Finance Answers

CH 16-16
Beckheart is seeking financing for its inventory. Safe-proof Warehouses offers space in their facility for Beckheart’s inventory.
They offer loans with a 15 percent APR equal to 60 percent of the inventory. Monthly fees for the usage of the warehouse are $500 plus 0.5 percent of the inventory’s value. If Beckheart has saleable inventory of $2 million,
A. how much money can the firm borrow?
B. what is the interest cost of the loan in dollars over a year?
C. what is the total amount of fees to be paid in a year?
D. what is the effective annual rate of using Safe-proof to finance Beckheart’s inventory?

march correll house of couture orders and distributes high fashion clothing items to fachion outlets all over Kuala Lumpur. they buy their clothing item from a well-known designer in italy. clothing items are ordered in lots that requre quantitites of 200 units per order, and each order cost usd50 to make. demand for high fashion clothing items is 7,000 units per month and the carrying const of usd0.50 per item: i. calculate the total inventory cost if marc correll haouse of couture needs to place order per year

him to put a down payment of 20% of the value of the house. The loan terms are as follows:
Interest rate on the loan 1.8% a year for the first two years and then the rate will be 3-month SIBOR + 0.5 percent. This rate will be adjusted every 3 months after the first two years. The loan period will be 15 years. If loan is approved, the monthly payments will start from September 1, 2012
(a) Calculate the monthly payment on September 1, 2012.

(b) If the SIBOR rate is expected to be 1.2% on September 1, 2014, calculate the revised monthly payment on September 1, 2014.

carrington holdings is considering two mutually exclusive projects which requred an initial outlay of usd165,000 for project Alpha and usd150,000 for project Beta. the cost of capital is 12%. below are expected cash flows for two project. Alpha years 1. 46600 2.52000 3.65000 4.50000 5.60000 . Beta years 1 - 5 is 42200 . i) calculate the internal rate of return for project beta only ii) calculate the payback period and net present value for both projects. tq

Valdes Enterprises is considering issuing a 10-year convertible bond that would be priced at its $1,000 par value. The bonds would have an 8.00% annual coupon, and each bond could be converted into 20 shares of common stock. The required rate of return on an otherwise similar nonconvertible bond is 10.00%. The stock currently sells for $40.00 a share, has an expected dividend in the coming year of $2.00, and has an expected constant growth rate of 5.00%. What is the estimated floor price of the convertible at the end of Year 3?

D. Butler Inc. needs to raise $14 million. Assuming that the market price of the firm's stock is $95, and flotation costs are 10% of the market price, how many shares would have to be issued? What is the dollar size of the issue?

Based on the corporate valuation model, the value of a company's operations is $900 million. Its balance sheet shows $70 million in accounts receivable, $50 million in inventory, $30 million in short-term investments that are unrelated to operations, $20 million in accounts payable, $110 million in notes payable, $90 million in long-term debt, $20 million in preferred stock, $140 million in retained earnings, and $280 million in total common equity. If the company has 25 million shares of stock outstanding, what is the best estimate of the stocks price per share?

a. $23.00
b. $25.56
c. $28.40
d. $31.24
e. $34.36

PLEASE show calculations. I have seen a wide variety of answers to this and they are all different.

11. The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year. Nominal GDP was $20 million this year, and the money supply was $7 million. The central bank for the One Product economy plans to increase the money supply by 10 percent next year.
a. What was the average selling price for the personal computers this year? M1/unit $7million/12,500 =560
b. What is the expected average selling price next year for personal computers if the velocity of money remains at this year’s turnover rate? What percentage change in price level is expected to occur? $7million/10%= 7.7 million, 7.7 million/12,500=616, 616-560=56/560=.10
c. If the objective is to keep the price level the same next year (i.e., no inflation), what percentage increase in the money supply should the central bank plan for?
d. How would your answer in (c) change if the velocity of money is expected to be three times next year? What is it now?

the abc big oil company is considering two mutually exclusive plans for extracting oil on property for which it has mineral rights. both plans call for the expenditure of $10mm to drill development wells. under plan a, all the oil will be extracted in 1 year, producing a cash flow at t=1 of $12mm, while plan b would have cash flows of $1.75mm per year for 20 years.

a) What are the annual incremental cash flows that will be available to the firm if it undertakes Plan B rather than Plan A?

b) If the firm accepts Plan A, and then invests the extra cash generated at the end of year 1, what rate of return (reinvestment rate) would cause the cash flows from reinvestment to equal the cash flows of Plan B?

stocks a and b have the following data. assuming the stock market is efficient and the stocks are in equilibrium, whic of the following statements is correct?
a, these two stocks should have the same price
b, these two stocks must have the same dividend yield
c, these two stocks should have the same exoected return
d, these two stocks must have the same expected capital gains
e, these two stocks must have the same expected year end dividend