Calculate Business Risk. Calculate the Operating Leverage or Degree of Operating Leverage (DOL) for JMC Corp.

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Financial Management:Leverage and Capital Structure

JMC Corp. sells 500,000 bottles of its herbal soda drinks per year. Each bottle produced is sold for $0.45 and has a variable cost of $0.25. The fixed operating costs for the firm are $50,000. The corporate tax for the firm is 40%.

Requirements:
Calculate Business Risk.
Calculate the Operating Leverage or Degree of Operating Leverage (DOL) for JMC Corp.

JMC Corp. also wants to double its sales to 1,000,000 bottles next year. Towards that it plans to restructure its capital. It is currently financed entirely by equity of $200,000. It plans to reduce its equity 50% and borrow long-term debt of $200,000 @ 5% interest cost.

Calculate the new:
Degree of Operating Leverage (DOL).

Elaborate on the distinction between project and parent viewpoints in an investment. Elucidate the Internal Rate of Return versus the Net Present value Criteria of investments.

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Multinational Business Finance

Instruction:
MUST Write two pages essay for 5, 9, and for 10 just give a few sentence definitions on one page.
BOOK: Eiteman, D. K., Stonehill, A. I., Moffett, M. H., & Kwok, C. (2022). Multinational Business Finance. 16th ed., Pearson.
READ CHAPTER 18

5. Elaborate on the distinction between project and parent viewpoints in an investment.
(Note: Distinguish between the two approaches. WRITE IN 2 PAGES)

9. Elucidate the Internal Rate of Return versus the Net Present value Criteria of investments. (WRITE IN 2 PAGES)

10 .DEFINITIONS: (WRITE IN 1 PAGE)
a. Sensitivity analysis.
b. Capital Budgeting
c. International WACC
d. Hamada equation
e. cost of equity

Suppose you have $50,000 in your retirement fund and you’ll be saving $15,000 per year at the end of the year for the next 40 years. How much will you have in your fund when you retire if your return is 12% per year.

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DISCUSSION ESSAY

Fleming Golf has decided to sell a new line of golf clubs. The clubs will sell for $1,200 per set and have a variable cost of 80% of revenues per set. The company has spent $350,000 for a marketing study that determined the company will sell 75,000 sets per year for seven years. The company also plans to offer a line of golf balls, which are expected to sell for $54/dozen and have a variable cost of $12/dozen. The company expects to sell 100,000 dozen golf balls. The fixed costs each year will be $20,500,000. The company has also spent $1,000,000 on research and development for the new clubs. The plant and equipment required will cost $15,500,000 and will be depreciated using the MACRS seven-year schedule. The equipment will be sold for 150% of its book value in year 7. The new clubs will also require an increase in net working capital of $1,800,000 that will be returned at the end of the project. The tax rate is 25 percent. Information for computing the cost of capital is given in the previous problems.

  1. Construct the proforma income statement for this project.
  2. Calculate the NPV of the project. (Use the WACC from 3)
  3. Compute the IRR of the project.
  4. Compute the profitability of the project.
  5. Suppose you have $50,000 in your retirement fund and you’ll be saving $15,000 per year at the end of the year for the next 40 years. How much will you have in your fund when you retire if your return is 12% per year.
  6. Now reconsider Problem 8. This time assume that the returns have a mean of 12% and a standard deviation of 10%. Use a Monte Carlo simulation to estimate how much you will have in the fund in 40 years.

You may find the following video helpful for Problem 9.

 

Without any of these investments, the projected PV tree cannot be realized. The simple annual risk-free rate is 5%. What is the value of the project today?

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Present value

The present value (PV) of a new project is $100 million today, and it will either increase by 25% or decrease by 25% per year for the next two years. This project requires optional multi-stage investments: $5 million today, $10 million next year, and $90 million in two years.

Without any of these investments, the projected PV tree cannot be realized. The simple annual risk-free rate is 5%. What is the value of the project today?

 

Calculate financial ratio #1. Include a picture of the source for your numbers included in your calculations. Use the numbers calculated above to explain what the calculated ratio means.

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Financial Ratios 

Choose three financial ratios to calculate from the following: Current Ratio, Quick Ratio, Inventory Turnover, Days Sales Outstanding, Fixed Asset Turnover, Total Asset Turnover, Times Interest Earned, Operating Margin, Profit Margin, Return on Assets, and/or Return on Equity. You can calculate any three from this list that you want. But you must use formulas from my Powerpoint to get credit. If you can’t find the numbers you need, use another ratio. Use each ratio you select to answer the questions below.

  • Financial Ratio #1:
  • Financial Ratio #2:
  • Financial Ratio #3:

Financial Ratio #1 (from the list above):

Calculate financial ratio #1. You must show the formula, numbers and calculation in order to get credit. See Hints document for an example. Also, you must use Yahoo Finance for the numbers.

Include a picture of the source for your numbers included in your calculations. Picture no links.

Use the numbers calculated above to explain what the calculated ratio means.

Calculate financial ratio #1 again but for the firm’s competitor. You must show the formula, numbers and calculation in order to get credit. Also, you must use Yahoo Finance for the numbers.

Include a picture of the source of your numbers included in your calculations.

Compare the firm’s ratio to the competitor’s ratio. Explain which is stronger or weaker.

 

Compare your debt ratings’ calculations against Getronics’ actual debt ratings outlining why limitations in the prediction model may explain any differences.

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MSc Financial Management

AMBS75006 Financial Statement Analysis – A2 – Individual Assignment

Assignment Instructions:

Assignment Reference  FSA-StudentNumber-Sep22-A2

Due Date 17 January 2023

Wordcount  2,000 words

Weighting 50% of the course

File Format Task 1: Excel and Word

Task 1: Word

Submission Details Task 1: Blackboard

Task 2: Turnitin

Instructions provided on Blackboard

Important instructions:

This final individual assignment should be attempted individually and without cooperating with other students. You should comply with the maximum word limit that is set for each task.report at the end of each answer the total number of words used, bearing in mind that you do not need to consider any tables / excel workings and reference lists when counting words. The assignment comprises two tasks, each weighted with 50% of the marks.

Task 1: Applying debt rating prediction models to real-life data: Getronics

Read the case study Getronics . A spreadsheet containing the exhibits  is available on Blackboard. Using the information from the case and the data in the spreadsheets, you are required to:

  1. Apply the debt rating prediction model outlined in Table a on the next page, a version of the model described in Table 10.8, page 401 of the core text1 to determine a debt rating for each half year end during the years 2002 – 2007. State any assumptions made, and ensure your workings are clear in your spreadsheet answer.
  2. Compare your debt ratings’ calculations against Getronics’ actual debt ratings  outlining why limitations in the prediction model may explain any differences.

 

Ten years later, Fergus and Felicia had a number of disagreements and Fergus decides to leave the business. At the time, the business’s net worth was $857,000. Felicia argues that she owns the business and that Fergus, if not an employee, was no more than a franchisee. Fergus argues that he is Felicia’s partner. Were Felicia and Fergus partners? Explain and discuss the factors that lead to your conclusion.

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Irac Style with case law

Felicia makes fabulous fried foods that she sells to family and friends. Felicia’s friend, Fergus, is interested in selling her fried foods using the name “Felicia’s Fabulous Food Company.” Felicia is flattered but does not have enough time to fry any more foods; so Felicia charges Fergus $125,000 to allow Fergus to use her recipes and market the food using her name. On March 10, 2001, Fergus and Felicia enter into a written agreement that provides:

  1. Felicia will market and advertise the fried foods.
  2. All food is to be prepared with no deviation from Felicia’s recipes.
  3. Fergus will manage sales and accounts receivables.
  4. Felicia and Fergus will each pay 50 percent of the expenses of the business, such as electricity, water, telephone, heat, insurance and advertising.
  5. Felicia will keep two-thirds of the gross receipts and Fergus one-third.

Ten years later, Fergus and Felicia had a number of disagreements and Fergus decides to leave the business. At the time, the business’s net worth was $857,000. Felicia argues that she owns the business and that Fergus, if not an employee, was no more than a franchisee. Fergus argues that he is Felicia’s partner. Were Felicia and Fergus partners? Explain and discuss the factors that lead to your conclusion.

 

Develop a solid plan for how the Enterprise Resource Planning system will help to solve accounting and financial reporting problems for the organization’s unintegrated system, and provide highlights from each step along the pathway.

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Case study

Scenario: You have been required to prepare a written proposal explaining the accounting and financial processes from the Enterprise Resource Planning perspective to the organization’s mid-level management team. If the proposal is well received, your team will present its recommendations to senior-level management. Remember the high stakes involved in the scenario as you write your proposal.Create a 1,050- to 1,400-word proposal in which you complete the following:

  • Express the differences between financial and managerial accounting.
  • Provide benefits to adopting sound financial and managerial accounting practices.
  • Develop a solid plan for how the Enterprise Resource Planning system will help to solve accounting and financial reporting problems for the organization’s unintegrated system, and provide highlights from each step along the pathway.

Format the paper consistent with APA guidelines.

 

Evaluate the relationship between Congress and the President and discuss two (2) reasons why the presidential duties may conflict with the role of Congress. Justify your response with examples.

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The Craft of Budgeting

Respond to the following:

  • From the first e-Activity, evaluate the relationship between Congress and the President and discuss two (2) reasons why the presidential duties may conflict with the role of Congress. Justify your response with examples.

 

Which of the above do you think are the most important? Why? What other suggestions do you have? Explain.

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Discussion Essay

Financial experts can suggest many ways to deal with cash flow problems. A small business owner must remember to always make finances their number one priority. Constant monitoring is the best way to identify problems at the earliest possible state. Many small business operators, and those who have at one time or another been involved with small business, will tell you that you can never spend too much effort or time on the financing aspect of operations.

Key areas to watch include:

  • Cash balances.
  • Accounts receivable turnover.
  • Accounts payable balance.
  • Interest payments and percentages.
  • Worker productivity.
  • Unnecessary expenses or excesses.
  • Obsolete assets and inventory.
  • Making sure that the people handling your cash are capable and honest.

 

Which of the above do you think are the most important? Why?

What other suggestions do you have? Explain.