federal government implement its fiscal policies? Given economic conditions today, do you suggest expansionary fiscal policy or contractionary fiscal policy? How would your suggestions affect production and employment? Why?
  • Post your response to the following: Assume the government is running a budget deficit. Should the government raise taxes to balance the budget? Should the government decrease spending to balance the budget? What are the pros and cons of each action?

XECO 212 Week 6 - $9.95

Week 6

CheckPoint: Money

  • Submit a 250- to 300-word response addressing the following points:

  • Money acts as a unit of account, medium of exchange, or a store of value. Describe each of these different functions.
  • Provide an example of your use of money in each of these different functions.

Assignment: Money Train Multimedia Activity

  • Compete the Money Train Multimedia Activity.
  • Post your three responses as an attachment.


XECO 212 Week 5 - $9.95

Week 5

CheckPoint: A New House – Risks and Benefits

The government and the fiscal policy it implements play a large role in the housing market. In this CheckPoint, you examine how government policy has consequences for you and the decision to buy a house. This helps you consider situations and alternative decisions in your final project.

  • Assume for this CheckPoint that purchasing a new home is a major decision requiring a substantial financial outlay where the wrong decision has long-term financial consequences.
  • Evaluate the health of the housing market for the next two years by researching forecasts for mortgage rates, housing starts, and housing prices. The following Web sites provide a starting place for your research:
  • Mortgage rates: http://www.realtor.org
  • Housing starts: http://www.nahb.org
  • Housing prices: http://www.mbaa.org
  • Submit a 250- to 300-word response addressing the following questions:
  • Which government bodies influence national fiscal policies that potentially affect the housing market?
  • What are some national fiscal policies that can affect mortgage rates, housing starts, and housing prices? Be sure to provide specific examples.
  • What is your recommendation as to the risks and benefits of purchasing a home based on these considerations?

Week 5 DQs

  • What is the relationship between GDP and the business cycle? How can you use information about the business cycle when making a decision about a large purchase?
  • What is inflation? How do interest rates affect inflation? What are the different types of unemployment? Which of these has the most impact on the economy? Explain.