Finance Answers

PARCO is considering a new project that complements its existing business. The machine required for the project costs $3.9 million. The marketing department predicts that sales related to the project will be $2.35 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. PARCO also needs to add net working capital of $150,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 30 percent. The required rate of return for PARCO is 13 percent. Should PARCO proceed with the project?

tal budgeting [7 marks] 3. PARCO is considering a new project that complements its existing business. The machine required for the project costs $3.9 million. The marketing department predicts that sales related to the project will be $2.35 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. PARCO also needs to add net working capital of $150,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 30 percent. The required rate of return for PARCO is 13 percent. Should PARCO proceed with the project?

As an analyst in the valuation team your job is to perform significant financial modeling and analysis. Your company is seeing a new sales strategy that require your input. The strategy will be effective for the upcoming 4 Years. If the company adopts the new strategy, sales will grow at the rate of 15% per year for three years. Other ratios such as: Asset turnover, gross margin, the capital structure and income tax will remain unchanged. However, depreciation would be applicable at 8% of net fixed assets at the starting of the year. Moreover, the target rate of return for the company is 12%. Additional financial information for current year is mentioned below:

Income Statement

Sales

50,000

Gross Margin (15%)

7,500

Admin., selling and Distribution expenses (7%)

3,500

Profit before tax

10,000

Tax (35%)

3,500

Profit After Taxes

6,500

Balance Sheet

Fixed Assets

17,000

Current Assets

12,000

Equity

25,000

C)    Provide detailed comments should the company proceeds with this new strategy or Not?      (3 Marks)

: As an analyst in the valuation team your job is to perform significant financial modeling and analysis. Your company is seeing a new sales strategy that require your input. The strategy will be effective for the upcoming 4 Years. If the company adopts the new strategy, sales will grow at the rate of 15% per year for three years. Other ratios such as: Asset turnover, gross margin, the capital structure and income tax will remain unchanged. However, depreciation would be applicable at 8% of net fixed assets at the starting of the year. Moreover, the target rate of return for the company is 12%. Additional financial information for current year is mentioned below:

Income Statement

Sales

50,000

Gross Margin (15%)

7,500

Admin., selling and Distribution expenses (7%)

3,500

Profit before tax

10,000

Tax (35%)

3,500

Profit After Taxes

6,500

Balance Sheet

Fixed Assets

17,000

Current Assets

12,000

Equity

25,000

A)   Determine value of business before adoption of new strategy?                          

What will be the incremental value and value of business after adoption of this new strategy?

Dalda Foods is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 18 percent over the following year, and then 8 percent per year indefinitely. The required return on this stock is 11 percent, and the stock currently sells for PKR65 per share. What is the projected dividend for the coming year?

A new device ranges from $42,350-$56,210.  Your team wants the $56,210.00 version. Your facility currently bills $350 to Medicaid for 3D ultrasounds that are medically necessary and $150 for 2D ultrasounds. Private insurance is billed $385 (3D) and $185 (2D).

Analyze how many patients your facility would need to see to pay off the device in 6 months (25% of your practice is Medicaid patients) and your practice includes 5 physicians and 2 nurse-midwives. Each sees 50 patients per week.

Is it true that  In a bigger, more global economy, one can expect the wages of the most popular entertainers, financial experts and sports stars to increase due to the ‘winner take all’ economics theory ?

PARCO is considering a new project that complements its existing business. The machine required for the project costs $3.9 million. The marketing department predicts that sales related to the project will be $2.35 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. PARCO also needs to add net working capital of $150,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 30 percent. The required rate of return for PARCO is 13 percent. Should PARCO proceed with the project?

Dalda Foods is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 18 percent over the following year, and then 8 percent per year indefinitely. The required return on this stock is 11 percent, and the stock currently sells for PKR65 per share. What is the projected dividend for the coming year?

1. Pakistan State Oil (PSO) issues a bond with a par value of PKR1,000, 15 years to maturity, and a coupon rate of 5 percent paid annually. If the yield to maturity is 4 percent, what is the current price of the bond?