Corporate Finance

Questions & Answers

Earnings per share Dividend per share Return on Assets Return on Equity

The Capital Budgeting Decision 1. What are the relevant cashflows?

Prepare a Common Size Analysis and Trend Analysis for three years for the income Statement, Balance Sheet and Cash Flows Statement of Excel Corporation (there is a separate worksheet for each of these analyses). Once you have completed the Common Size and Trend Analyses, review your work and prepare a written summary of Insights to management of how the Excel Corporation is performing (there are two separate worksheets for your written analysis). Download the attached spreadsheet (https://ms.devry.edulm/content/1840/83883FIN332)FIN332 Week4 Homework.xlsx)..

Every new iPhone comes with a basic one-year warranty. If defects in materials or workmanship are discovered in one year from the date of retail purchase, Apple will repair or replace the iPhone at no cost to the customer. Recently, a batch of iPhone 6s devices was discovered to have a defect that causes them to shut down unexpectedly when the battery charge level reaches about 30%. Apple has issued a battery replacement program for these iPhone 6s devices. 1. Assume that Apple makes a quarterly adjusting entry using the percent-of-sales method to estimate warranty expense for all new iPhones sold during the quarter. How will this adjusting entry impact Apple's balance sheet? Its income statement? 2. Is the adjusting entry for warranty expense an accrual or a deferral? Explain. 3. Now think about the battery replacement program for the affected iPhone 6s devices. When a customer brings in his/her iPhone 6s for a battery replacement under the battery replacement program, how will this transaction impact Apple's balance sheet? Its income statement?

1. If you set aside $5,000 per year (i.e., one deposit of $5,000 each year) in a Roth IRA for the next 25 years (the first contribution is to be made exactly one year from now, so use an ordinary annuity setup), how much will you have at your retirement in 25 years if your IRA earns 8% APR, compounded monthly?

1. Your grandmother is trying to determine the value of her bond portfolio and turns to you for help. Find the current market values of the components of your grandmother's portfolio. a) 100 zero coupon bonds with a $1,000 face value and 3 years to maturity. The YTM on these bonds is 4.8% (assume annual compounding here). What is the total value of these 100 zero coupon bonds? b) 75 bonds with a $1,000 face value and a coupon rate of 6%. These bonds have 8 years left to maturity and pay coupons on a semiannual basis. The YTM of these bonds is 5.2%. What is the total value of these 75 bonds?

Question 4: What is the NPV and MIRR of the project?

Question 1 Consider the two mutually exclusive projects described in the table below. (Note: Each part of the question requires a written answer.) a) Assuming 9% minimum attractive rate of return (MARR), should either of the two projects be accepted? Why? b) Assuming 16% MARR, should either of the two projects be accepted? Why? c) For any positive value of the MARR, divide the possible MARR values into ranges with different decisions; describe and discuss what decision would be made in each range and why. You will need to calculate the crossover rate to determine the precise MARR where the decision changes. Include an NPV profile table and chart to illustrate your answer.

As the winner of the Housecleaners sweepstakes, you are entitled to one of the following prizes: A. $999,999 immediately. B. $100,000 per year forever, starting next year. C. $180,000 per year for 10 years starting immediately. D. $300,000 payable every 2 years over 20 years (first payment to occur 2 years from today). E. $39,000 starting next year growing by 6% forever. In terms of present values, which prize should be chosen if r = 9%? Please show all your work for each of the above and round to 0 decimal places.

Based on the information presented above, answer the following questions. 1. (12 marks) Calculate the incremental free cash flow during the project's life (starting from Year 0 to Year 5). Show workings. 2. (13 marks) Calculate the NPV, payback period and IRR of the project. Should the project be accepted? Show workings and explain your answer(s).

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