1.)Your sister wants to open a store that sells antique-style jewelry and accessories. She has $15,200 of savings to invest, but opening the store will require an initial investment of $21,800. Net cash inflows will be $2,500, $1,200, and $0 in the first three months. As the store becomes better known, net cash inflows will become +$700 in the fourth month and grow at a constant rate of 5 percent in the following months. You want to help your sister by providing the additional money that she needs. How much money do you have to invest each month to start and to keep the store operating with a minimum cash balance of $1,200?

You will have to invest $

each month to start and to keep the store operating with a minimum cash balance of $1,200.

You will then need to invest an additional $

during the first month to cover the cash flow.

2.)You have the following information for a company you are valuing and for a comparable company:

Comparable company:Company you are valuing:Stock price = $24.25Value of debt = $4.47 millionNumber of shares outstanding = 6.46 millionEst. EBITDA next year = $5.20 millionValue of debt = $18.40 millionEst. income next year = $2.00 millionEst. EBITDA next year = $16.00 millionEst. income next year = $5.70 million

Estimate the enterprise value of the company you are evaluating using the P/E and enterprise value/EBITDA multiples.(Round intermediate calculation and final answer to 2 decimal places, e.g. 15.25.)

Enterprise value of the company

million

3.)You are valuing a company using the WACC approach and have estimated that the free cash flows from the firm (FCFF) in the next five years will be $35.7, $41.3, $43.1, $46.2, and $46.5 million, respectively. Beginning in year 6, you expect the cash flows to decrease at a rate of 2 percent per year for the indefinite future. You estimate that the appropriate WACC to use in discounting these cash flows is 9 percent. What is the value of this company?(Round answer to 2 decimal places, e.g. 52.75.)

Value of company

$

million

4.)You want to estimate the value of a local advertising firm. The earnings of the firm are expected to be $2 million next year. Based on expected earnings next year, the average price-to-earnings ratio of similar firms in the same industry is 45. Therefore, you estimate the value of the firm you are valuing to be $90 million.

Further investigation shows that a large portion of the firm's business is obtained through connections that John Smith, a senior partner of the firm, has with various advertising executives at customer firms. Mr. Smith only recently started working with his junior partners to establish similar relationships with these customers.

Mr. Smith is approaching 65 years of age and might announce his retirement at the next board meeting. If he does retire, revenues will drop significantly and earnings are estimated to shrink by 35 percent. You estimate that the probability that Mr. Smith will retire this year is 50 percent. If he does not retire this year, you expect that Mr. Smith will have sufficient time to work with his junior partners so his departure will not affect earnings when he departs. How does this information affect your estimate of the value of the firm?(Round answer to 2 decimal places, e.g. 52.75.)

Value of the firm

million

5.)If a Volkswagen Passat costs $40,500 in Baltimore and 30,000 in Frankfurt, what is the implied exchange rate between the U.S. dollar and the euro?(Round answer to 4 decimal places, e.g. 15.2570.)

Implied exchange rate $ (?) /

6.)Calculate the indicated exchange rates given the following information.(Round answers to 5 decimal places, e.g. 15.25750.)

GivenCompute

a.102.7500/$

b.$1.1050/

c.$0.9800/C$

7.)Management of Sheridan, Inc., an electronic games manufacturer, is planning to purchase flash memory from one of two sources. Kyoto, Inc., quotes a price of 6,700 per gigabyte. The current exchange rate is 101.50/$. Another Japanese manufacturer offers to supply the same flash memory at a price of 58.00 per gigabyte. The spot rate available is 208.08/.(Round answers to 2 decimal places, e.g. 15.25.)

Vendor 1 Cost from $ (?) per gigabyte

Vendor 2 Cost from $ (?) per gigabyte

Which is the cheaper source of flash memory for Sheridan?

Which has the cheaper source of flash memory for Sheridan, Vendor 1 or Vendor 2?

8.)Blossom Corp. has just made a sale to a British customer. The sale was for a total value of 138,500 and is to be paid 60 days from now. Blossom management is concerned that the British pound will depreciate against the U.S. dollar and plans to hedge this risk. The company's bank informs management that the spot rate is $1.2325/ and the 60-day forward rate is $1.2225/.

If Blossom sells its pounds receivable at the forward rate, what is the dollar value of its receivables?(Round answers to 2 decimal places, e.g. 15.25.)

Value of receivables $ (?)

If it did not enter into a forward contract and the spot rate 60 days later is $1.1950/, how much would the company lose by not hedging?(Round answers to 2 decimal places, e.g. 15.25.)

Loss incurred by not hedging $ (?)

9.)American Sandhill management is planning to make a $3.5 million loan to a French firm. Currently, LIBOR is at 1.9 percent. American management considers a default risk premium of 1.55 percent, a foreign exchange rate risk premium of 0.35 percent, and a country risk premium of 0.13 percent to be appropriate for this loan.

What is the loan rate charged by American Sandhill?

Loan rate charged (?) %