The Concept of Interest and Rate

b. What would be the value of each bond if they had annual coupon payments?

21. Universal Forests current stock price is $154.00 and it is likely to pay a $5.23 dividend next year. Since analysts estimate Universal Forest will have a 13.0% growth rate what is the required return?

a) Assuming the opportunity interest rate is 6%, what is the present value of the second alternative?

* Our company’s sales forecast has been based on performance from previous years along with market circumstances. We are looking at the future of the business objectively which we then can evaluate past to

In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.

year 2 is $23.64 or $33.64. In each case the market expects the firm to earn 10%

9. You want to purchase a business with the following cash flows. How much would you pay for this business today assuming you needed a 14% return to make this deal?

addition, the company has an applicable tax rate of 40% and no unused tax loss or credit carryforwards.

The revenue is $600,600*1.2= $720,720. The variable cost changes as sales increases and fixed cost stays the same, the gross profit is $175,500. After tax, the net income is $100,557.

* Refer sheet “30000 Sales” for cost incurred and Gain/loss for AIFS for different scenarios and actual sales volume of 30000.

a. Assuming the most current operational cost levels, what sales must it generate to recoup the above investment?

No.of employees * 10% of gross sales = Cost of set up & ongoing communication + No. of employees * (Employee Base Salary + 5% of gross sales)

During performing the sales forecast for Victoria's Secret, I learned that for most part that Victoria's Secret has an incline in their profits. They have however hit a few bumps here and there. The causes of this could be more cost for Victoria's Secret purchasing materials and production of their products. Another reason for this could also be a slower rate in sales than usual. Like I said, for the most Victoria Secret has seen an incline in their profits and sales throughout the years. Performing the percentage of sales forecast for Victoria's Secret, I established a forecasted sales of 5 percent which means that they would have to have a sales of $2,808 compared to their last years $2,675. This is a very feasible number for Victoria Secret to achieve, considering that majority of their money in assets outweighs their liabilities.

After paying 25% to the venture capital firm, $22,776.50, the net profit before taxes would be $68,329.50. Then after paying taxes of $34,164.75 they would be left with $34,165 of an increase in cash.

net sales: $1,000,000 cost of goods sold: $700,000 rent: $20,000 wages: $100,000 other operating expenses: $50,000 net sales – all operating expenses = 530,000