Finance Answers

Consider an asset that costs $459,000 and is depreciated straight-line to zero over its 6-year tax life. The asset is to be used in a 4-year project; at the end of the project, the asset can be sold for $120,000. If the relevant tax rate is 34 percent, what is the aftertax cash flow from the sale of this asset?
$131,220
$127,840
$116,500
$97,600
$79,200

LKM, Inc. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 6.5 percent coupon bonds on the market that sell for $972.78, make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par?
6.25 percent
6.37 percent
6.50 percent
6.67 percent
6.75 percent

show how the following events and transactions should appear on your personal incomestatement,
balance sheet,and cash flow statement.
a.On july 1,200X, you receive $20,000 in gifts upon graduation from school and
pay off a $10,000 student laon

KF can obtain an option on a site for $100,000 on 31 Dec 2012. The option would give KF the right to purchase the site for $2.6million on 31 Dec 2017. It is estimated that similar sites will then have a market value of $3 million. Calculate the present value of purchasing the option now and compare it with the present value of purchasing the land outright later on. Which is the better alternative? Why?

Discuss the non-rational factors that may have a role in the valuation of stocks and stock market equilibrium. Provide specific examples to support your response.

Suppose a new company decides to raise a total of $200 million, with $100 million as common equity and $100 million as long-term debt. The debt can be mortgage bonds or debentures, but by an iron-clad provision in its charter, the company can never raise any additional debt beyond the original $100 million. Given these conditions, which of the following statements is CORRECT?

a. The higher the percentage of debt represented by mortgage bonds, the riskier both types of bonds will be and, consequently, the higher the firm’s total dollar interest charges will be.
b. If the debt were raised by issuing $50 million of debentures and $50 million of first mortgage bonds, we could be certain that the firm’s total interest expense would be lower than if the debt were raised by issuing $100 million of debentures.
c. In this situation, we cannot tell for sure how, or whether, the firm’s total interest expense on the $100 million of debt would be affected by the mix of debentures versus first mortgage bonds. The interest rate on each of the two types of bonds would increase as the percentage of mortgage bonds used was increased, but the result might well be such that the firm’s total interest charges would not be affected materially by the mix between the two.
d. The higher the percentage of debentures, the greater the risk borne by each debenture, and thus the higher the required rate of return on the debentures.
e. If the debt were raised by issuing $50 million of debentures and $50 million of first mortgage bonds, we could be certain that the firm’s total interest expense would be lower than if the debt were raised by issuing $100 million of first mortgage bonds.

4. Steve and Ed are cousins who were both born on the same day, and both turned 25 today. Their grandfather began putting $2,500 per year into a trust fund for Steve on his 20th birthday, and he just made a 6th payment into the fund. The grandfather (or his estate'trustee) will make 40 more $2,500 payments until a 46th and final payment is made on Steve's 65th birthday. The grandfather set things up this way because he wants Steve to work, not be a "trust fund baby," but he also wants to ensure that Steve is provided for in his old age.
Until now, the grandfather has been disappointed with Ed, hence has not given him anything. However, they recently reconciled, and the grandfather decided to make an equivalent provision for Ed. He will make the first payment to a trust for Ed today, and he has instructed his trustee to make 40 additional equal annual payments until Ed turns 65, when the 41st and final payment will be made. If both trusts earn an annual return of 8%, how much must the grandfather put into Ed's trust today and each subsequent year to enable him to have the same retirement nest egg as Steve after the last payment is made on their 65th birthday?
a. $3,726
b. $3,912
c. $4,107
d. $4,313
e. $4,528

Hello there! I am currently doing an MBA course about the financial crisis which is quite challenging. Today we were given a question about the topic: Long term capital management & the black swan.
The questions that need to be answered are the following: 1) Has a risk managers become a marketer in disguise? 2) Is risk management a predictive science or is it an art that has been misrepresented and marketed as a predictive science?
If you guys have any ideas, i would really appreciate your help! Thank you!:)

Zervos Inc. had the following data for 2008 (in millions). The new CFO believes (a) that an improved inventory management system could lower the average inventory by $4,000, (b) that improvements in the credit department could reduce receivables by $2,000, and (c) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered?
Original Revised
Annual sales: unchanged
Cost of goods sold: unchanged
Average inventory: lowered by $4,000
Average receivables: lowered by $2,000
Average payables: increased by $2,000
Days in year $110,000
$80,000
$20,000
$16,000
$10,000
365 $110,000
$80,000
$16,000
$14,000
$12,000
365

a. 34.0
b. 37.4
c. 41.2
d. 45.3
e. 49.8

Following are components of the M1 money suppy at the endof last year. What will be the size of the M1
money supply at the end of next year if currency grows by 10 percent, demand deposits grow by 5 percent,
other checkable deposits grow by 8 percent, and the amount of travelers's checks stays the same?