MBA-FPX5014_VitosGarciaJavierAndres_Assessment2_1

Explain the following concepts and how they relate to one another: - Operating leverage - Financial leverage - Optimal capital structure ALTERNATIVE:   What effect does financial leverage have on a company's return on equity and its overall valuation?  What guiding principles help managers decide on the amount of debt and equity (i.e. the capital structure) they should fund their activities with?  Is there an optimal capital structure the firm should target?

Calculate the weighted average cost of capital for Foggy Futures Weather Forecasters.The firm is in the 25% tax bracket. The optimal capital structure is listed below:SOURCE OF CAPITAL WEIGHTDebt 20%Preferred Stock 30%Common Stock 50% DebtThe firm can issue $1000 par value, 9% coupon interest bond with a 15 year maturity date. The bond has an average discount of $20 and flotation costs of $30 per bond. The selling price is $1,000Preferred Stock The firm can sell preferred stock with a dividend that is 10% of the current price of $95. The cost of issuing and selling the stock is expected to be $7 per shareCommon Stock The firm's common stock is currently selling for $100 per share. The firm expects to pay cash dividends of $12 per share next year. The dividends have been growing at 8%. The stock was discounted by $7, and the flotation costs amounted to $5 per share.

1.State the problems facing the manager/key person 2.Identify and link the symptoms and root causes of the problems 3.Differentiate short term from long term problems 4.Conclude with the decision facing the manager/key person

Financial ratio analysis is conducted by three main groups of analysts: credit analysts, stock analysts, and managers. What is the primary emphasis of each group, and how would that emphasis affect the ratios on which they focus? Why would the inventory turnover ratio be more important for someone analyzing a grocery store chain than an insurance company? Over the past year, M.D. Ryngaert & Co. had an increase in its current ratio and a decline in its total asset’s turnover ratio. However, the company’s sales, cash, and equivalents, DSO, and fixed assets turnover ratio remained constant. What balance sheet accounts must have changed to produce the indicated changes? Profit margins and turnover ratios vary from one industry to another. What differences would you expect to find between the turnover ratios, profit margins, and DuPont equations for a grocery store and a steel company? How does inflation distort ratio analysis comparisons for one company over time (trend analysis) and…

The following information was gathered by the Budget Committee Chairman of ABC Corporation: ABC Co. produces and sells only one product. The selling price during the budget period is expected to be the prevailing price of ₱7.50 per unit. The company expects to sell 112,500 units of the product during the period. The desired finished goods inventory at the end of the period is 75,000 units while the expected beginning inventory is 62,500 units. Direct labor is ₱4.50 per hour. Each product requires 30 minutes to complete. Factory overhead is applied to production on the basis of direct labor hours. Variable factory overhead cost at the planned level of operations is budgeted at ₱49,800. Fixed budgeted overhead is ₱149,400. Each unit of product requires 1.5 kgs. of raw materials. Only one kind of raw material is used and it is expected to cost ₱0.30 per kilo. The desired ending inventory of raw materials is 12,000 kgs. the expected beginning inventory is 9,500 kilograms. Variable selling…

You have been appointed as a financial consultant by the directors of Sizonke Holdings. They require you to determine the cost of capital of the company. The following information is available on the capital structure of the company:✓1 500 000 ordinary shares, with a market price of R3 per share. The latest dividend declared was 85 cents per share. A dividend growth of 14% was maintained for the past 5 years.✓1 000 000 11%, R1 preference shares, with a market value of R2 per share.✓R1 000 000 9%, debentures due in 7 years and the current yield-to-maturity is 10%.✓R700 000 14%, bank loan, due in December 2019.Additional information:- The company has a tax rate of 28%.- The beta of the company is 1.6, a risk free rate of 6% and the return on the market is 15%.Required:2.1 Calculate the weighted average cost of capital. Use the Gordon Growth Model to calculate the cost of equity. (22 marks)2.2 Calculate the cost of equity, using the Capital Asset Pricing Model. (

Ethics and Professional Conduct in Business At the end of the current month, Jonni Rembert prepared a trial balance for Star Rescue Service. The credit side of the trial balance exceeds the debit side by a significant amount. Jonni has decided to add the difference to the balance of the miscellaneous expense account in order to complete the preparation of the current month's financial statements by a 5 o'clock deadline. Jonni will look for the difference next week when she has more time. Discuss whether Jonni is behaving professionally.

Lingenburger Cheese Corporation has 7.5 million shares of common stock outstanding, 275,000 shares of 4.7 percent preferred stock outstanding, and 160,000 bonds with a semiannual coupon rate of 5.6 percent outstanding, par value $2,000 each. The common stock currently sells for $62 per share and has a beta of 1.10, the preferred stock has a par value of $100 and currently sells for $94 per share, and the bonds have 18 years to maturity and sell for 108 percent of par. The market risk premium is 7.2 percent, T-bills are yielding 3.4 percent, and the company's tax rate is 24 percent. a. What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? (Do not round intermediate calculations enter your answer as a percent rounded…

What is the cost of Common Stock for Foggy Futures Weather Forecasters? The firm is in the 40% tax bracket.  The optimal capital structure is listed below: The firm's common stock is currently selling for $65 per share. The firm expects to pay cash dividends of $7 per share next year. The dividends have been growing at 5%. The flotation costs amounted to $5 per share.

Calculate the annual interest and the semiannual interest payment for the following corporate bond issues with a face value of $1,000. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Annual Semiannual Annual Interest Interest Interest Rate Amount Payment 4.40% 5.10% 3.05% 3.60%

1.Discuss the attractiveness of Treynor Black methodology to an investor in developed market large and medium cap equities?                   2. The stock market falls by 33 percent in one day: is this necessarily inconsistent with the market hypothesis? Explain your reasoning        3. New information hits a company share such that the share price rises from 100 pence to 120 pence and then the share price rises gradually over the following 6 months to 150 pence despite any further news. Is this evidence of market efficiency? Explain your reasoning.

19 of Vision Company purchased treasury stock with a cost of $16,000 during 2017. During the year, the company paid dividends of $20,000 and issued bonds payable for proceeds of $860,000. Cash flows from financing activities for 2017 total Select one: a. $840,000 net cash inflow b. $856,000 net cash inflow c. $860,000 net cash outflow d. $824,000 net cash inflow

Air Asia is a low-cost airline operating primarily in Asia. It was the first airline in Asia to operate under the low fare no-frills model first introduced in Europe. Air Asia enjoyed for quite a while some success in a very competitive industry where many firms have failed. This case considers Air Asia’s development, its business model, and the reactions of some of its competitors. The objective is to use Porter’s Five Forces Model and seek to evaluate if Air Asia’s success is sustainable in the market it has defined for itself. What competitive advantages does Air Asia enjoy at the time of this case? Do you think these advantages are sustainable?

When forming the objectives and constraints part of the IPS, a portfolio manager must consider ability and willingness to take risk.  Explain what is meant by these terms and how the manager can accommodate these risks

Which of the following projects would normally be accounted for in a capital projects fund? O A) The construction of a parking garage operated as an enterprise fund. OB) Payment of interest on bonds issued to finance the construction of a new city hall, OC) The construction of a police station addition. O D) Payment of principal on revenue bonds. Question 2 ( Siler City receives a trust donation for the purpose of maintaining flower beds in city parks, but the donor does not specify that the principal must be maintained. This type of trust would be most appropriately accounted for in a O A) Permanent Fund B) Special Revenue Fund OC) Private Purpose Trust Fund OD) General Fund.

Badwin Ltd is a rapidly growing company presently owned by the Badwin family. It sells designer clothing and accessories that it sourced from around the world and the trading result are exceeding expectations. The family is looking to cash in on the success of the business and also provide some capital for expansion, so they have decided to float the company on the stock exchange.   At present, the board of directors consists of Mark Badwin who is the Chairman and Managing Director, and his two sons David and John who are Sales and Buying Directors respectively. They are going to appoint Bill Struter who is presently the Chief Accountant, as Financial Director just before flotation.   The Auditor, T & R are a little concerned that the Stock Exchange will find the level of Corporate Governance unacceptably low, if not actually non-existence, and they think they should tell Mark Badwin, who is dogmatic and not a man who like others interfering in his business, what he need to do to…

Make vs. Buy; Strategy Martens Inc. manufactures a variety of electronic products. It specializes in commercial and residential products with moderate-to-large electric motors such as pumpsand fans. Martens is now looking closely at its production of attic fans, which included 10,000 unitsin the prior year (see the table below). These costs included $100,000 of allocated fixed manufacturing overhead. Martens has capacity to manufacture 15,000 attic fans per year.Martens believes demand in the coming year will be 20,000 attic fans. The company has lookedinto the possibility of purchasing the attic fans from another manufacturer to help it meet thisdemand. Harris Products, a steady supplier of quality products, would be able to provide up to 9,000attic fans per year at a price of $46.00 per fan delivered to Martens’s facility.The following is based on the production of 10,000 units in the prior year:[LO 11-3]Selling price per unit $72.00Costs per unit:Electric motor $ 6.00Other parts…

Scenario Your corporation has just approved an 8-year expansion plan to grow its market share. The plan requires an influx of cash in each of the 8 years. Management wants to develop a financial plan to ensure the cash needed for the expansion will be available at the beginning of each of the 8 years. The corporation has the following investment options: Security Price per unit Return Rate (%) Years to Maturity 1 $1,200 10.255 5 2 $1,000 6.7550 6 3 $1,175 12.110 7 Savings Account   5.500     Each unit of security 1, 2, and 3 guarantees to pay $1,000 at maturity. Investments in these securities must take place only at the beginning of year 1 and will be held until maturity. Any funds not invested in securities will be invested in a savings account that pays the annual interest rates noted above. The following table summarizes the cash needs for the expansion plan for each of the 8 years: Year 1 = $250,000 Year 5 = $295,000…

Gro-Tech is a profitable but small company in a technology related service industry withannual sales of P150 million. The industry is highly competitive but there are major barriersfor entry to new competitors and the long-term future of Gro-Tech is considered by industryanalysts to be sound.The board comprises a non-executive chairman, a chief executive who has a largeshareholding, an executive finance director, operation director and marketing director and anon-executive director with wide knowledge of the industry and who retired from thecompany 3 years ago. There is only one committee of the board. The audit committeeconsists of the chairman, non-executive director and finance director.There is no internal audit function in Gro-Tech but the external auditors are relied on toreport on any weaknesses in control and their letter of engagement authorises them to carryout work over and above the financial audit in relation to internal control. The externalauditors have always given a…

Clean Air Ltd (Clean Air) had been a successful air conditioner manufacturer for manyyears. During the past two years, Clean Air has conducted research into newenvironmentally friendly ways to cool air without using electricity.In 2018, Clean Air made a decision to raise capital to enable it to conduct moreresearch. It also planned to expand its business by manufacturing portable solarpowered air conditioners. The board estimated it would need $100,000.After much consideration the Board decided to borrow the $100,000.00 from Vast Bank.Vast Bank would provide the loan only if Clean Air granted the bank a security interestover Clean Air’s assets.For some months Clean Air’s business expanded as planned but then a competitor, PureAir Pty Ltd, developed a more effective solar powered air conditioner and Clean Air’s salesbegan to decline rapidly.Clean Air is now finding it hard to pay its contractors and suppliers on time and is failing tomake regular loan repayments to Vast Bank. It is also…

Marco has become charitably inclined since suffering serious health issues. He wants to establish a charitable trust that will provide him with an annual income for life with the remainder to charity. He also wants to be able to make additional contributions to the trust on an ongoing basis. Which of the following charitable trusts will meet his needs? Charitable lead trust (CLT) Charitable remainder annuity trust (CRAT) Charitable remainder unitrust (CRUT) A)II and III   B)I only   C)III only   D)I and II

Subject-accounting

Gro-Tech is a profitable but small company in a technology related service industry with annual sales of P150 million. The industry is highly competitive but there are major barriers for entry to new competitors and the long-term future of Gro-Tech is considered by industry analysts to be sound. The board comprises a non-executive chairman, a chief executive who has a large shareholding, an executive finance director, operation director and marketing director and a non-executive director with wide knowledge of the industry and who retired from the company 3 years ago. There is only one committee of the board. The audit committee consists of the chairman, non-executive director and finance director. There is no internal audit function in Gro-Tech but the external auditors are relied on to report on any weaknesses in control and their letter of engagement authorises them to carry out work over and above the financial audit in relation to internal control. The external auditors have…

As the manager of ABC Bank the shareholders are not satisfied that you (the manager) have managed the capital requirement effectively. The capital requirement is below the requirement of the Bank of Canada. Explain in no more than 6 sentences what strategies you can employ to ratify the problem of capital adequacy

Plan for potential investors for 39 Storage https://www.39storage.com/ (This Company) Cover these points below Identify the problem to be solved. Introduce your solution to the problem. Discuss your beginning traction for getting sales. Identify the target market. Explain the costs of acquiring customers in your target market. Communicate the value proposition relative to competitors. Describe the basics of the revenue model. Provide financial projections, along with the assumptions. Sell the team. Identify your funding needs, and explain the use of the funds (the investment price must be stated) Describe possible exit strategies—how the investors may be able to cash out. End on a high note—remind investors why your product/service/team is so great.

Limitations of Portfolio analysis is Naively following the prescriptions of a portfolio model may actually reduce corporate profits if they are used inappropriately that have caused some companiesto reduce their use of this approach.Why?

Assignment 1 Adom Ltd, is a private company in Ghana operating in the manufacturing sec Below is a Statement of financial position and a summarized statement of income with comparatives for the year ended 31stDecember 2019. Statement of Financial Position as at 31 December 2019: Non-Current Assets   2019         2018 GH¢         GH¢ Property, Plant & Equipment 200,000 250,000 Research & Development   40,000            -   240,000 250,000 Current Assets Available For Sale Investments   12,000   20,000 Inventory 70,000 45,000 Trade Receivables 30,000 23,000 Cash and Cash equivalents 18,000 17,000   130,000 105,000   370,000 355,000 Equity     Equity Share Capital(GH¢1 per Share) 150,000 100,000 10%PreferenceShareCapital 50,000 50,000 Retained Earnings    60,000   55,000    260,000 205,000 Non-Current Liabilities 10% Loan Note   50,000   90,000 12%…

PLease answer part A

The table below, shows the balance sheet of the Bruins Bank. Liabilities/Equity Assets Reserves $40 Demand Deposits Loans 300 Shareholders' equity $450 50 Securities 100 Fixed assets 60 Total 500 Total 500 By how much is the Bruins Bank over- or under-reserved if the target reserve ratio is as listed below. a. If the target reserve ratio is 4.0% the Bruins Bank is (Click to select) by $ b. If the target reserve ratio is 8.0% the Bruins Bank is (Click to select) by $ c. If the target reserve ratio is 12.0% the Bruins Bank is (Click to select) by $ d. If the target reserve ratio is 14.0% the Bruins Bank is (Click to select) by $