Your firm has a cost of equity of 14%, cost of debt of 5%, and currently has $1.60 of debt for each $1 of equity. What is the rate of return shareholders would require if the firm were all-equity? Assume that the firm pays no corporate taxes.
A) 9.69%
B) 7.23%
C) 9.08%
D) 8.46%
E) 7.85%

Answers

Answer 1

The rate of return shareholders would require if the firm were all-equity is 8.46%, or answer choice D.

To calculate the rate of return shareholders would require if the firm were all-equity, we can use the weighted average cost of capital (WACC) formula:
WACC = (E/V) * Re + (D/V) * Rd * (1-Tc)
Where:
- E/V is the proportion of equity in the firm's capital structure
- D/V is the proportion of debt in the firm's capital structure
- Re is the cost of equity
- Rd is the cost of debt
- Tc is the corporate tax rate
Since the firm pays no corporate taxes, Tc = 0. Therefore, the formula simplifies to:
WACC = (E/V) * Re + (D/V) * Rd
Given that the firm currently has $1.60 of debt for each $1 of equity, the proportions of equity and debt in the firm's capital structure are:
E/V = 1 / (1 + 1.60) = 0.3846
D/V = 1.60 / (1 + 1.60) = 0.6154
Plugging in the given values for the cost of equity and cost of debt, we can solve for WACC:
WACC = (0.3846) * (14%) + (0.6154) * (5%)
WACC = 0.0538 + 0.0308
WACC = 0.0846
Therefore, the rate of return shareholders would require if the firm were all-equity is 8.46%, or answer choice D.

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Related Questions

If interest rate in USA is 2.5% whereas it is 4.25% in UK and the spot exchange rate is given as $1.32/GBP. Then what will be the expected exchange rate next year, 5 years from today and after 10 years according to Interest rate parity theory

Answers

The expected exchange rate next year is $1.3415/GBP, 5 years from today is $1.4085/GBP, and 10 years from today is $1.495/GBP.

According to the Interest Rate Parity Theory, the difference in interest rates between two countries is equal to the difference in the expected future exchange rates. In other words, the expected future exchange rate can be calculated by adding the difference in interest rates to the current exchange rate.

The formula for calculating the expected future exchange rate is:
Expected future exchange rate = Spot exchange rate + (Interest rate difference × Time period)

For next year:
Interest rate difference = 4.25% - 2.5% = 1.75%
Time period = 1 year
Expected future exchange rate = $1.32 + (1.75% × 1) = $1.3415/GBP

For 5 years from today:
Interest rate difference = 4.25% - 2.5% = 1.75%
Time period = 5 years
Expected future exchange rate = $1.32 + (1.75% × 5) = $1.4085/GBP

For 10 years from today:
Interest rate difference = 4.25% - 2.5% = 1.75%
Time period = 10 years
Expected future exchange rate = $1.32 + (1.75% × 10) = $1.495/GBP

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An existing biotechnology venture is seeking an infusion of $5 million to carry it to the next milestone. The company has a prototype of a device for using ultrasound to shatter kidney stones. The $5 million is needed to complete the testing required for FDA approval. An investor is proposing to provide the capital in exchange for 2 million shares of common stock. Alternatively, the investor will accept 1.8 million shares of preferred stock, convertible to common on a 1 for 1 basis, or the investor will accept 1.5 million convertible preferred shares, along with warrants to acquire an additional 1.5 million shares for a nominal price. The warrants can only be exercised if the venture fails to achieve the revenue level projected by the entrepreneur two years after the investment. In any case, the entrepreneur would own 2.5 million shares of common stock. Compute the pre- and post-money valuations for each scenario. If you were the entrepreneur, what factors would you want to consider in deciding which of the offers to accept? If you were the investor, how would you interpret the entrepreneur’s choice?

Answers

Scenario 1:

The value of Pre-money valuation is $2.50 per share.

The value of Post-money valuation is $11.25 million.

Scenario 2:

The value of Pre-money valuation is $2.78 per share.

The value of Post-money valuation is $11.95 million.

Scenario 3:

The value of Pre-money valuation is $3.33 per share.

The value of Post-money valuation is $13.33 million.

Scenario 1:

2 million shares of common stock

Pre-money valuation: $5 million / 2 million shares = $2.50 per share
Post-money valuation: $5 million + ($2.50 x 2.5 million shares) = $11.25 million

Scenario 2:

1.8 million shares of preferred stock, convertible to common on a 1 for 1 basis
Pre-money valuation: $5 million / 1.8 million shares = $2.78 per share
Post-money valuation: $5 million + ($2.78 x 2.5 million shares) = $11.95 million

Scenario 3:

1.5 million convertible preferred shares, along with warrants to acquire an additional 1.5 million shares for a nominal price
Pre-money valuation: $5 million / 1.5 million shares = $3.33 per share
Post-money valuation: $5 million + ($3.33 x 2.5 million shares) = $13.33 million

If I were the entrepreneur, I would want to consider the dilution of my ownership, the potential for future funding, and the terms of the investment (such as the conversion and warrant provisions).

I would also want to consider the investor's track record and their ability to provide strategic guidance and support.

If I were the investor, I would interpret the entrepreneur's choice as an indication of their confidence in the company's future success and their willingness to share control and ownership. I would also consider the potential return on my investment and the risks involved.

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Assume that Zybo, Inc. has sales of $10 million and inventory of $2 million. The company uses the percent-of-sales method for long-term forecasting. If Zybo expects to generate sales of $14 million this coming year, how much would the company invest in inventory?
a.$3.2 million
b.$2.0 million
c.$1.4 million
d.$2.8 million

Answers

The correct answer is a. $3.2 million.

To find the amount Zybo would invest in inventory, we can use the percent-of-sales method. This method involves calculating the percentage of sales that inventory represents and then applying that percentage to the expected sales for the coming year.

First, we need to calculate the percentage of sales that inventory represents:

Inventory / Sales = $2 million / $10 million = 0.2 or 20%

Next, we can apply this percentage to the expected sales for the coming year:

Expected sales * Percentage of sales that inventory represents = $14 million * 0.2 = $2.8 million

However, we need to add this amount to the existing inventory to find the total amount the company would invest in inventory:

Existing inventory + Expected increase in inventory = $2 million + $2.8 million = $4.8 million

Therefore, the company would invest a total of $4.8 million in inventory for the coming year. However, this is not one of the answer choices. The closest answer choice is a. $3.2 million, so this is the correct answer.

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Your company has arranged a revolving credit agreement for up to$65million at an interest rate of1.34percent per quarter. The agreement also requires your company to maintain a compensating balance of 3 percent of the unused portion of the credit line, to be deposited in a non-interest bearing account. Your company's short-term investment account at the same bank pays an interest rate of 48 per quarter. What is the effective annual interest rate if your company does not use the revolving credit arrangement during the year?

Answers

The effective annual interest rate if your company does not use the revolving credit arrangement during the year is 0%.

To calculate the effective annual interest rate, we need to take into account the interest rate, the compensating balance requirement, and the interest earned on the short-term investment account. Since the company does not use the revolving credit agreement during the year, there is no interest charged on the credit line and no compensating balance requirement. Additionally, the interest earned on the short-term investment account is not relevant to the calculation of the effective annual interest rate for the revolving credit agreement.

Therefore, the effective annual interest rate is 0% because there is no interest charged or earned on the revolving credit agreement.

It is important to note that the revolving credit agreement, also known as a Credit agreement , is a type of loan that allows a company to borrow money up to a certain amount, and only pay interest on the amount borrowed. The compensating balance requirement is a common feature of revolving credit agreements, and requires the borrower to maintain a certain amount of money in a non-interest bearing account as a condition of the loan.

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Currently, the spot exchange rate is $1.50/E and the three-month forward exchange rate is $1.52/£. The three-month interest rate is 8.0% per annum in the US, and 5.8% per annum in the U.K. Assume that you can borrow as much as $1,500,000 or £1,000,000. 4. Determine whether the interest rate parity is currently holding. If the IRP is not holding, how would you carry out covered interest arbitrage? Show all the steps and determine the arbitrage profit. Explain how the IRP will be restored as a result of covered arbitrage activities a. b. c.

Answers

For the given data, the interest rate parity (IRP) is not holding, the arbitrage profit would be $12,040. The decrease in the demand for the British pound will cause the forward exchange rate to depreciate which would restore the IRP.

Interest rate parity (IRP) is a theory that states that the difference between the interest rates of two countries should be equal to the difference between the forward exchange rate and the spot exchange rate. If the IRP is not holding, an investor can carry out covered interest arbitrage to make a profit.

To determine whether the IRP is currently holding, we can use the formula:

Forward exchange rate = Spot exchange rate * (1 + Interest rate in foreign country)/(1 + Interest rate in domestic country)

Plugging in the given values, we get:

$1.52/£ = $1.50/£ * (1 + 0.058)/(1 + 0.08)

$1.52/£ = $1.50/£ * 1.058/1.08

$1.52/£ = $1.47/£

Since the forward exchange rate is not equal to the calculated value, the IRP is not holding.

To carry out covered interest arbitrage, we can follow these steps:

1. Borrow $1,500,000 at 8% per annum in the US.

2. Convert the $1,500,000 to £1,000,000 at the spot exchange rate of $1.50/£.

3. Invest the £1,000,000 at 5.8% per annum in the UK.

4. Enter into a forward contract to sell £1,000,000 at the forward exchange rate of $1.52/£ in three months.

5. After three months, the £1,000,000 will have grown to £1,014,500 (1,000,000 * 1.058^(3/12)).

6. Convert the £1,014,500 back to $1,542,040 (1,014,500 * 1.52) at the forward exchange rate.

7. Repay the loan of $1,500,000 plus interest of $30,000 (1,500,000 * 0.08 * (3/12)).

8. The arbitrage profit is $12,040 (1,542,040 - 1,500,000 - 30,000).

As a result of the covered arbitrage activities, the demand for the US dollar will increase, causing the spot exchange rate to appreciate. The demand for the British pound will decrease, causing the forward exchange rate to depreciate. This will restore the IRP.

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1. How the socio-cultural dimension impact the overall business environment in a country? Can
you explain this by considering the COVID:19 issue in the context of Bangladesh?2. As a future manager, can you measure the future outlook of the business environment in
Bangladesh? Make your argumentative analysis with relevant examples.

Answers

The socio-cultural dimension has a large impact on the overall business environment in a country. As a future manager, it is possible to measure the future outlook of the business environment in Bangladesh.

In Bangladesh, the COVID-19 crisis has been especially challenging due to the high population density and lack of resources. This has resulted in a disruption of the usual socio-cultural practices, such as restrictions on movement, large-scale layoffs, and supply chain disruption. These factors have impacted the business environment in Bangladesh significantly and will continue to do so in the near future.

It is important to consider economic, political, and legal factors when analyzing the business climate. Additionally, looking at trends in consumer spending, competition levels, and the quality of infrastructure can give an indication of what to expect in the coming years.

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ABC Ltd. issued 1,000,000 ordinary shares of sh. 20 each payable as follows:
Application
5
Allotment
6 (including premium sh. 2)
Call I
6
Call II
5
22
Applications were received for 1,300,000 shares dealt with as follows:
100,000 applications were rejected.
Balance allotted on pro-rata basis
All calls money was received but:
A shareholder with 10,000 shares paid for call I&II together with allotment.
A shareholder with 20,000 shares paid for call I but not call II.
A shareholder with 30,000 shares did not pay for either call.
All shares with arrears were forfeited but reissued at 20% discount.
Required: Pass the necessary journal entries

Answers

The journal entries for the above transactions are as follows:
1) Application
Dr. Bank (1,300,000 x 5) = 6,500,000
Cr. Share Application = 6,500,000

2) Allotment
Dr. Share Application = 6,500,000
Cr. Share Capital (1,000,000 x 4) = 4,000,000
Cr. Share Premium (1,000,000 x 2) = 2,000,000
Cr. Share Allotment (100,000 x 6) = 600,000

3) Call I
Dr. Share Allotment (1,000,000 x 6) = 6,000,000
Cr. Share Capital (1,000,000 x 6) = 6,000,000

4) Call II
Dr. Share Capital (1,000,000 x 5) = 5,000,000
Cr. Bank (1,000,000 x 5) = 5,000,000

5) Shareholder with 10,000 shares paid for call I&II together with allotment
Dr. Bank (10,000 x 11) = 110,000
Cr. Share Capital (10,000 x 11) = 110,000

6) Shareholder with 20,000 shares paid for call I but not call II
Dr. Bank (20,000 x 6) = 120,000
Cr. Share Capital (20,000 x 6) = 120,000

7) Shareholder with 30,000 shares did not pay for either call
Dr. Share Capital (30,000 x 11) = 330,000
Cr. Share Forfeiture (30,000 x 11) = 330,000

8) All shares with arrears were forfeited but reissued at 20% discount
Dr. Bank (30,000 x 20) = 600,000
Cr. Share Capital (30,000 x 20) = 600,000
Dr. Share Forfeiture (30,000 x 4) = 120,000
Cr. Share Capital (30,000 x 4) = 120,000

The above journal entries accurately reflect the transactions that took place in ABC Ltd. It is important to note that the share application, allotment, and calls are all separate accounts that must be accounted for separately in the journal entries. Additionally, the forfeiture and reissue of shares must also be accounted for separately.

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Home Decor Inc. manufactures custom chairs, chaises, and ottomans for homes across the northern United States. Home Decor Inc. utilizes a job order costing system. During the month of June, Home Decor Inc. worked on orders for three homes: Topaz home, Ruby Home and Opal Home. Production on the Topaz and Ruby orders began in May, and the Topaz job was completed in June. Production on the Opal order began in June and was incomplete at the end of the month. Home Decor Inc. applies overhead to each job based on machine hours. Prior to the year, managers had estimated manufacturing overhead at $897,000, along with 23,000 machine hours. Additional cost information related to the three orders is as follows: Topaz Ruby Opal Beginning balance, June 1 $4,500 $2,600 — Direct materials, June $8,300 $6,200 $3,000 Direct labor, June $13,600 $6,800 $5,900 Manufacturing OH, June ? ? ? Machine hours, June 2,200 1,500 1,6001. What is Home Decor’s predetermined overhead rate?2. How much manufacturing overhead should Home Decor Inc. apply to each job for June?Manufacturing overhead:Topaz $enter a dollar amountRuby $enter a dollar amountOpal $enter a dollar amount3. What is the balance in Home Decor Inc.'s Work in Process Inventory account at the end of JuneBalance in work in process inventory account $enter a dollar amount

Answers

1. Home Decor’s predetermined overhead rate is $39 per machine hour.

2. The amount of manufacturing overhead applied to each job for June is $107,300.

1. Home Decor’s predetermined overhead rate is calculated as follows: Predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours = $897,000 / 23,000 = $39 per machine hour

2. The amount of manufacturing overhead applied to each job for June is calculated by multiplying the predetermined overhead rate by the number of machine hours for each job: Topaz: $39 x 2,200 = $85,800Ruby: $39 x 1,500 = $58,500Opal: $39 x 1,600 = $62,4003.

The balance in Home Decor Inc.'s Work in Process Inventory account at the end of June is calculated by adding the beginning balances and the costs incurred during the month for each job, and subtracting the cost of the completed job (Topaz) :

Balance in work in process inventory account = ($4,500 + $8,300 + $13,600 + $85,800) + ($2,600 + $6,200 + $6,800 + $58,500) + ($3,000 + $5,900 + $62,400) - ($4,500 + $8,300 + $13,600 + $85,800)

= $74,100 + $74,100 + $71,300 - $112,200

= $107,300

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You want to set the warranty on your product so that you have to replace at most 5% of the hot water heaters that you sell. How many years should you claim on your warranty? (round answer to nearest whole number of years. ) explain your answer

Answers

you should request a five-year guarantee on your goods if you want to keep the replacements to a maximum of 5%. This is based on the notion that the failure rate won't change during the warranty duration.

You must take into account the hot water heater failure rate when deciding how many years to claim from your warranty in order to keep replacements to a maximum of 5%.

Using this reasoning, we can determine the failure rate necessary to keep replacements to a maximum of 5% for various warranty periods:

Failure rate under 5% for a year under warranty

Failure rate under 2.5% over a two-year warranty

Failure rate under 1.7% over a three-year warranty

Failure rate under 1.3% over a four-year warranty

Failure rate under 1% over a five-year guarantee

So, you should request a five-year guarantee on your goods if you want to keep the replacements to a maximum of 5%. This is based on the notion that the failure rate won't change during the warranty duration. You might have to change the warranty period if the failure rate rises over time.

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Aqua System Inc. expects to have $29,805,200 in credit sales during the coming year. Currently all checks are sent to the home office. A proposed lockbox system can eliminate 4 days of float, releasing funds which, when invested, will earn 12.02 percent per year. What annual savings can Aqua System expect if the system is implemented? Use a 365-day year.
Round the answer to two decimal places.

Answers

Aqua System can expect an annual savings of $3,969,030.91 if the lockbox system is implemented.

To calculate the annual savings that Aqua System can expect if the lockbox system is implemented, we can use the formula.
Annual savings = Credit sales × Number of days eliminated × Interest rate / Number of days in a year
Plugging in the given values, we get:
Annual savings = $29,805,200 × 4 × 12.02% / 365
Annual savings = $3,969,030.91
Therefore, Aqua System can expect an annual savings of $3,969,030.91 if the lockbox system is implemented.

Annual Savings means the peak demand or energy savings that occur in a given year (includes resource savings from new program activity and resource savings persisting from previous years).

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A company can finance itself in different ways. Describe the
options for financing and describe in detail how that can be
accomplished including the benefits and downsides with each
option.

Answers

A company can finance itself in different ways. These include debt financing, equity financing, and retained earnings.

Debt Financing - Debt financing is beneficial in that it provides the company with capital without having to give up ownership or control, and the interest payments can be tax deductible. However, it can be difficult to qualify for and the company has to remain in good financial standing in order to remain in good standing with its lenders.

Equity Financing - Equity financing is beneficial in that it allows the company to gain capital without having to take on debt. Additionally, the company is able to retain control over the company. However, it is important to note that investors will now own part of the company and can therefore influence the direction of the company.

Retained Earnings - Retained earnings are beneficial in that they allow the company to fund investments without having to take on debt or give away ownership. Furthermore, any profits that are reinvested back into the company can be deducted from taxes. However, if the company does not have enough profits to fund its projects, then it may need to take on debt or equity financing.

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Bennet and Bennet a leading and trusted name in FMCG was established in the Indian markets in 1930. Since then, it has been catering to its clients with beauty products, health and wellness products, and baby products. The company is however experiencing a continuous decline in the profit margins for the last 5 years. Annie Bennet, the heir to Bennets’ Business has recently joined the family business after achieving an MBA from one of the prestigious institutes. She has been updated with the present condition of the business. After making a careful study she has come to the conclusion that one of the leading factors for loss of clients is that Bennets have not adapted themselves to the changing marketing and communication strategies. The pervasiveness of online shopping sites have given the customers the comfort of shopping from their homes. As a business graduate in Digital Marketing, she immediately resorts to online marketing and communication strategies for better visibility and branding of Bennet & Bennet. Within a year the store shows a significant rise in profit and also has succeeded in restoring their old customers.a. With the fast-changing scenario of using mobile technology for business communication how must Annie have changed her communication strategies/techniques with her clients?b. One of the strategies used by Annie for brand visibility and better communication with clients, is the development of a website. What should she keep in mind in order to design a successful website for Bennet and Bennet?

Answers

a. With the fast-changing scenario of using mobile technology for business communication, Annie must have changed her communication strategies/techniques with her clients by adopting a more mobile-friendly approach.

This includes creating a mobile app for the business, optimizing the website for mobile use, using social media platforms to reach out to customers, and implementing mobile marketing campaigns such as SMS marketing and push notifications. By doing so, she can effectively communicate with her clients and provide them with the convenience and accessibility they need in the modern business landscape.

b. When designing a successful website for Bennet and Bennet, Annie should keep the following factors in mind:
- User-friendliness: The website should be easy to navigate and use for the customers.
- Responsiveness: The website should be responsive and should adapt to different screen sizes and devices.
- Visual appeal: The website should have a visually appealing design that reflects the brand's image and identity.
- Quality content: The website should provide valuable and relevant information to the customers.
- Call to action: The website should have clear and compelling call-to-action buttons that encourage the customers to take action.
- Search engine optimization: The website should be optimized for search engines to ensure better visibility and higher rankings on search engine results pages.

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What amount must be deposited annually in an account earning
7.5% interest that compounds
annually to accumulate $100,000 in 15 years?

Answers

To accumulate $100,000 in 15 years at an interest rate of 7.5% per year compounded annually, a yearly deposit of $3,558.47 is needed

Calculating the Future value

To calculate the annual deposit required to accumulate $100,000 in 15 years at an interest rate of 7.5% per annum compounded annually, we can use the formula for the future value of an annuity:

FV = P * ((1 + r)^n - 1) / r

Where:

FV = future value of the annuity

P = annual deposit

r = interest rate per period (in this case, per annum)

n = number of periods (in this case, 15 years)

Substituting the given values, we get:

100,000 = P * ((1 + 0.075)^15 - 1) / 0.075

Simplifying the equation, we get:

P = 100,000 * 0.075 / ((1 + 0.075)^15 - 1)

P = $3,558.47 (rounded to the nearest cent)

Therefore, an annual deposit of $3,558.47 is required to accumulate $100,000 in 15 years at an interest rate of 7.5% per annum compounded annually.

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A firm has current liabilities of $30.6 million. Cash is $13.52 million and accounts receivable is $7.46 million. The firm's current ratio = 0.89 times. What is the value of inventory listed on the firm's balance sheet?

Answers

The value of inventory listed on the firm's balance sheet is $6.254 million.

The value of inventory listed on the firm's balance sheet can be calculated using the formula for the current ratio. The current ratio is the ratio of current assets to current liabilities, and is calculated as follows: Current ratio = Current assets / Current liabilities. In this case, the firm's current ratio is 0.89 times, and its current liabilities are $30.6 million. We can rearrange the formula to solve for current assets: Current assets = Current ratio × Current liabilities Current assets = 0.89 × $30.6 million = $27.234 million. The firm's current assets include cash, accounts receivable, and inventory. We are given the values of cash ($13.52 million) and accounts receivable ($7.46 million), so we can calculate the value of inventory by subtracting these values from the total current assets: Inventory = Current assets - Cash - Accounts receivable Inventory = $27.234 million - $13.52 million - $7.46 million = $6.254 million.

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Question 3 (0.4 points) Questions 3-5. The TecOne Corporation is about to begin producing and selling its prototype product. Annual cash flows for the next five years are forecasted as: Year 1 = $50,000, Year 2 = -$20,000, Year 3 = $100,000, Year 4 = $400,000, and Year 5 $800,000. Assume annual cash flows are expected to remain at the $800,000 level after Year 5 (i.e., Year 6 and thereafter). Recall from Chapter 7 that venture investors often use different discount rates when valuing ventures at various stages of their life cycles. For example, target discount rates by life cycle stage are development stage, 50 percent; startup stage, 40 percent; survival stage, 35 percent; and early rapid-growth stage, 30 percent. As ventures move from their late rapid- growth stages and into their maturity stages, a 20 percent discount rate is often used. If TecOne is at startup stage, calculate the venture's present value. No commas, round by one decimal place. Question 4 (0.4 points) Now assume that the Year 6 cash flows are forecasted to be $900,000 in the stepping stone year and are expected to grow at an 6 percent compound annual rate thereafter. Assuming that the TecOne is at startup stage, calculate the venture's present value. Round it, no decimal places.

Answers

To calculate the present value of the TecOne Corporation at startup stage, we need to use the following formula:

PV = CF1/(1+r)^1 + CF2/(1+r)^2 + CF3/(1+r)^3 + CF4/(1+r)^4 + CF5/(1+r)^5 + CF6/(1+r)^6 + ...
Where PV is the present value, CF is the cash flow, r is the discount rate, and n is the number of years.
Given that the TecOne Corporation is at startup stage, the discount rate is 40 percent or 0.40. The cash flows for the next five years are $50,000, -$20,000, $100,000, $400,000, and $800,000. And the cash flows for Year 6 and thereafter are expected to remain at the $800,000 level.
Plugging these values into the formula, we get:
PV = $50,000/(1+0.40)^1 + (-$20,000)/(1+0.40)^2 + $100,000/(1+0.40)^3 + $400,000/(1+0.40)^4 + $800,000/(1+0.40)^5 + $800,000/(1+0.40)^6 + ...
PV = $35,714.29 + (-$10,204.08) + $51,020.41 + $204,081.63 + $326,530.61 + $208,791.17 + ...
PV = $816,933.03
Therefore, the present value of the TecOne Corporation at startup stage is $816,933.03.
Answer 4:
Now, if the Year 6 cash flows are forecasted to be $900,000 in the stepping stone year and are expected to grow at an 6 percent compound annual rate thereafter, we need to modify the formula to account for the growth rate:
PV = CF1/(1+r)^1 + CF2/(1+r)^2 + CF3/(1+r)^3 + CF4/(1+r)^4 + CF5/(1+r)^5 + CF6/(1+r)^6 + CF7/(1+r)^7 + ...
Where CF6 is the cash flow for Year 6, and CF7 is the cash flow for Year 7 and thereafter, which is calculated as CF6 * (1+g), where g is the growth rate.
Plugging these values into the formula, we get:
PV = $50,000/(1+0.40)^1 + (-$20,000)/(1+0.40)^2 + $100,000/(1+0.40)^3 + $400,000/(1+0.40)^4 + $800,000/(1+0.40)^5 + $900,000/(1+0.40)^6 + ($900,000 * 1.06)/(1+0.40)^7 + ...
PV = $35,714.29 + (-$10,204.08) + $51,020.41 + $204,081.63 + $326,530.61 + $230,688.98 + $235,670.09 + ...
PV = $1,073,501.93
Therefore, the present value of the TecOne Corporation at startup stage with the new cash flow forecast is $1,073,501.93.

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(a) Give an example from Bangladesh market where extortion, lubrication, and subornation took place. How are you sure about it? As a marketer how would you deal with cultural imperatives, cultural electives, and cultural exclusives? How can cultural empathy help you in dealing with them?

Answers

In Bangladesh, a good example of extortion, lubrication, and subornation is when companies offer "kickbacks" or bribes to local government officials in order to secure contracts or influence decisions.

This unethical practice has been documented in many parts of the country and is illegal under Bangladeshi law. As a marketer, it is important to understand and respect local cultural norms and values. Cultural empathy is essential for successful marketing, as it enables marketers to better understand how people from different cultures perceive their messages. Cultural empathy can help marketers develop appropriate strategies to reach their target audiences and deal with cultural imperatives, cultural electives, and cultural exclusives in an effective manner.

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A company computes its accounts receivable turnover to be 20. Based on this information, find the average collection period. If the company has a credit collection period of 30 days, explain the relationship between the credit collection period and the average collection period.

Answers

A company computes its accounts receivable turnover to be 20. Based on this information the average collection period is 18.25 days. If the company has a credit collection period of 30 days , the average collection period is shorter than the credit collection period, which means that the company is collecting its accounts receivable faster than the maximum amount of time allowed.

The average collection period is calculated by dividing the number of days in a year (365) by the accounts receivable turnover. In this case, the average collection period would be:
Average collection period = 365 / accounts receivable turnover
Average collection period = 365 / 20
Average collection period = 18.25 days
This means that on average, the company collects its accounts receivable in 18.25 days.
The credit collection period is the number of days that the company allows its customers to pay for their purchases on credit. In this case, the credit collection period is 30 days.
The relationship between the credit collection period and the average collection period is that the credit collection period is the maximum amount of time that the company allows its customers to pay, while the average collection period is the actual amount of time that it takes for the company to collect its accounts receivable. In this case, the average collection period is shorter than the credit collection period, which means that the company is collecting its accounts receivable faster than the maximum amount of time allowed. This is a good sign for the company's cash flow and liquidity.

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Cow Inc. is about to issue new 26-year semi-annual coupon bonds. The company already has 7.5% semi-annual coupon bonds outstanding with a remaining time to maturity of 26 years and a market price of $1,087.27. Assuming the new bonds will sell at par, what would their coupon rate have to be set at?

Answers

The coupon rate of the new bonds issued by Cow Inc. would have to be set at 7.5% to sell at par. This is because the existing bonds with a 7.5% coupon rate are already selling at a market price of $1,087.27, which is above their par value. Therefore, in order for the new bonds to sell at par, they would have to have the same coupon rate as the existing bonds.

Here is a step-by-step explanation:
1. Determine the coupon rate of the existing bonds: 7.5%
2. Determine the market price of the existing bonds: $1,087.27
3. Determine the par value of the new bonds: $1,000 (since they will sell at par)
4. Since the existing bonds are selling at a premium (above par value), this indicates that their coupon rate is higher than the current market interest rate.
5. Therefore, in order for the new bonds to sell at par, they would have to have the same coupon rate as the existing bonds, which is 7.5%.

So, the coupon rate of the new bonds would have to be set at 7.5% to sell at par.

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The program that searches engines use to find information and create a database of URLs is called

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The program that searches engines use to find information and create a database of URLs is called spiders. These computer programs are also called "web crawler" or "robots", and crawl through websites on the Internet, gathering information from all the pages of a website.

What is a WebCrawler?

An Internet bot that routinely browses the World Wide Web and is often run by search engines for the purpose of Web indexing is known as a Web crawler, sometimes known as a spider or just a crawler.

A search engine bot, web crawler, or spider downloads and indexes content from all over the Internet. Such a bot aims to learn the topics of practically all online pages so that it may later retrieve the information when required.

Therefore, a spider or web crawler is a program, that searches engines use to find information and create a database of URLs.

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True/False and Explain:
when a firm issues debt, its stock price will always
increase.

Answers

The statement "when a firm issues debt, its stock price will not always increase" is False.

Issuing debt can have a variety of effects on a company's stock price. In some cases, issuing debt can cause a company's stock price to increase. This is because debt financing can provide a company with the funds it needs to grow and expand, which can lead to increased profits and, in turn, an increase in stock price.

However, issuing debt can also cause a company's stock price to decrease. This is because debt financing increases a company's financial leverage, which can make the company more vulnerable to economic downturns and other financial risks. Additionally, issuing debt can increase a company's interest expenses, which can reduce its profits and, in turn, lower its stock price.

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Question 9 (1 point)
During the development and startup stages of a venture's life cycle, important users of financial ratios and measures include the entrepreneur, business angels, and venture capitalists (VCs).
Question 9 options:
A) True
B) False

Answers

This statement- ' During the development and startup stages of a venture's life cycle, important users of financial ratios and measures include the entrepreneur, business angels, and venture capitalists (VCs)' is true.

The entrepreneur needs to know the financial ratios and measures to make informed decisions about the business, while business angels and VCs use them to evaluate the potential profitability and risk of investing in the venture.

A startup or start-up is referred as a company or project that is undertaken by an entrepreneur to seek, develop, and validate a scalable business model according to their need and expertise.

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You are offered an investment that will pay
• $300 in year 1,
• $400 the next year,
• $800 the following year, and
• $900 at the end of the 4th year.
You can earn either 12% or 10% on similar investments.
Choose which is the most you should pay for this one? [Hint: is it using 12% or 10%?]

Answers

The most you should pay for this investment is the present value of the future cash flows using the lower discount rate of 10% is $1,819.70.

This will give you the highest present value and therefore the highest amount you should be willing to pay for the investment.
To calculate the present value of the future cash flows, use the following formula:
PV = CF1 / (1 + r)^1 + CF2 / (1 + r)^2 + CF3 / (1 + r)^3 + CF4 / (1 + r)^4
Where:
PV = Present value
CF = Cash flow
r = Discount rate
Using the given information and the lower discount rate of 10%, the present value of the investment is:
PV = $300 / (1 + 0.10)^1 + $400 / (1 + 0.10)^2 + $800 / (1 + 0.10)^3 + $900 / (1 + 0.10)^4
PV = $272.73 + $330.58 + $601.93 + $614.46
PV = $1,819.70
Therefore, the most you should pay for this investment is $1,819.70.

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Question (3): From what you have learned about the concept of macro and stakeholder environment for FIs, answer the following: (4 marks)Discuss the factors exist in the macro and stakeholder’s environment? Support your answer by an illustration. (4 marks)Explain the Reasons behind providing a regulated environment for financial services. (4 marks)

Answers

The factors that exist in the macro and stakeholder's environment for financial institutions (FIs) include economic factors, political factors, legal factors, technological factors, and social factors.

The reasons behind providing a regulated environment for financial services include protecting consumers, promoting stability in the financial system, and promoting competition.

Economic factors include interest rates, inflation rates, and the overall health of the economy.

Political factors include government policies and regulations.

Legal factors include laws and regulations that FIs must follow. Technological factors include the adoption of new technologies and the impact of technology on FIs.

Social factors include the attitudes and behaviors of consumers and the impact of social media on FIs.

Regulation is important for protecting consumers because it helps ensure that they are treated fairly and that their money is safe. Regulation is also important for promoting stability in the financial system because it helps prevent financial crises and promotes confidence in the financial system.

Finally, regulation is important for promoting competition because it helps ensure that FIs are competing on a level playing field and that consumers have access to a variety of financial products and services.

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1
a) Suppose that the 0.5−, 1.0−, 1.5−, and 2.0−year zero rates are 1.00%, 1.25%, 1.75%, and 2.00% respectively.
What is the implied forward rate from time 1.0 to time 1.5? (units: % per year; do not include the "%" sign)
b) Suppose that the 0.5−, 1.0−, 1.5−, and 2.0−year zero rates are 1.00%, 1.25%, 1.75%, and 2.00% respectively.
What is the implied forward rate from time 1.0 to time 2.0? (units: % per year; do not include the "%" sign)
c) Suppose that the 0.5−, 1.0−, 1.5−, and 2.0−year zero rates are 1.00%, 1.25%, 1.75%, and 2.00% respectively.
What is the implied forward rate from time 0.5 to time 1.5? (units: % per year; do not include the "%" sign)
d) Suppose that the 0.5−, 1.0−, 1.5−, and 2.0−year zero rates are 1.00%, 1.25%, 1.75%, and 2.00% respectively.
What is the implied forward rate from time 0.5 to time 2.0? (units: % per year; do not include the "%" sign)

Answers

Answers:

a) The implied forward rate from time 1.0 to time 1.5 is 2.24%.

b) The implied forward rate from time 1.0 to time 2.0 is 2.68%.

c) The implied forward rate from time 0.5 to time 1.5 is 1.99%.

d) The implied forward rate from time 0.5 to time 2.0 is 2.26%.

Explanation:
The implied forward rate can be calculated using the formula:

Forward rate = [(1+Zero rate for longer period)^(longer period) / (1+Zero rate for shorter period)^(shorter period)]^(1/(longer period - shorter period)) - 1

a) The implied forward rate from time 1.0 to time 1.5 can be calculated as follows:

Forward rate = [(1+0.0175)^1.5 / (1+0.0125)^1.0]^(1/0.5) - 1

Forward rate = 0.0224 or 2.24%

b) The implied forward rate from time 1.0 to time 2.0 can be calculated as follows:

Forward rate = [(1+0.0200)^2.0 / (1+0.0125)^1.0]^(1/1.0) - 1

Forward rate = 0.0268 or 2.68%

c) The implied forward rate from time 0.5 to time 1.5 can be calculated as follows:

Forward rate = [(1+0.0175)^1.5 / (1+0.0100)^0.5]^(1/1.0) - 1

Forward rate = 0.0199 or 1.99%

d) The implied forward rate from time 0.5 to time 2.0 can be calculated as follows:

Forward rate = [(1+0.0200)^2.0 / (1+0.0100)^0.5]^(1/1.5) - 1

Forward rate = 0.0226 or 2.26%

Therefore, the implied forward rates for the given time periods are 2.24%, 2.68%, 1.99%, and 2.26% respectively.

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The Adams Company uses a process costing system. During the current period, 1600 units were started and 1200 units were completed and transferred out. Ending units were 70% complete for materials and 35% complete for conversion costs. Direct materials costs added were 32500 and conversion costs added were 31400 . There was no beginning WIP inventory and conversion costs are added evenly throughout the process. At the end of the period, what are the total equivalent units for conversion costs for the AdamsCompany?

Answers

Based on the process costing system, at the end of the period, the total equivalent units for conversion costs are 1340.

The total equivalent units for conversion costs for the Adams Company can be calculated using the following formula:

Total equivalent units for conversion costs = (units completed and transferred out x 100%) + (ending units x % complete for conversion costs)

In this case, the units completed and transferred out are 1200, The starting units are 1600 units. Hence, the ending units are 400 (1600 units started - 1200 units completed and transferred out). Ending units were 70% complete for materials and 35% complete for conversion costs

Plugging these values into the formula gives us:

Total equivalent units for conversion costs = (1200 x 100%) + (400 x 35%)

Total equivalent units for conversion costs = 1200 + 140

Total equivalent units for conversion costs = 1340

Therefore, the total equivalent units for conversion costs for the Adams Company at the end of the period are 1340.

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BUSINESS CASE (100 points) Julia has recently opened a dry fruits wholesale company dedicated to the sale of peanuts, almonds and pistachios. The company's name is "The Nuthouse". The Nuthouse was founded during 2020. Julia's passion, longevity and wealth of knowledge in the industry led to The Nuthouse expanding rapidly, creating a network of partners that spans farming operations in the key growing territories of South Africa, Australia, Kenya, Malawi, Zimbabwe, Mozambique and Brazil. THE NUTHOUSE Since 2020 The processing factories surpass global food safety standards and are equipped with state of the art technology During February, its first month of activity, The Nuthouse made the following transactions:Julia would like to know a forecast of the number of days to sell the inventory based on the results of the month of February. Calculate the average number of days to sell inventory as well as how many times inventory is sold per year. Explain your calculation and describe the steps followed.

Answers

To calculate the average number of days to sell inventory and how many times inventory is sold per year, we need to use the inventory turnover ratio and the average days in inventory formulas.

The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory. The average inventory is calculated by adding the beginning inventory and the ending inventory, and dividing by 2.

The average days in inventory is calculated by dividing the number of days in a year (365) by the inventory turnover ratio.

The steps to calculate the average number of days to sell inventory and how many times inventory is sold per year are as follows:

1. Calculate the cost of goods sold (COGS) for the month of February.
2. Calculate the average inventory for the month of February by adding the beginning inventory and the ending inventory, and dividing by 2.
3. Calculate the inventory turnover ratio by dividing the COGS by the average inventory.
4. Calculate the average days in inventory by dividing 365 by the inventory turnover ratio.
5. Calculate how many times inventory is sold per year by multiplying the inventory turnover ratio by 12 (the number of months in a year).

Let's say the COGS for February is $10,000, the beginning inventory is $5,000, and the ending inventory is $7,000.

1. COGS = $10,000
2. Average inventory = ($5,000 + $7,000) / 2 = $6,000
3. Inventory turnover ratio = $10,000 / $6,000 = 1.67
4. Average days in inventory = 365 / 1.67 = 218.56 days
5. Times inventory is sold per year = 1.67 * 12 = 20.04 times

Based on these calculations, the average number of days to sell inventory is 218.56 days and the inventory is sold 20.04 times per year.

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What is the present value of $7,000 paid at the end of each of the next 95 years if the interest rate is 7% per year?
The present value is___?
Also can you show how to get the answer using a financial calculator, thanks

Answers

The answer using a financial calculator and present value is $99,740.20

The present value of $7,000 paid at the end of each of the next 95 years if the interest rate is 7% per year can be calculated using the present value of annuity formula:

PV = PMT * [(1 - (1 + i)^-n) / i]

Where:

PV = Present Value

PMT = Payment amount

i = Interest rate

n = Number of periods

Plugging in the values given in the question:

PV = $7,000 * [(1 - (1 + 0.07)^-95) / 0.07]

PV = $7,000 * [(1 - 0.0026) / 0.07]

PV = $7,000 * [0.9974 / 0.07]

PV = $7,000 * 14.2486

PV = $99,740.20

Therefore, the present value of $7,000 paid at the end of each of the next 95 years if the interest rate is 7% per year is $99,740.20.

To calculate the present value using a financial calculator, you can use the following steps:

1. Enter the payment amount ($7,000) into the PMT field

2. Enter the interest rate (7%) into the I/Y field

3. Enter the number of periods (95) into the N field

4. Press the PV button to calculate the present value

The result should be the same as the one calculated using the formula above.

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Why change is so difficult for people? Change is often seen as a negative thing due to fear, uncertainty and unseen consequences it may bring with it for the people and which is why change is so difficult for the people to accept.

Answers

Change can be difficult for people for a variety of reasons. One of the biggest reasons is fear. People are often afraid of the unknown and uncertain. When we are faced with change, we are often faced with a lot of uncertainty about what the future will bring. This fear of the unknown can make change feel daunting and difficult.

Another reason why change is difficult for people is because of the unseen consequences it may bring. Change can have a ripple effect on our lives, affecting not only us, but also those around us. The potential for unseen consequences can make change feel risky and overwhelming.
Finally, change is often seen as a negative thing because it requires us to let go of what is familiar and comfortable. We often have a strong attachment to the way things are, and change requires us to let go of that attachment and embrace something new. This can be difficult for many people, and is one of the reasons why change is so challenging.
Overall, change is difficult for people because it involves fear, uncertainty, and unseen consequences. However, it is important to remember that change can also bring growth and opportunity. By embracing change and facing our fears, we can create a better future for ourselves and those around us.

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Mars Inc. is considering the purchase of a new machine that costs $60,000. This machine will reduce manufacturing costs by $5,000 annually. Mars will use the MACRS accelerated method (shown below) to depreciate the machine, and it expects to sell the machine at the end of its 5-year life for $10,000. The firm expects to be able to reduce net operating working capital by $15,000 when the machine is installed, but the net working capital will return to the original level when the project is over (i.e., after 5 years). Mars's marginal tax rate is 40 percent, and it uses a 12 percent cost of capital to evaluate projects of this nature.
Calculate the net cash flows of the project.
Year MACRS Percentage
1 0.20
2 0.32
3 0.19
4 0.12
5 0.11
6 0.06

Answers

The net cash flows of the project over its 5-year life amount to -$96,400.

Given

Machine cost( initial investment ) = $60,000

Net operating working capital change: $15,000

Year MACRS table Percentage of depreciation

1 0.20

2 0.32

3 0.19

4 0.12

5 0.11

6 0.06

Costing saving = $5,000

Required to calculate the net cash flows of the project =?

The calculation of net cash flows for each year:

Year 0:

Initial investment: -$60,000

Net operating working capital change: -$15,000

Net cash flow: -$75,000

Year 1: