Calculate an EBIT breakeven between a debt firm (DF) and an all-equity firm (EF) based on the following information: DF interest = $40,000; DF number common shares = 6,000; EF number of common shares = 10,000; and tax rate = 35 percent.

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Assume that a firm’s earnings per share (EPS) are expected to be $2.00 next year and that analysts have determined that an appropriate forward-looking multiple is 15 times the projected earnings. What should the stock price be?

Suppose that the firm in question #1 plans to increase the proportion of debt as part of its capital structure. The projected EPS would then be $2.50. In a world with no financial distress, determine what the stock price should be and explain why in the real world the stock price would be less than that amount.

Calculate an EBIT breakeven between a debt firm (DF) and an all-equity firm (EF) based on the following information: DF interest = $40,000; DF number common shares = 6,000; EF number of common shares = 10,000; and tax rate = 35 percent. Check your answer by calculating the EPS for both DF and EF at the breakeven EBIT.

Calculate the cash flow coverage ratio based on the following information: EBIT = $540,000; depreciation and amortization = $65,000; interest payments = $180,000; principal repayment = $75,000; and tax rate = 35 percent.

Suppose a firm has an EBIT of $5 million, interest expenses of $2 million, depreciation expenses of $1 million, and a tax rate of 35 percent. Its bank agrees to lend up to 4 times its EBITDA. How much debt can the firm borrow from the bank?

Suppose an all-equity firm has a beta estimated to be 1.2. If the firm changes its capital structure such that its debt-to-equity ratio is now 0.4, what should be the revised beta estimate if it also faces a tax rate of 35 percent?

Explain why a hotel company might have a higher proportion of debt in its capital structure relative to a drug company. Suppose a firm has $10 million in debt that it expects to hold in perpetuity.

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Upon completion of the Required Readings, write a thorough, well-planned narrative answer to the following discussion question.  Rely on your Required Readings and the Lecture and Research Update for specific information to answer the discussion question, but turn to your original thoughts when asked to apply, evaluate, analyze, or synthesize the information.  Your Discussion Question response should be both grammatically and mechanically correct, and formatted in the same fashion as the question itself.  If there is a Part A, your response should identify a Part A, etc.  In addition, you must appropriately cite all resources used in your responses and document in a bibliography using APA style.

Discussion Question 1 (50 points)

Respond to the following:

  1. Explain why a hotel company might have a higher proportion of debt in its capital structure relative to a drug company.
  2. According to Modigliani and Miller (M&M), in a world of perfect capital markets, what will be the expected equity return (or cost of equity) for a firm that has a cost of capital of 10 percent, a cost of debt of 6 percent, debt valued at $1.2 million, and equity valued at $1.0 million?
  3. Suppose a firm has $10 million in debt that it expects to hold in perpetuity. If the interest rate is 7 percent and the corporate tax rate is 35 percent, what is the value of the interest tax shield?
  4. What is the value of an all-equity firm that: has a dividend payout ratio of 100 percent, is expected to generate net income each year (forever) of $1 million, and has a required equity return (also the ROE) of 16 percent?

 

Discuss the purpose and importance of financial ratios and financial analysis. What are the limitations of financial ratio analysis? If we divided the users of financial ratios, such as short-term lenders, long-term lenders, and stockholders, which ratios would each prefer and why?

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Discuss the purpose and importance of financial ratios and financial analysis. What are the limitations of financial ratio analysis? If we divided the users of financial ratios, such as short-term lenders, long-term lenders, and stockholders, which ratios would each prefer and why? Provide examples.

The writing assignment will demonstrate writing across the curriculum by responding to the following topic in a 750 – 1250 words (3 – 5 pages of content/body) paper. Your paper must integrate at least three external references. Your paper must be formatted according to APA 6th edition. Use the template and refer to APA Resources attached below.

Save your document as “LastnameFirstinitial-FINC300-8”. Submit your paper by Day 7 (Sunday), 11:55 pm ET.

Note that your attached paper will automatically be submitted to Turnitin, and an Originality Report should be sent back to the classroom within around 15 minutes. The Originality report does not actually recommend changes. It does point out where you may need to add a citation or quotation marks (if not already cited). Once you use it a few times, you will appreciate this tool, as it will assist you in improving quality and content, as well as avoid plagiarism. Your goal is to keep direct quotations to a minimum and to make sure that you do not just cut and paste material. Ensure that all your references are cited. A report with a similarity index less than 25% is acceptable for undergraduate level work.

Perform sensitivity analysis for WACC, cost saving, and salvage value of the new machine with their values change at increasing and decreasing of 10%, 20% and 30%. Which variable is more dangerous?

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1.The Zhang Equipment Company’s machine was purchased 5 years ago for $55,000. It had an expected life of 10 years when it was bought, and its remaining depreciation is $5,500 per year for each year of its remaining life. As older machine are robust and useful machine, this one can be sold for $20,000 at the end of its useful life. A new high-efficiency, digital-controlled machine can be purchased for $120,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $30,000 per year. Sales revenue will not be affected. At the end of its useful life, the highefficiency machine is estimated to be sold at $10,000. MACRS depreciation will be used, and the machine will be depreciated over its 5-year property class life. The old machine can be sold today for $35,000. The firm’s tax rate is 25%, and the appropriate cost of capital is 13%.

a) If the new machine is purchased, what is the amount of the initial cash flow at Year 0?

b) What is the after-tax salvage value of the new machine at the end of the project?

c) What are the incremental cash flows that will occur at the end of Years 1 through 5?

d) What is the NPV, IRR, MIRR, payback period, discounted payback period of the project?

e) Perform sensitivity analysis for WACC, cost saving, and salvage value of the new machine with their values change at increasing and decreasing of 10%, 20% and 30%. Which variable is more dangerous? Explain through graph. Datatable is required to get credit for this problem.

Develop sound analytical frameworks to grasp the process of decision making with respect to making investment in fixed assets and the methods used to evaluate new projects.

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    • Develop sound analytical frameworks to grasp the process of decision making with respect to making investment in fixed assets and the methods used to evaluate new projects.
    • Understand what free cash flow is and how to measure it.
    • Understand a company’s capital structure and dividend policy.

    The following information is available for Solley Corporation:

    Debt:     5,000 bonds outstanding that are selling for 96 percent of par. Bonds with similar characteristics are yielding 8.5 percent, pretax. The bond par value is €1,000.

    Common stock:  43,800 shares outstanding, selling for €51 per share; the beta is 1.54.

    Preferred stock: 10,000 shares of 7 percent preferred stock outstanding with a stated value of €100 per share, currently selling for €83 per share.

    Market:                7.5 percent market risk premium and 3.6 percent risk-free rate.

    Assume the company’s tax rate is 21 percent.

    Instructions:

    1. Calculate the firm’s market value capital structure.
    2. Calculate the firm’s costs of common equity, preferred stock and debt.
    3. Calculate the weighted average cost of capital (WACC).
    4. What discount rate should the firm apply to a new project’s cash flows if the project has the same risk as the company’s typical project? Explain.
    5. What happens if we use the WACC as the discount rate for all projects? Explain.
    6. Which is more relevant, the pretax or the after-tax cost of debt? Explain.
    7. Which are more relevant, the book or market value weights? Explain.

Analyzing the structure of deal between Nokia and Microsoft ( valuation and other considerations) Assess and identify the purpose of acquisition by Microsoft.

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Main contents of the report.

  1. Analysis of the acquiring company (Microsoft)
  2. Analysis of the Target Company (Nokia Handset business segment)
  3. Purpose of Acquisition
    1. Microsoft’s View
    2. Nokia’s View
  4. Analysis of the acquisition
    1. Structure of the deal
    2. Deal Valuation & Market Sentiment
    3. Identifying the challenges and issues during the integration of Nokia in the Microsoft business model.
  5. Post-Acquisition Analysis
    1. Potential impact of the Nokia Acquisition in the share prices of Microsoft
    2. Financial considerations
    3. Business considerations
    4. HR Considerations

Research aim: To assess the post-launch impact of the acquisition of Nokia by Microsoft whether the M&A is successful or not.

Following research objectives would facilitate the achievement of this aim:

  1. Analyzing the structure of deal between Nokia and Microsoft ( valuation and other considerations)
  2. Assess and identify the purpose of acquisition by Microsoft.
  3. Identifying the challenges and issues during the integration of Nokia in the Microsoft business model.
  4. Potential impact of the Nokia Acquisition in the share prices of Microsoft

Present, describe and illustrate the use of horizontal analyses. Form numerical examples to clarify your points. Form clear conclusions on the value gained from the analysis.

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Research the topic of common size financial statements. Address the following:

Present, describe and illustrate the use of horizontal analyses. Form numerical examples to clarify your points. Form clear conclusions on the value gained from the analysis.
Present, describe and illustrate the use of vertical analyses. Form numerical examples using two comparative companies. Form clear conclusion on the value gained from the analysis.
Review the referenced paper by Melse (2008). Describe the research question being addressed. Discuss the methods used and the conclusions reached by the study.
Support your paper with a minimum of five (5) external resources In addition to these specified resources, other appropriate scholarly resources, including older articles, may be included.

Explain how the cash flow cycle works.Describe how financial management is related to accounting.How do sole proprietorships, general partnerships, limited liability companies, S corporations, and C corporations differ?

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Upon completion of the Required Readings, write a thorough, well-planned narrative answer to the following discussion question.  Rely on your Required Readings and the Lecture and Research Update for specific information to answer the discussion question, but turn to your original thoughts when asked to apply, evaluate, analyze, or synthesize the information.  Your Discussion Question response should be both grammatically and mechanically correct, and formatted in the same fashion as the question itself.  If there is a Part A, your response should identify a Part A, etc.  In addition, you must appropriately cite all resources used in your responses and document in a bibliography using APA style.

 Explain how the cash flow cycle works.

Describe how financial management is related to accounting.

How do sole proprietorships, general partnerships, limited liability companies, S corporations, and C corporations differ?

Suppose three optometrists wished to form a business that was expected to last until the oldest one was about to retire. The three had known each other since college and were close friends who trusted one another. What type of firm might be appropriate? Why?

 

Describe how financial management is related to accounting. How do sole proprietorships, general partnerships, limited liability companies, S corporations, and C corporations differ?

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Upon completion of the Required Readings, write a thorough, well-planned narrative answer to the following discussion question.  Rely on your Required Readings and the Lecture and Research Update for specific information to answer the discussion question, but turn to your original thoughts when asked to apply, evaluate, analyze, or synthesize the information.  Your Discussion Question response should be both grammatically and mechanically correct, and formatted in the same fashion as the question itself.  If there is a Part A, your response should identify a Part A, etc.  In addition, you must appropriately cite all resources used in your responses and document in a bibliography using APA style.

Discussion Question 1 (50 points)

Respond to the following:

  1. Explain how the cash flow cycle works.
  2. Describe how financial management is related to accounting.
  3. How do sole proprietorships, general partnerships, limited liability companies, S corporations, and C corporations differ?
  4. Suppose three optometrists wished to form a business that was expected to last until the oldest one was about to retire. The three had known each other since college and were close friends who trusted one another. What type of firm might be appropriate? Why?

Describe the major components of the monetary system, including organizations and financial institutions. Describe the currency exchange rates and any significant economic impacts on the exchange rates.

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Select a foreign country (Qatar is my choice) and analyze its monetary system. Research the country’s monetary system using at least five scholarly sources, including a minimum of three from the Library. Your analysis should be an eight to ten page paper formatted according to APA style guidelines
Address the following aspects in your paper:

Analyze the evolution of the country’s monetary system, including the impact of any fiscal monetary and trade policies.
Describe the major components of the monetary system, including organizations and financial institutions.
Describe the currency exchange rates and any significant economic impacts on the exchange rates.
Plot the currency exchange rate against the US Dollar:
Go to: Pacific Exchange Rate Service (Links to an external site.) website
Select US Dollar as the base currency
Select your countries currency as the target currency
Time horizon should equal one year
Select make chart. Include this chart in your analysis
Analyze the issues around economic exposure, transaction exposure, and translation exposure.
Recommend to investors whether they should buy or sell futures or options in that currency. Be sure to support your recommendation with calculations where necessary.