31 Dec Suppose the exchange

FIN534 Week 1 Discussion

Week 1 Discussion 1

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“An Overview of Financial Management” Please respond to the following:

* From the e-Activity, examine ethical behavior within firms in relation to financial management. Provide two (2) examples of companies that have been guilty of ethics-based malfeasance related to financial management and determine why their comeuppance was deserved.

* From the scenario, recommend two (2) actions that Trevose Fitness Center (TFC) could take in order to raise capital that will, in turn, enable it to reach its expansion goals. Defend your response. Support your recommendation with two (2) real-world examples of successful implementations of these actions.

FIN534 Week 2 Discussion

Week 2 Discussion 1

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“Analysis of Financial Statements” Please respond to the following:

* From the e-Activity, determine why it is sometimes misleading to compare a company’s financial ratios with those of other firms that operate within the same industry. Support your response with one (1) example from your research.

* From the scenario, determine two (2) strategies that TFC could utilize to reach its expansion goals. You may, for example, consider your analysis of TFC’s financial statements, as well as your knowledge of TFC’s excessive cash position. Provide a rationale for your response.

FIN534 Week 3 Discussion

Week 3 Discussion 1

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“Time Value of Money and Bond Valuation” Please respond to the following:

Examine the concept of time value of money in relation to corporate managers. Propose two (2) methods in which time value of money can help corporate managers in general.

Examine the pros and cons of a sinking fund from the viewpoint of both a firm and its bondholders. Determine the fundamental manner in which this knowledge could be helpful to a financial manager. Provide a rationale for your response.

FIN534 Week 4 Discussion

Week 4 Discussion 1

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“Risk and Return” Please respond to the following:

* From the e-Activity, determine whether stock prices are affected more by long-term or short-term performance. Provide one (1) example of the effect that supports your claim.

* From the scenario, value a share of TFC’s stock using a growth model method and compare that value to the current trading price of a share of TFC. Determine whether the stock is undervalued or overvalued. Provide a rationale for your response.

FIN534 Week 5 Discussion

Week 5 Discussion 1

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“Financial Options and Weighted Average Cost of Capital (WACC)” Please respond to the following:

Determine two to three (2-3) methods of using stocks and options to create a risk-free hedge portfolio. Support your answer with examples of these methods being used to create a risk-free hedge portfolio.

* From the scenario, create a unique hypothetical weighted average cost of capital (WACC) and rate of return. Recommend whether or not the company should expand, and defend your position.

FIN534 Week 6 Discussion

Week 6 Discussion 1

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“Capital Budgeting and Risk Analysis” Please respond to the following:

* From the e-Activity, analyze the reasons why the short-term project that you have chosen might be ranked higher under the NPV criterion if the cost of capital is high, while the long-term project might be deemed better if the cost of capital is low. Determine whether or not changes in the cost of capital could ever cause a change in the internal rate of return (IRR) ranking of two (2).

* From the scenario, take a position for or against TFC’s decision to expand to the West Coast. Provide a rationale for your response in which you cite at least two (2) capital budgeting techniques (e.g., NPV, IRR, Payback Period, etc.) that you used to arrive at your decision.

FIN534 Week 7 Discussion

Week 7 Discussion 1

“Financial Planning and Agency Conflicts” Please respond to the following:

* From the scenario, cite your forecasting conclusions that support TFC’s decision to expand to the West Coast market. Speculate as to whether or not the agency conflict discussed in the scenario could become a roadblock to your conclusions. Provide a rationale for your response.
* From the mini case, recommend two (2) desired characteristics of a board of directors. Provide support for your response, citing the ways in which these characteristics usually lead to effective corporate governance.

FIN534 Week 8 Discussion

Week 8 Discussion 1

“Distributions to Shareholders and Capital Structure Decisions” Please respond to the following:

* From the e-Activity, contrast the differences between a stock dividend and a stock split. Imagine that you are a stockholder in a company. Determine whether you would prefer to see the company that you researched declare a 100% stock dividend or declare a 2-for-1 split. Provide support for your answer with one (1) real-world example of your preference.
* From the scenario, examine the dividend rate that TFC is paying in order to determine if the company should receive a rate adjustment. Suggest whether TFC’s dividends should either (1) stay the same; (2) be increased; (3) or go down. Provide a rationale for your response.

FIN534 Week 9 Discussion

Week 9 Discussion 1

“Working Capital Management” Please respond to the following:

Examine the key reasons why a business may not want to hold too much or too little working capital. Provide examples that illustrate the consequences of either situation.
* From the scenario, analyze TFC’s cash budget to determine key methods in which the budget may be optimized (e.g., by renegotiating terms and conditions on some of its payables, etc.). If you believe that there is room for improvement, recommend key strategies for TFC to use in order to optimize its cash budget. If you do not believe that this is the case, provide a rationale for your response.

FIN534 Week 10 Discussion

Week 10 Discussion 1

“Multinational Financial Management”Please respond to the following:

* From the e-Activity, determine key reasons why a multinational corporation might decide to borrow in a country such as Brazil, where interest rates are high, rather than in a country like Switzerland, where interest rates are low. Provide support for your rationale.
* From the scenario, select two (2) potential international markets in which TFC may wish to do business. Compare the currency markets of the two (2) countries you have chosen with that of the U.S. dollar. Based on currency considerations only, recommend whether or not TFC should expand to the international markets that you have chosen.

FIN534 Week 5 Midterm Exam Part 1

Question 1

2 out of 2 points

Which of the following statements is CORRECT?

Question 2

2 out of 2 points

Which of the following statements is CORRECT?

Question 3

2 out of 2 points

Which of the following statements is CORRECT?

Question 4

2 out of 2 points

Cheers Inc. operates as a partnership. Now the partners have decided to convert the business into a regular corporation. Which of the following statements is CORRECT?

Question 5

2 out of 2 points

Which of the following statements is CORRECT?

Question 6

2 out of 2 points

Money markets are markets for

Question 7

2 out of 2 points

Which of the following statements is CORRECT?

Question 8

2 out of 2 points

Which of the following statements is CORRECT?

Selected Answer:

Correct Capital market instruments include both long-term debt and common stocks.

Correct Answer:

Correct Capital market instruments include both long-term debt and common stocks.

Question 9

2 out of 2 points

Which of the following statements is CORRECT?

Question 10

2 out of 2 points

Which of the following statements is CORRECT?

Question 11

2 out of 2 points

The LeMond Corporation just purchased a new production line. Assume that the firm planned to depreciate the equipment over 5 years on a straight-line basis, but Congress then passed a provision that requires the company to depreciate the equipment on a straight-line basis over 7 years. Other things held constant, which of the following will occur as a result of this Congressional action? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

Question 12

2 out of 2 points

Which of the following statements is CORRECT?

Question 13

0 out of 2 points

Which of the following statements is CORRECT?

Question 14

2 out of 2 points

Which of the following statements is CORRECT?

Question 15

2 out of 2 points

Which of the following statements is CORRECT?

Question 16

2 out of 2 points

Danielle’s Sushi Shop last year had (1) a negative net cash flow from operations, (2) a negative free cash flow, and (3) an increase in cash as reported on its balance sheet. Which of the following factors could explain this situation?

Question 17

2 out of 2 points

Assume that Congress recently passed a provision that will enable Barton’s Rare Books (BRB) to double its depreciation expense for the upcoming year but will have no effect on its sales revenue or tax rate. Prior to the new provision, BRB’s net income after taxes was forecasted to be $4 million. Which of the following best describes the impact of the new provision on BRB’s financial statements versus the statements without the provision? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

Question 18

0 out of 2 points

If a bank loan officer were considering a company’s request for a loan, which of the following statements would you consider to be CORRECT?

Question 19

2 out of 2 points

You observe that a firm’s ROE is above the industry average, but its profit margin and debt ratio are both below the industry average. Which of the following statements is CORRECT?

Question 20

2 out of 2 points

Companies A and C each reported the same earnings per share (EPS), but Company A’s stock trades at a higher price. Which of the following statements is CORRECT?

Question 21

2 out of 2 points

Which of the following would, generally, indicate an improvement in a company’s financial position, holding other things constant?

Question 22

2 out of 2 points

Which of the following statements is CORRECT?

Question 23

2 out of 2 points

Which of the following statements is CORRECT?

Correct If a firm increases its sales and cost of goods sold while holding its inventories constant, then, other things held constant, its inventory turnover ratio will increase.

Question 24

2 out of 2 points

Companies Heidee and Leaudy are virtually identical in that they are both profitable, and they have the same total assets (TA), Sales (S), return on assets (ROA), and profit margin (PM). However, Company Heidee has the higher debt ratio. Which of the following statements is CORRECT?

Question 25

2 out of 2 points

The Cavendish Company recently issued new common stock and used the proceeds to pay off some of its short-term notes payable. This action had no effect on the company’s total assets or operating income. Which of the following effects would occur as a result of this action?

FIN534 Week 5 Midterm Exam Part 2

Question 1

2 out of 2 points

A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT?

Question 2

2 out of 2 points

You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment?

Question 3

2 out of 2 points

A $150,000 loan is to be amortized over 6 years, with annual end-of-year payments. Which of these statements is CORRECT?

Question 4

2 out of 2 points

Which of the following statements regarding a 20-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?

Question 5

2 out of 2 points

You are considering two equally risky annuities, each of which pays $15,000 per year for 20 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT?

Question 6

2 out of 2 points

Your bank offers a 10-year certificate of deposit (CD) that pays 6.5% interest, compounded annually. If you invest $2,000 in the CD, how much will you have when it matures?

Question 7

2 out of 2 points

Which of the following statements is NOT CORRECT?

Question 8

2 out of 2 points

Which of the following statements is CORRECT?

Question 9

2 out of 2 points

Which of the following statements is CORRECT?

Question 10

2 out of 2 points

A 10-year bond with a 9% annual coupon has a yield to maturity of 8%. Which of the following statements is CORRECT?

Question 11

2 out of 2 points

Which of the following statements is CORRECT?

Question 12

2 out of 2 points

An 8-year Treasury bond has a 10% coupon, and a 10-year Treasury bond has an 8% coupon. Both bonds have the same yield to maturity. If the yield to maturity of both bonds increases by the same amount, which of the following statements would be CORRECT?

Question 13

2 out of 2 points

Which of the following statements is CORRECT?

Question 14

2 out of 2 points

Assume that the risk-free rate is 6% and the market risk premium is 5%. Given this information, which of the following statements is CORRECT?

Question 15

2 out of 2 points

Assume that the risk-free rate is 5%. Which of the following statements is CORRECT?

Question 16

2 out of 2 points

Which of the following statements is CORRECT?

Question 17

2 out of 2 points

Recession, inflation, and high interest rates are economic events that are best characterized as being

Question 18

2 out of 2 points

Which of the following statements is CORRECT? (Assume that the risk-free rate is a constant.)

Question 19

2 out of 2 points

Which of the following statements is CORRECT?

Question 20

2 out of 2 points

Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

Question 21

2 out of 2 points

Which of the following statements is CORRECT, assuming stocks are in equilibrium?

Question 22

2 out of 2 points

A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 10.1%, and the constant growth rate is g = 4.0%. What is the current stock price?

Question 23

2 out of 2 points

Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

Question 24

2 out of 2 points

Stock X has the following data. Assuming the stock market is efficient and the stock is in equilibrium, which of the following statements is CORRECT?

Question 25

2 out of 2 points

If a firm’s expected growth rate increased then its required rate of return would

FIN534 Week 2 Homework Assignment Set 1

FIN 534 – Homework Set #1

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 through 4:

Assume that you recently graduated and have just reported to work as an investment advisor at the one of the firms on Wall Street. You have been presented and asked to review the following Income

Statement and Balance Sheets of one of the firm’s clients. Your boss has developed the following set of questions you must answer.

Income Statements and Balance Sheet

Balance Sheet 2012 2013 2014

Cash $9,000 $7,282 $14,000

Short-term investments 48,600 20,000 71,632

Accounts receivable 351,200 632,160 878,000

Inventories 715,200 1,287,360 1,716,480

Total current assets $1,124,000 $1,946,802 $2,680,112

Gross fixed assets 491,000 1,202,950 1,220,000

Less: Accumulated depreciation 146,200 263,160 383,160

Net fixed assets $344,800 $939,790 $836,840

Total assets $1,468,800 $2,886,592 $3,516,952

Liabilities and Equity

Accounts payable $145,600 $324,000 $359,800

Notes payable 200,000 720,000 300,000

Accruals 136,000 284,960 380,000

Total current liabilities $481,600 $1,328,960 $1,039,800

Long-term debt 323,432 1,000,000 500,000

Common stock (100,000 460,000 460,000 1,680,936

shares)

Retained earnings 203,768 97,632 296,216

Total equity $663,768 $557,632 $1,977,152

Total liabilities and equity $1,468,800 $2,886,592 $3,516,952

© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.

FIN 534 Homework Set #1 1156 (5-19-2015) Page 1 of 3

FIN 534 – Homework Set #1

Income Statements 2012 2013 2014

Sales $3,432,000 $5,834,400 $7,035,600

Cost of goods sold except depr. 2,864,000 4,980,000 5,800,000

Depreciation and amortization 18,900 116,960 120,000

Other expenses 340,000 720,000 612,960

Total operating costs $3,222,900 $5,816,960 $6,532,960

EBIT $209,100 $17,440 $502,640

Interest expense 62,500 176,000 80,000

EBT $146,600 ($158,560) $422,640

Taxes (40%) 58,640 -63,424 169,056

Net income $87,960 ($95,136) $253,584

Other Data 2012 2013 2014

Stock price $8.50 $6.00 $12.17

Shares outstanding 100,000 100,000 250,000

EPS $0.88 ($0.95) $1.104

DPS $0.22 0.11 0.22

Tax rate 40% 40% 40%

Book value per share $6.64 $5.58 $7.909

Lease payments $40,000 $40,000 $40,000

© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.

FIN 534 Homework Set #1 1156 (5-19-2015) Page 2 of 3

FIN 534 – Homework Set #1

Ratio Analysis 2012 2013 Industry

Average

Current 2.3 1.5 2.7

Quick 0.8 0.5 1.0

Inventory turnover 4 4 6.1

Days sales outstanding 37.3 39.6 32.0

Fixed assets turnover 10 6.2 7.0

Total assets turnover 2.3 2 2.5

Debt ratio 35.60% 59.60% 32.0%

Liabilities-to-assets ratio 54.80% 80.70% 50.0%

TIE 3.3 0.1 6.2

EBITDA coverage 2.6 0.8 8.0

Profit margin 2.60% ?1.6% 3.6%

Basic earning power 14.20% 0.60% 17.8%

ROA 6.00% ?3.3% 9.0%

ROE 13.30% ?17.1% 17.9%

Price/Earnings (P/E) 9.7 ?6.3 16.2

Price/Cash flow 8 27.5 7.6

Market/Book 1.3 1.1 2.9

1. What is the free cash flow for 2014?

2. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow?

3. Calculate the 2014 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company’s liquidity position in 2013?

4. Use the extended DuPont equation to provide a summary and overview of company’s financial condition as projected for 2014. What are the firm’s major strengths and weaknesses?

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FIN 534 Homework Set #1 1156 (5-19-2015) Page

FIN534 Week 4 Homework Assignment Set 2

FIN 534 – Homework Set #2

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Assume that you are nearing graduation and have applied for a job with a local bank. The bank’s evaluation process requires you to take an examination that covers several financial analysis techniques.

Use the following information for Questions 1 through 2:

5. What is the present value of the following uneven cash flow stream ?$50, $100, $75, and $50 at the end of Years 0 through 3? The appropriate interest rate is 10%, compounded annually.

6. Suppose that on January 1 you deposit $100 in an account that pays a nominal (or quoted) interest rate of 11.33463%, with interest added (compounded) daily. How much will you have in your account on October 1, or 9 months later?

Use the following information for Questions 3 and 4:

A firm issues a 10-year, $1,000 par value bond with a 10% annual coupon and a required rate of return is 10%.

3. What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does a bond selling at a discount or at a premium tell you about the relationship between rd and the bond’s coupon rate?

4. What are the total return, the current yield, and the capital gains yield for the discount bond in Question #3 at $887.00? At $1,134.20? (Assume the bond is held to maturity and the company does not default on the bond.)

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FIN 534 Homework Set #2 1156 (7-21-15) Page

FIN534 Week 6 Homework Assignment Set 3

FIN 534 – Homework Set #3

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for questions 1 through 4:

The Goodman Industries’ and Landry Incorporated’s stock prices and dividends, along with the Market

Index, are shown below. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends.

Goodman Industries Landry Incorporated Market Index

Year Stock Price Dividend Stock Price Dividend Includes Dividends

2013 $25.88 $1.73 $73.13 $4.50 17495.97

2012 22.13 1.59 78.45 4.35 13178.55

2011 24.75 1.50 73.13 4.13 13019.97

2010 16.13 1.43 85.88 3.75 9651.05

2009 17.06 1.35 90.00 3.38 8403.42

2008 11.44 1.28 83.63 3.00 7058.96

1. Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then calculate average annual returns for the two stocks and the index. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and then dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2008 because you do not have 2007 data.)

2. Calculate the standard deviations of the returns for Goodman, Landry, and the Market Index. (Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the STDEV function in Excel.)

3. What dividends do you expect for Goodman Industries stock over the next 3 years if you expect the dividend to grow at the rate of 5% per year for the next 3 years? In other words, calculate D1, D2, and D3. Note that D0 = $1.50.

4. Assume that Goodman Industries’ stock has a required return of 13%. You will use this required return rate to discount the dividends calculated earlier. If you plan to buy the stock, hold it for 3 years, and then sell it for $27.05, what is the most you should pay for it?

FIN534 Week 8 Homework Assignment Set 4

FIN 534 – Homework Set #4

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 through 3:

Assume you are presented with the following mutually exclusive investments whose expected net cash flows are as follows:

EXPECTED NET CASH FLOWS:

Year Project A Project B

0 ?$400 ?$650

1 ?528 210

2 ?219 210

3 ?150 210

4 1,100 210

5 820 210

6 990 210

7 ?325 210

1. (a) What is each project’s IRR?

(b) If each project’s cost of capital were 10%, which project, if either, should be selected? If the cost of capital were 17%, what would be the proper choice?

2. (a) What is each project’s MIRR at the cost of capital of 10%? At 17%? (Hint: Consider Period 7 as the end of Project B’s life.)

3. What is the crossover rate, and what is its significance?

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FIN 534 Homework Set #4 1156 (5-19-2015) Page 1 of 2

FIN 534 – Homework Set #4

Use the following information for Question 4:

The staff of Porter Manufacturing has estimated the following net after-tax cash flows and probabilities for a new manufacturing process:

Line 0 gives the cost of the process, Lines 1 through 5 give operating cash flows, and Line 5* contains the estimated salvage values. Porter’s cost of capital for an average-risk project is 10%.

Net After-Tax Cash Flows

Year P = 0.2 P = 0.6 P = 0.2

0 ?$100,000 ?$100,000 ?$100,000

1 20,000 30,000 40,000

2 20,000 30,000 40,000

3 20,000 30,000 40,000

4 20,000 30,000 40,000

5 20,000 30,000 40,000

5* 0 20,000 30,000

4. Assume that the project has average risk. Find the project’s expected NPV. (Hint: Use expected values for the net cash flow in each year.)

© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.

FIN 534 Homework Set #3 1158 (8-14-2015) Page 1 of 1

FIN534 Week 9 Assignment 1 Financial Research Report

Students, please view the “Submit a Clickable Rubric Assignment” in the Student Center.

Instructors, training on how to grade is within the Instructor Center.

Assignment 1: Financial Research Report

Due Week 9 and worth 300 points

Imagine that you are a financial manager researching investments for your client. Use the Strayer Learning Resource Center to research the stock of any U.S. publicly traded company that you may consider as an investment opportunity for your client. Your investment should align with your client’s investment goals. (Note: Please ensure that you are able to find enough information about this company in order to complete this assignment. You will create an appendix, in which you will insert related information.)

The assignment covers the following topics:

Rationale for choosing the company for which to invest

Ratio analysis

Stock price analysis

Recommendations

Refer to the following resources to assist with completing your assignment:

Stock Selection

Forbes – “Six Rules to Follow When Picking Stocks”

CNN Money – “Stocks: Investing in stocks”

The Motley Fool – “13 Steps to Investing Foolishly”

Seeking Alpha – “The Graham And Dodd Method For Valuing Stocks”

Investopedia – “Guide to Stock-Picking Strategies”

Seeking Alpha – “Get Your Smart Beta Here! Dividend Growth Stocks As ‘Strategic Beta’ Investments”

Market and Company Information

U.S. Securities and Exchange Commission – “Market Structure”

Yahoo! Finance

Mergent Online (Note: This resource is also available through the Strayer Learning Resource Center.)

Seeking Alpha (Note: Also available through the Android or iTunes App store.)

Morningstar (Note: You can create a no-cost Basic Access account.)

Research Hub, located in the left menu of your course in Blackboard.

Write a ten to fifteen (10-15) page paper in which you:

Provide a rationale for the stock that you selected, indicating the significant economic, financial, and other factors that led you to consider this stock.

Suggest the primary reasons why the selected stock is a suitable investment for your client. Include a description of your client’s profile.

Select any five (5) financial ratios that you have learned about in the text. Analyze the past three (3) years of the selected financial ratios for the company; you may obtain this information from the company’s financial statements. Determine the company’s financial health. (Note: Suggested ratios include, but are not limited to, current ratio, quick ratio, earnings per share, and price earnings ratio.)

Based on your financial review, determine the risk level of the stock from your investor’s point of view. Indicate key strategies that you may use in order to minimize these perceived risks.

Provide your recommendations of this stock as an investment opportunity. Support your rationale with resources, such as peer-reviewed articles, material from the Strayer Learning Resource Center, and reviews by market analysts.

Use at least five (5) quality academic resources in this assignment. Note: Wikipedia and other similar websites do not qualify as academic resources.

Your assignment must follow these formatting requirements:

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.

Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

The specific course learning outcomes associated with this assignment are:

Critique financial management strategies that support business operations in various market environments.

Analyze financial statements for key ratios, cash flow positions, and taxation effects.

Review fixed income strategies using time value of money concept, bond valuation methods, and interest rate calculations.

Estimate the risk and return on financial investments.

Apply financial management options to corporate finance.

Determine the cost of capital and how to maximize returns.

Formulate cash flow analysis for capital projects including project risks and returns.

Evaluate how corporate valuation and forecasting affect financial management.

Analyze how capital structure decision-making practices impact financial management.

Use technology and information resources to research issues in financial management.

Write clearly and concisely about financial management using proper writing mechanics.

FIN534 Week 10 Homework Assignment Set 5

FIN 534 – Homework Set #5

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 and 2:

Boehm Corporation has had stable earnings growth of 8% a year for the past 10 years and in 2013 Boehm paid dividends of $2.6 million on net income of $9.8 million. However, in 2014 earnings are expected to jump to $12.6 million, and Boehm plans to invest $7.3 million in a plant expansion. This one-time unusual earnings growth won’t be maintained, though, and after 2014 Boehm will return to its previous 8% earnings growth rate. Its target debt ratio is 35%.

Calculate Boehm’s total dividends for 2014 under each of the following policies:

1. (a) Its 2014 dividend payment is set to force dividends to grow at the long-run growth rate in earnings.

(b) It continues the 2013 dividend payout ratio.

2. (a) It uses a pure residual policy with all distributions in the form of dividends (35% of the $7.3 million investment is financed with debt).

(b) It employs a regular-dividend-plus-extras policy, with the regular dividend being based on the long-run growth rate and the extra dividend being set according to the residual policy.

Use the following information for Questions 3 and 4:

Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm’s fixed costs, F, are $2 million, 50 earth stations are produced and sold each year, profits total $500,000, and the firm’s assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $4 million to investment and $500,000 to fixed operating costs. This change will (1) reduce variable costs per unit by $10,000 and (2) increase output by 20 units, but (3) the sales price on all units will have to be lowered to $95,000 to permit sales of the additional output. The firm has tax loss

carryforwards that render its tax rate zero, its cost of equity is 16%, and it uses no debt.

3. What is the incremental profit? To get a rough idea of the project’s profitability, what is the project’s expected rate of return for the next year (defined as the incremental profit divided by the investment)? Should the firm make the investment? Why or why not?

4. Would the firm’s break-even point increase or decrease if it made the change?

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FIN 534 Homework Set #5 1156 (5-19-2015) Page 1 of 1

FIN534 Week 11 Final Exam Part 1

Question 1

2 out of 2 points

Braddock Construction Co.’s stock is trading at $20 a share. Call options that expire in three months with a strike price of $20 sell for $1.50. Which of the following will occur if the stock price increases 10%, to $22 a share?

Question 2

2 out of 2 points

Which of the following statements is CORRECT?

Question 3

2 out of 2 points

Other things held constant, the value of an option depends on the stock’s price, the risk-free rate, and the

Question 4

2 out of 2 points

The current price of a stock is $50, the annual risk-free rate is 6%, and a 1-year call option with a strike price of $55 sells for $7.20. What is the value of a put option, assuming the same strike price and expiration date as for the call option?

Question 5

2 out of 2 points

Which of the following statements is CORRECT?

Question 6

2 out of 2 points

The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binomial model, what is the option’s value? (Hint: Use daily compounding.)

Question 7

2 out of 2 points

Which of the following statements is CORRECT?

.

Question 8

2 out of 2 points

Which of the following statements is CORRECT?

Question 9

2 out of 2 points

Suppose Acme Industries correctly estimates its WACC at a given point in time and then uses that same cost of capital to evaluate all projects for the next 10 years, then the firm will most likely

Question 10

2 out of 2 points

Which of the following statements is CORRECT?

.

Question 11

2 out of 2 points

Burnham Brothers Inc. has no retained earnings since it has always paid out all of its earnings as dividends. This same situation is expected to persist in the future. The company uses the CAPM to calculate its cost of equity, and its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would REDUCE its WACC?

Question 12

2 out of 2 points

Which of the following statements is CORRECT? Assume a company’s target capital structure is 50% debt and 50% common equity.

Question 13

2 out of 2 points

Which of the following statements is CORRECT?

Question 14

2 out of 2 points

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

Question 15

2 out of 2 points

Which of the following statements is CORRECT?

Question 16

2 out of 2 points

Which of the following statements is CORRECT?

Question 17

0 out of 2 points

Which of the following statements is CORRECT?

Question 18

2 out of 2 points

Which of the following statements is CORRECT?

Question 19

2 out of 2 points

Which one of the following would NOT result in incremental cash flows and thus should NOT be included in the capital budgeting analysis for a new product?

Question 20

2 out of 2 points

Which of the following statements is CORRECT?

Question 21

2 out of 2 points

Which of the following is NOT a relevant cash flow and thus should not be reflected in the analysis of a capital budgeting project?

Question 22

2 out of 2 points

Puckett Inc. risk-adjusts its WACC to account for project risk. It uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Which of the following independent projects should Puckett accept, assuming that the company uses the NPV method when choosing projects?

Question 23

2 out of 2 points

Which one of the following would NOT result in incremental cash flows and thus should NOT be included in the capital budgeting analysis for a new product?

Question 24

2 out of 2 points

When evaluating a new project, firms should include in the projected cash flows all of the following EXCEPT:

Question 25

2 out of 2 points

The capital intensity ratio is generally defined as follows:

Question 26

2 out of 2 points

Which of the following statements is CORRECT?

Question 27

2 out of 2 points

Spontaneous funds are generally defined as follows:

Question 28

2 out of 2 points

The Besnier Company had $250 million of sales last year, and it had $75 million of fixed assets that were being operated at 80% of capacity. In millions, how large could sales have been if the company had operated at full capacity?

Question 29

2 out of 2 points

Which of the following statements is CORRECT?

Question 30

2 out of 2 points

North Construction had $850 million of sales last year, and it had $425 million of fixed assets that were used at only 60% of capacity. What is the maximum sales growth rate North could achieve before it had to increase its fixed assets?

FIN534 Week 11 Final Exam Part 2

Question 1

2 out of 2 points

Which of the following is NOT normally regarded as being a barrier to hostile takeovers?

Question 2

2 out of 2 points

Which of the following is NOT normally regarded as being a good reason to establish an ESOP?

Question 3

2 out of 2 points

Which of the following statements is correct?

Question 4

2 out of 2 points

Consider two very different firms, M and N. Firm M is a mature firm in a mature industry. Its annual net income and net cash flows are both consistently high and stable. However, M’s growth prospects are quite limited, so its capital budget is small relative to its net income. Firm N is a relatively new firm in a new and growing industry. Its markets and products have not stabilized, so its annual operating income fluctuates considerably. However, N has substantial growth opportunities, and its capital budget is expected to be large relative to its net income for the foreseeable future. Which of the following statements is correct?

Question 5

2 out of 2 points

The projected capital budget of Kandell Corporation is $1,000,000, its target capital structure is 60% debt and 40% equity, and its forecasted net income is $550,000. If the company follows a residual dividend policy, what total dividends, if any, will it pay out?

Question 6

2 out of 2 points

Which of the following statements is correct?

Question 7

2 out of 2 points

Rohter Galeano Inc. is considering how to set its dividend policy. It has a capital budget of $3,000,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity. The company forecasts that its net income this year will be $3,500,000. If the company follows a residual dividend policy, what will be its total dividend payment?

Question 8

0 out of 2 points

Which of the following statements is correct?

Correct Stock repurchases make the most sense at times when a company believes its stock is undervalued.

Question 9

2 out of 2 points

In the real world, dividends

Question 10

2 out of 2 points

Which of the following statements is CORRECT?

Question 11

2 out of 2 points

Blueline Publishers is considering a recapitalization plan. It is currently 100% equity financed but under the plan it would issue long-term debt with a yield of 9% and use the proceeds to repurchase common stock. The recapitalization would not change the company’s total assets, nor would it affect the firm’s basic earning power, which is currently 15%. The CFO believes that this recapitalization would reduce the WACC and increase stock price. Which of the following would also be likely to occur if the company goes ahead with the recapitalization plan?

Question 12

2 out of 2 points

Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant?

Question 13

2 out of 2 points

Firms U and L both have a basic earning power ratio of 20% and each has the same amount of assets. Firm U is unleveraged, i.e., it is 100% equity financed, while Firm L is financed with 50% debt and 50% equity. Firm L’s debt has a before-tax cost of 8%. Both firms have positive net income. Which of the following statements is CORRECT?

Question 14

2 out of 2 points

Which of the following is NOT associated with (or does not contribute to) business risk? Recall that business risk is affected by a firm’s operations.

Question 15

0 out of 2 points

Which of the following statements is CORRECT?

Question 16

2 out of 2 points

Which of these items will not generally be affected by an increase in the debt ratio?

Question 17

0 out of 2 points

Which of the following statements is most consistent with efficient inventory management? The firm has a

Question 18

2 out of 2 points

Which of the following will cause an increase in net working capital, other things held constant?

Question 19

2 out of 2 points

Which of the following actions would be likely to shorten the cash conversion cycle?

Question 20

2 out of 2 points

A lockbox plan is most beneficial to firms that

Question 21

2 out of 2 points

Which of the following is NOT commonly regarded as being a credit policy variable?

Question 22

2 out of 2 points

Which of the following actions should Reece Windows take if it wants to reduce its cash conversion cycle?

Question 23

2 out of 2 points

A product sells for $750 in the United States. The exchange rate is $1 to 1.65 Swiss francs. If purchasing power parity (PPP) holds, what is the price of the product in Switzerland?

Question 24

2 out of 2 points

Suppose Yates Inc., a U.S. exporter, sold a consignment of antique American muscle-cars to a Japanese customer at a price of 143.5 million yen, when the exchange rate was 140 yen per dollar. In order to close the sale, Yates agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction. The terms were net 6 months. If the yen fell against the dollar such that one dollar would buy 154.4 yen when the invoice was paid, what dollar amount would Yates actually receive after it exchanged yen for U.S. dollars?

Question 25

2 out of 2 points

In 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for the same amount of yen today but the current exchange rate is 144 yen per dollar, what would the car be selling for today in U.S. dollars?

Question 26

2 out of 2 points

In Japan, 90-day securities have a 4% annualized return and 180-day securities have a 5% annualized return. In the United States, 90-day securities have a 4% annualized return and 180-day securities have an annualized return of 4.5%. All securities are of equal risk, and Japanese securities are denominated in terms of the Japanese yen. Assuming that interest rate parity holds in all markets, which of the following statements is most CORRECT?

Question 27

2 out of 2 points

If the inflation rate in the United States is greater than the inflation rate in Britain, other things held constant, the British pound will

Question 28

2 out of 2 points

A box of chocolate candy costs 28.80 Swiss francs in Switzerland and $20 in the United States. Assuming that purchasing power parity (PPP) holds, what is the current exchange rate?

Question 29

2 out of 2 points

Suppose the exchange rate between U.S. dollars and Swiss francs is SF 1.41 = $1.00, and the exchange rate between the U.S. dollar and the euro is $1.00 = 1.64 euros. What is the cross-rate of Swiss francs to euros?

Question 30

2 out of 2 points

If the spot rate of the Israeli shekel is 5.51 shekels per dollar and the 180-day forward rate is 5.97 shekels per dollar, then the forward rate for the Israeli shekel is selling at a ____ to the spot rate.