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why is the concept of inertia important when determining the effects of labor market frictions?
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ECO 110 Strayer University Week 4 Impact of Economics on Daily Living Paper
PLEASE USE ATTACHED TEMPLATE AND RUBRIC
Due: Week 4
Points: 105
Skill(s) Being Assessed: Problem Solving
Criteria for S ...
ECO 110 Strayer University Week 4 Impact of Economics on Daily Living Paper
PLEASE USE ATTACHED TEMPLATE AND RUBRIC
Due: Week 4
Points: 105
Skill(s) Being Assessed: Problem Solving
Criteria for Success: In this assignment, you will:
Identify a relevant economic concept and describe how it applies to the scenario.
Summarize the change in expenditures between budgets.
Record the ways in which economic trends impacted personal income and consumer prices.
Explain the rationale for budget decisions made in response to economic changes.
Explain an additional economic trend or change from within the last year and how it has impacted your personal life and finances.
What to submit/deliverables: A completed Assignment 1 template, in Word document form.
What is the value of doing this assignment? Economic trends and events in the world have real impacts on your daily life. This could take the form of a new technology that increases the demand for workers in a certain field, the amount of economic growth for a country affecting the ability (or willingness) of employers to increase wages, or even trade decisions between two countries that cause price of some everyday goods to fluctuate.
Economic impacts require you to make decisions on how to allocate resources and effectively budget, and use critical thinking strategies to help you navigate the world of finance and economics. Throughout the previous weeks of this course, you have learned foundational economic concepts, basic personal finance considerations, and problem solving strategies. In this assignment, you will apply all of these to help a friend communicate her budgeting decisions to her family.
Your goal for this assignment is to: Build your problem solving skill by articulating how economics have real impacts on families and their budgets. You will apply decision making and critical thinking strategies to explain how economics impacts a friend’s personal budget decisions.
Steps to complete: In Week 4, submit your assignment by following these steps:
STEP 1:Read the scenario in the TEMPLATE ATTACHED And preview the questions that follow.
Scenario: A friend who knows that you are learning problem solving skills and economics has come to you for advice. At the beginning of this year, rent and the price of imported food rose. At the same time, prices for domestic food dropped. The family’s income stayed the same, but because of these economic changes, they had to make changes to their yearly budget.
Your friend’s family is unhappy about the lifestyle changes that your friend has chosen. Your friend knows that you are studying personal finance and have asked you how to explain to her family what has happened to their spending. She has brought with her their family budget from last year, as well as their current budget for this year.
STEP 2: Identify one relevant economic concept that applies to the scenario and describe how it applies. (Question 1)
STEP 3: Summarize how expenditures changed between budgets. Make sure to address how expenditures changed (or did not change). (Question 2)
STEP 4: Describe the economic trends that created the need for a change in expenditures. Make connections to the economic concepts you have learned. (Question 3)
STEP 5: Explain the rationale for your friend’s budget decisions to her family. Address all changes (or non-changes) in expenditures and discuss long term effects. (Question 4)
STEP 6: Reflect on how changes in economic variables may impact your personal life and finances. (Question 5)
STEP 7: After completing all questions in the Assignment 1 Template, save your responses as a Word document titled: Your Name, ECO110_Assignment 1 Economic Impacts and upload to BB in Week 4. Make sure to also review the scoring rubric before submitting.
Assignment 1 Template: Impact of Economics on Daily Living
Scenario:A friend who knows that you are learning problem solving skills and economics has come to you for advice. They have brought their family’s budget from last year, as well as their current budget for this year. At the beginning of this year, rent and the price of imported food rose. At the same time, prices for domestic food dropped. Your friend’s family’s income stayed the same, but because of these economic changes, they had to make changes to their yearly budget. Budget 1 on the left shows how their family used to spend their income of $25,000. Budget 2 on the right reflects changes your friend made to the family’s budget based on economic changes.
Your friend’s family is unhappy about the lifestyle changes that your friend has chosen. They are having a difficult time explaining the reasons for some of the decisions they have had to made about family finances. Since they know that you are studying personal finance, they have asked you to help them come up with a way to explain to their family what has happened to their spending.
Answer the following questions based on the scenario and Budget 1 and 2:
1. In the first four weeks of this class you have learned about several economic concepts and how they impact daily living. Choose one economic concept from this list and explain how it is relevant to your friends' budget situation:
Supply and demand
Scarcity
Tradeoff decisions
International trade
Opportunity cost
Compound growth
2. How did expenditures change between budgets? Which expenditures changed the most? Which expenditures changed the least? Which stayed the same?
3. What were the economic trends that created the need for your friend’s family to change their expenditures? What can you infer about the connection between prices and expenditures, based on the economic concepts you have learned?
4. Help your friend explain the rationale for their budget decisions to their family. For each expenditure change, describe why your friend made that decision and how it impacts the family overall. Also make sure to address expenditures that did not change. What are the long-term benefits/risks of these changes? Some questions you could help them answer are:
Why did your friend decide to buy less imported food, and more domestic food?
Why did your friend decide to use the furnace and air conditioning less?
Why did your friend decide to walk more?
Why did your friend not change the amount spent of education and family care?
Why did your friend decide to reduce savings, and what will the long-term effects of that be?
5. In our personal lives, we sometimes need to react to changes in our economic environment. Thinking about your own budget, describe how a change in an economic variable (such as a change in income, employment, interest rates, or prices) could impact your personal life and finances.
FIN 307 Grantham University Economics Principle of Finance Discussions
Discussion # 1
A financial system consists of both financial institutions and financial markets. Financial ...
FIN 307 Grantham University Economics Principle of Finance Discussions
Discussion # 1
A financial system consists of both financial institutions and financial markets. Financial markets bring the “key players” together and their funds. For this discussion, choose one of the functions of the financial markets and discuss how financial institutions play a role in this process.
Discussion # 2
The financial crisis was caused by several factors related to investments in real estate. This week, we have discussed a variety of reasons why the financial crisis occurred. For this discussion, choose one of these reasons and discuss why you believe this reason was at the root of 2008 financial crisis and recession. In addition, discuss what legislation has been enacted to prevent this event from taking place in the future and causing another financial crisis.
30 pages
Tesla Final Paper
A Case Analysis of Tesla, Inc.: How can a complete outsider to a well established market so successfully Growing concern a ...
Tesla Final Paper
A Case Analysis of Tesla, Inc.: How can a complete outsider to a well established market so successfully Growing concern about environmental ...
Lynn University Finance & Market Value Capital Structure Tasks
Q7-1: Finding the WACC
Blue Corp has $5 million shares of common stock outstanding, 750,000 shares of 7% preferred stock o ...
Lynn University Finance & Market Value Capital Structure Tasks
Q7-1: Finding the WACC
Blue Corp has $5 million shares of common stock outstanding, 750,000 shares of 7% preferred stock outstanding, and 250,000 11% semi-annual bonds outstanding, par value $1,000 each. The stock sells for $40 per share and has a beta of 1.3, the preferred stock currently sells for $75 per share, and the bonds have 15 years to maturity and sell for 93.5% of par. The market risk premium is 6%, T-bills are yielding 4%, and Blue’s tax rate is 35%.
What is the firm’s market value capital structure?
If Blue’s is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should it use to discount the project’s cash flow?
Q7-2 AAPL
Go to Yahoo Finance and look up the information for Apple Inc. (AAPL), a specialty company that designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. You want to estimate the cost of equity for the company. First, find the current Treasury bill rate. Next, find the beta for AAPL. Using the historical market risk premium, what is the estimated cost of equity for AAPL using the CAPM? Now, find the analysts’ growth rate estimates for the next five years for the company. Using this growth rate in the dividend growth model, what is the estimated cost of equity? Now find the dividends paid by the company over the past five years and calculate the arithmetic and geometric growth rates in dividends. Using these growth rates, what is the estimated cost of equity? Looking at these four estimates, what cost of equity would you use for the company?
Description
This assignment requires you to answer a series of questions. Q7-1 and 2. Answer all questions, perform all calculations and submit in one Excel Spreadsheet.
Answer the following questions:
Q7-1: Finding the WACC
Blue Corp has $5 million shares of common stock outstanding, 750,000 shares of 7% preferred stock outstanding, and 250,000 11% semi-annual bonds outstanding, par value $1,000 each. The stock sells for $40 per share and has a beta of 1.3, the preferred stock currently sells for $75 per share, and the bonds have 15 years to maturity and sell for 93.5% of par. The market risk premium is 6%, T-bills are yielding 4%, and Blue’s tax rate is 35%.
What is the firm’s market value capital structure?
If Blue’s is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should it use to discount the project’s cash flow?
Q7-2 AAPL
Go to Yahoo Finance and look up the information for Apple Inc. (AAPL), a specialty company that designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. You want to estimate the cost of equity for the company. First, find the current Treasury bill rate. Next, find the beta for AAPL. Using the historical market risk premium, what is the estimated cost of equity for AAPL using the CAPM? Now, find the analysts’ growth rate estimates for the next five years for the company. Using this growth rate in the dividend growth model, what is the estimated cost of equity? Now find the dividends paid by the company over the past five years and calculate the arithmetic and geometric growth rates in dividends. Using these growth rates, what is the estimated cost of equity? Looking at these four estimates, what cost of equity would you use for the company?
new assignment here
Valuing Stocks and Bonds3 of 3
Assignment Description
This assignment requires you to answer a series of questions. Q5-1, 2, and 3. Answer all questions, perform all calculations and submit in one Excel Spreadsheet.
Assignment Requirement
As
Answer the following questions:
Q5-1
Barret Connelly and Danny Ferris, the owners of LynnU Inc. have decided to expand their operations. They have instructed their newly hired financial analyst, Brett Clulow to enlist an underwriter to help sell $100 million in new 10-year bonds to finance the new construction. Brett has entered into discussion with Michelle Tolsma, an underwriter from the firm Fighting Knights, about which bond features LynnU Inc. should consider and what coupon rate the issue will likely have.
Although Brett is aware of the bond features, he is uncertain as to the costs and benefits of some features, so he isn’t clear on how each feature would affect the coupon rate of the bond issue. You are Michelle’s assistant, and she has asked you to prepare a memo to Brett describing the effect of each of the following bond features on the coupon rate of the bond. She also would like you to list any advantages or disadvantages of each feature.
Please address the following in Memo format:
The security of the bond: whether the bond has collateral.
The seniority of the bond.
The presence of a sinking fund.
A call provision with specified call dates and call prices.
A deferred call accompanying the preceding call provision.
A make-whole call provision.
Any positive covenants: discuss several possible positive covenants LynnU Inc. might consider.
Any negative covenants: discuss several possible negative covenants LynnU Inc. might consider.
A conversion feature (note that LynnU Inc. is NOT a publicly traded company).
A floating-rate coupon.
Q5-2
MEGG Inc. just paid a dividend of $2.00 per share on its stock. The dividends are expected to growth at a constant 6 percent per year indefinitely. If investors require a 13 percent return on the stock, what is the current price? What will the price be in 3 years? In 15 years?
Q5-3
BrainSoft has 12% coupon bonds on the market with 9 years to maturity. The bonds make semi-annual payments and currently sell for 110% of par. What is the current yield on the bonds? The yield to maturity? The effective annual yield?
MBA FPX 5014 Capella University Evaluation of Capital Projects Discussion
This assessment is about one of the basic functions of the finance manager, which is allocating capital to areas that will ...
MBA FPX 5014 Capella University Evaluation of Capital Projects Discussion
This assessment is about one of the basic functions of the finance manager, which is allocating capital to areas that will increase shareholder value and add the most value to the company. This means forecasting the projected cash flows of the projects and employing capital budgeting metrics to determine which project, given the forecast cash flows, gives the firm the best chance to maximize shareholder value. As a finance professional, you are expected to:Use capital budgeting tools to compute future project cash flows and compare them to upfront costs.Evaluate capital projects and make appropriate decision recommendations.Prepare reports and present the evaluation in a way that finance and non-finance stakeholders can understand.ScenarioSenior leadership has now called upon you to analyze three capital project requests based on forecasted cash flow as they relate to maximizing shareholder value.Your RoleYou are one of Maria's high-performing financial analyst managers at ABC Healthcare Corporation and she trusts your work and leadership. Senior leadership was impressed with your presentation in Assessment 1 and they are tasking you with the analysis of these three proposed capital projects based on forecasted cash flow. You have completed forecasting the projected cash flows of the projects as reflected in the attached spreadsheets, Projected Cash Flows [XLSX]. You now need to conduct your analysis recommending which will provide the most shareholder value to the organization.RequirementsUse capital budgeting tools to compute future project cash flows and compare them to upfront costs. Remember to only evaluate the incremental changes to cash flows.Employing capital budgeting metrics, determine which project, given the forecast cash flows, gives the organization the best chance to maximize shareholder value.Demonstrate knowledge of a variety of capital budgeting tools including net present value (NPV), internal rate of return (IRR), payback period, and profitability index (PI). The analysis of the capital projects will need to be correctly computed and the resulting decisions rational.Evaluate capital projects and make appropriate decision recommendations. Accurately compare the indicated projects with correct computations of capital budgeting tools and then make rational decisions based on the findings.Select the best capital project, based on data analysis and evaluation, that will add the most value for the company. Provide a rationale for your recommendations based on your financial analysis.Prepare reports and present the evaluation in a way that finance and non-finance stakeholders can understand.Project A: Major Equipment PurchaseA new major equipment purchase, which will cost $10 million; however, it is projected to reduce cost of sales by 5% per year for 8 years.The equipment is projected to be sold for salvage value estimated to be $500,000 at the end of year 8.Being a relatively safe investment, the required rate of return of the project is 8%.The equipment will be depreciated at a MACRS 7-year schedule.Annual sales for year 1 are projected at $20 million and should stay the same per year for 8 years.Before this project, cost of sales has been 60%.The marginal corporate tax rate is presumed to be 25%. Project B: Expansion Into Three Additional StatesExpansion into three additional states has a forecast to increase sales/revenues and cost of sales by 10% per year for 5 years.Annual sales for the previous year were $20 million.Start-up costs are projected to be $7 million and an upfront needed investment in net working capital of $1 million. The working capital amount will be recouped at the end of year 5.The marginal corporate tax rate is presumed to be 25%.Being a risky investment, the required rate of return of the project is 12%.Project C: Marketing/Advertising CampaignA major new marketing/advertising campaign, which will cost $2 million per year and last 6 years.It is forecast that the campaign will increase sales/revenues and costs of sales by 15% per year.Annual sales for the previous year were $20 million.The marginal corporate tax rate is presumed to be 25%. Being a moderate risk investment, the required rate of return of the project is 10%.
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ECO 110 Strayer University Week 4 Impact of Economics on Daily Living Paper
PLEASE USE ATTACHED TEMPLATE AND RUBRIC
Due: Week 4
Points: 105
Skill(s) Being Assessed: Problem Solving
Criteria for S ...
ECO 110 Strayer University Week 4 Impact of Economics on Daily Living Paper
PLEASE USE ATTACHED TEMPLATE AND RUBRIC
Due: Week 4
Points: 105
Skill(s) Being Assessed: Problem Solving
Criteria for Success: In this assignment, you will:
Identify a relevant economic concept and describe how it applies to the scenario.
Summarize the change in expenditures between budgets.
Record the ways in which economic trends impacted personal income and consumer prices.
Explain the rationale for budget decisions made in response to economic changes.
Explain an additional economic trend or change from within the last year and how it has impacted your personal life and finances.
What to submit/deliverables: A completed Assignment 1 template, in Word document form.
What is the value of doing this assignment? Economic trends and events in the world have real impacts on your daily life. This could take the form of a new technology that increases the demand for workers in a certain field, the amount of economic growth for a country affecting the ability (or willingness) of employers to increase wages, or even trade decisions between two countries that cause price of some everyday goods to fluctuate.
Economic impacts require you to make decisions on how to allocate resources and effectively budget, and use critical thinking strategies to help you navigate the world of finance and economics. Throughout the previous weeks of this course, you have learned foundational economic concepts, basic personal finance considerations, and problem solving strategies. In this assignment, you will apply all of these to help a friend communicate her budgeting decisions to her family.
Your goal for this assignment is to: Build your problem solving skill by articulating how economics have real impacts on families and their budgets. You will apply decision making and critical thinking strategies to explain how economics impacts a friend’s personal budget decisions.
Steps to complete: In Week 4, submit your assignment by following these steps:
STEP 1:Read the scenario in the TEMPLATE ATTACHED And preview the questions that follow.
Scenario: A friend who knows that you are learning problem solving skills and economics has come to you for advice. At the beginning of this year, rent and the price of imported food rose. At the same time, prices for domestic food dropped. The family’s income stayed the same, but because of these economic changes, they had to make changes to their yearly budget.
Your friend’s family is unhappy about the lifestyle changes that your friend has chosen. Your friend knows that you are studying personal finance and have asked you how to explain to her family what has happened to their spending. She has brought with her their family budget from last year, as well as their current budget for this year.
STEP 2: Identify one relevant economic concept that applies to the scenario and describe how it applies. (Question 1)
STEP 3: Summarize how expenditures changed between budgets. Make sure to address how expenditures changed (or did not change). (Question 2)
STEP 4: Describe the economic trends that created the need for a change in expenditures. Make connections to the economic concepts you have learned. (Question 3)
STEP 5: Explain the rationale for your friend’s budget decisions to her family. Address all changes (or non-changes) in expenditures and discuss long term effects. (Question 4)
STEP 6: Reflect on how changes in economic variables may impact your personal life and finances. (Question 5)
STEP 7: After completing all questions in the Assignment 1 Template, save your responses as a Word document titled: Your Name, ECO110_Assignment 1 Economic Impacts and upload to BB in Week 4. Make sure to also review the scoring rubric before submitting.
Assignment 1 Template: Impact of Economics on Daily Living
Scenario:A friend who knows that you are learning problem solving skills and economics has come to you for advice. They have brought their family’s budget from last year, as well as their current budget for this year. At the beginning of this year, rent and the price of imported food rose. At the same time, prices for domestic food dropped. Your friend’s family’s income stayed the same, but because of these economic changes, they had to make changes to their yearly budget. Budget 1 on the left shows how their family used to spend their income of $25,000. Budget 2 on the right reflects changes your friend made to the family’s budget based on economic changes.
Your friend’s family is unhappy about the lifestyle changes that your friend has chosen. They are having a difficult time explaining the reasons for some of the decisions they have had to made about family finances. Since they know that you are studying personal finance, they have asked you to help them come up with a way to explain to their family what has happened to their spending.
Answer the following questions based on the scenario and Budget 1 and 2:
1. In the first four weeks of this class you have learned about several economic concepts and how they impact daily living. Choose one economic concept from this list and explain how it is relevant to your friends' budget situation:
Supply and demand
Scarcity
Tradeoff decisions
International trade
Opportunity cost
Compound growth
2. How did expenditures change between budgets? Which expenditures changed the most? Which expenditures changed the least? Which stayed the same?
3. What were the economic trends that created the need for your friend’s family to change their expenditures? What can you infer about the connection between prices and expenditures, based on the economic concepts you have learned?
4. Help your friend explain the rationale for their budget decisions to their family. For each expenditure change, describe why your friend made that decision and how it impacts the family overall. Also make sure to address expenditures that did not change. What are the long-term benefits/risks of these changes? Some questions you could help them answer are:
Why did your friend decide to buy less imported food, and more domestic food?
Why did your friend decide to use the furnace and air conditioning less?
Why did your friend decide to walk more?
Why did your friend not change the amount spent of education and family care?
Why did your friend decide to reduce savings, and what will the long-term effects of that be?
5. In our personal lives, we sometimes need to react to changes in our economic environment. Thinking about your own budget, describe how a change in an economic variable (such as a change in income, employment, interest rates, or prices) could impact your personal life and finances.
FIN 307 Grantham University Economics Principle of Finance Discussions
Discussion # 1
A financial system consists of both financial institutions and financial markets. Financial ...
FIN 307 Grantham University Economics Principle of Finance Discussions
Discussion # 1
A financial system consists of both financial institutions and financial markets. Financial markets bring the “key players” together and their funds. For this discussion, choose one of the functions of the financial markets and discuss how financial institutions play a role in this process.
Discussion # 2
The financial crisis was caused by several factors related to investments in real estate. This week, we have discussed a variety of reasons why the financial crisis occurred. For this discussion, choose one of these reasons and discuss why you believe this reason was at the root of 2008 financial crisis and recession. In addition, discuss what legislation has been enacted to prevent this event from taking place in the future and causing another financial crisis.
30 pages
Tesla Final Paper
A Case Analysis of Tesla, Inc.: How can a complete outsider to a well established market so successfully Growing concern a ...
Tesla Final Paper
A Case Analysis of Tesla, Inc.: How can a complete outsider to a well established market so successfully Growing concern about environmental ...
Lynn University Finance & Market Value Capital Structure Tasks
Q7-1: Finding the WACC
Blue Corp has $5 million shares of common stock outstanding, 750,000 shares of 7% preferred stock o ...
Lynn University Finance & Market Value Capital Structure Tasks
Q7-1: Finding the WACC
Blue Corp has $5 million shares of common stock outstanding, 750,000 shares of 7% preferred stock outstanding, and 250,000 11% semi-annual bonds outstanding, par value $1,000 each. The stock sells for $40 per share and has a beta of 1.3, the preferred stock currently sells for $75 per share, and the bonds have 15 years to maturity and sell for 93.5% of par. The market risk premium is 6%, T-bills are yielding 4%, and Blue’s tax rate is 35%.
What is the firm’s market value capital structure?
If Blue’s is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should it use to discount the project’s cash flow?
Q7-2 AAPL
Go to Yahoo Finance and look up the information for Apple Inc. (AAPL), a specialty company that designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. You want to estimate the cost of equity for the company. First, find the current Treasury bill rate. Next, find the beta for AAPL. Using the historical market risk premium, what is the estimated cost of equity for AAPL using the CAPM? Now, find the analysts’ growth rate estimates for the next five years for the company. Using this growth rate in the dividend growth model, what is the estimated cost of equity? Now find the dividends paid by the company over the past five years and calculate the arithmetic and geometric growth rates in dividends. Using these growth rates, what is the estimated cost of equity? Looking at these four estimates, what cost of equity would you use for the company?
Description
This assignment requires you to answer a series of questions. Q7-1 and 2. Answer all questions, perform all calculations and submit in one Excel Spreadsheet.
Answer the following questions:
Q7-1: Finding the WACC
Blue Corp has $5 million shares of common stock outstanding, 750,000 shares of 7% preferred stock outstanding, and 250,000 11% semi-annual bonds outstanding, par value $1,000 each. The stock sells for $40 per share and has a beta of 1.3, the preferred stock currently sells for $75 per share, and the bonds have 15 years to maturity and sell for 93.5% of par. The market risk premium is 6%, T-bills are yielding 4%, and Blue’s tax rate is 35%.
What is the firm’s market value capital structure?
If Blue’s is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should it use to discount the project’s cash flow?
Q7-2 AAPL
Go to Yahoo Finance and look up the information for Apple Inc. (AAPL), a specialty company that designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. You want to estimate the cost of equity for the company. First, find the current Treasury bill rate. Next, find the beta for AAPL. Using the historical market risk premium, what is the estimated cost of equity for AAPL using the CAPM? Now, find the analysts’ growth rate estimates for the next five years for the company. Using this growth rate in the dividend growth model, what is the estimated cost of equity? Now find the dividends paid by the company over the past five years and calculate the arithmetic and geometric growth rates in dividends. Using these growth rates, what is the estimated cost of equity? Looking at these four estimates, what cost of equity would you use for the company?
new assignment here
Valuing Stocks and Bonds3 of 3
Assignment Description
This assignment requires you to answer a series of questions. Q5-1, 2, and 3. Answer all questions, perform all calculations and submit in one Excel Spreadsheet.
Assignment Requirement
As
Answer the following questions:
Q5-1
Barret Connelly and Danny Ferris, the owners of LynnU Inc. have decided to expand their operations. They have instructed their newly hired financial analyst, Brett Clulow to enlist an underwriter to help sell $100 million in new 10-year bonds to finance the new construction. Brett has entered into discussion with Michelle Tolsma, an underwriter from the firm Fighting Knights, about which bond features LynnU Inc. should consider and what coupon rate the issue will likely have.
Although Brett is aware of the bond features, he is uncertain as to the costs and benefits of some features, so he isn’t clear on how each feature would affect the coupon rate of the bond issue. You are Michelle’s assistant, and she has asked you to prepare a memo to Brett describing the effect of each of the following bond features on the coupon rate of the bond. She also would like you to list any advantages or disadvantages of each feature.
Please address the following in Memo format:
The security of the bond: whether the bond has collateral.
The seniority of the bond.
The presence of a sinking fund.
A call provision with specified call dates and call prices.
A deferred call accompanying the preceding call provision.
A make-whole call provision.
Any positive covenants: discuss several possible positive covenants LynnU Inc. might consider.
Any negative covenants: discuss several possible negative covenants LynnU Inc. might consider.
A conversion feature (note that LynnU Inc. is NOT a publicly traded company).
A floating-rate coupon.
Q5-2
MEGG Inc. just paid a dividend of $2.00 per share on its stock. The dividends are expected to growth at a constant 6 percent per year indefinitely. If investors require a 13 percent return on the stock, what is the current price? What will the price be in 3 years? In 15 years?
Q5-3
BrainSoft has 12% coupon bonds on the market with 9 years to maturity. The bonds make semi-annual payments and currently sell for 110% of par. What is the current yield on the bonds? The yield to maturity? The effective annual yield?
MBA FPX 5014 Capella University Evaluation of Capital Projects Discussion
This assessment is about one of the basic functions of the finance manager, which is allocating capital to areas that will ...
MBA FPX 5014 Capella University Evaluation of Capital Projects Discussion
This assessment is about one of the basic functions of the finance manager, which is allocating capital to areas that will increase shareholder value and add the most value to the company. This means forecasting the projected cash flows of the projects and employing capital budgeting metrics to determine which project, given the forecast cash flows, gives the firm the best chance to maximize shareholder value. As a finance professional, you are expected to:Use capital budgeting tools to compute future project cash flows and compare them to upfront costs.Evaluate capital projects and make appropriate decision recommendations.Prepare reports and present the evaluation in a way that finance and non-finance stakeholders can understand.ScenarioSenior leadership has now called upon you to analyze three capital project requests based on forecasted cash flow as they relate to maximizing shareholder value.Your RoleYou are one of Maria's high-performing financial analyst managers at ABC Healthcare Corporation and she trusts your work and leadership. Senior leadership was impressed with your presentation in Assessment 1 and they are tasking you with the analysis of these three proposed capital projects based on forecasted cash flow. You have completed forecasting the projected cash flows of the projects as reflected in the attached spreadsheets, Projected Cash Flows [XLSX]. You now need to conduct your analysis recommending which will provide the most shareholder value to the organization.RequirementsUse capital budgeting tools to compute future project cash flows and compare them to upfront costs. Remember to only evaluate the incremental changes to cash flows.Employing capital budgeting metrics, determine which project, given the forecast cash flows, gives the organization the best chance to maximize shareholder value.Demonstrate knowledge of a variety of capital budgeting tools including net present value (NPV), internal rate of return (IRR), payback period, and profitability index (PI). The analysis of the capital projects will need to be correctly computed and the resulting decisions rational.Evaluate capital projects and make appropriate decision recommendations. Accurately compare the indicated projects with correct computations of capital budgeting tools and then make rational decisions based on the findings.Select the best capital project, based on data analysis and evaluation, that will add the most value for the company. Provide a rationale for your recommendations based on your financial analysis.Prepare reports and present the evaluation in a way that finance and non-finance stakeholders can understand.Project A: Major Equipment PurchaseA new major equipment purchase, which will cost $10 million; however, it is projected to reduce cost of sales by 5% per year for 8 years.The equipment is projected to be sold for salvage value estimated to be $500,000 at the end of year 8.Being a relatively safe investment, the required rate of return of the project is 8%.The equipment will be depreciated at a MACRS 7-year schedule.Annual sales for year 1 are projected at $20 million and should stay the same per year for 8 years.Before this project, cost of sales has been 60%.The marginal corporate tax rate is presumed to be 25%. Project B: Expansion Into Three Additional StatesExpansion into three additional states has a forecast to increase sales/revenues and cost of sales by 10% per year for 5 years.Annual sales for the previous year were $20 million.Start-up costs are projected to be $7 million and an upfront needed investment in net working capital of $1 million. The working capital amount will be recouped at the end of year 5.The marginal corporate tax rate is presumed to be 25%.Being a risky investment, the required rate of return of the project is 12%.Project C: Marketing/Advertising CampaignA major new marketing/advertising campaign, which will cost $2 million per year and last 6 years.It is forecast that the campaign will increase sales/revenues and costs of sales by 15% per year.Annual sales for the previous year were $20 million.The marginal corporate tax rate is presumed to be 25%. Being a moderate risk investment, the required rate of return of the project is 10%.
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