Kindly help solve these problems. Please see attached documents below fro theproblem questions and templates

\fYou must show your work in excel worksheet for full credit; showing your work will also ease getting partial credit. I have shown the available points for each problem. PUT YOUR NAME ON YOUR EXAM (anything you submit), in the title of your files as well. Please consolidate your excel files and try to submit only one workbook with a separate tab for each question. Also do not forget to name the tabs to identify the questions/problems. Question 1. Answer the problem #2-12 on page 52 from the TM (3rd Edition) textbook. (25 points) Question 2. Answer the problem #4-9 on page 141 from the TM (3rd Edition) textbook. (25 points) Question 3. Answer the problem #5-10 on page 184-185 from the TM (3rd Edition) textbook. (25 points) Question 4. Answer the problem #6-7 on page 218 from the TM (3rd Edition) textbook. (25 points) QUESTION 1: PROBLEM 2-12 PROJECT VALUATION Carson electronics is currently considering whether to acquire a new materials-handling machine for its manufacturing operations. The machine cost $760,000 and will be depreciated using straight-line depreciation toward a zero salvage value over the next five years. During the life of the machine, no new capital expenditures or investments in working capital will be required. The new materials-handling machine is expected to save Carson Electronics $250,000 per year before taxes of 30%. Carson's CFO recently analyzed the firm's opportunity cost of capital and estimated it to be 9%. a. What are the annual free cash flows for the project? b. What are the project's NPV and IRR? Should Carson Electronics accept the project? c. Carson's new head of manufacturing was concerned about whether the new handler could deliver the promised savings. In fact, he projected that the savings might be 20% lower than projected. What are the NPV and IRR for the project under this scenario? QUESTION 2: PROBLEM 4-9 CALCULATING THE EXPECTED YTM International Tile Importers Inc. is a rapidly growing firm that imports and markets floor tiles from around the world. The tiles are used in the construction of custom homes and commercial buildings. The firm has grown so fast that its management is considering the issuance of a five-year interest-only note. The notes would have a principal amount of $1,000 and pay 12% interest annually, with the principal amount due at the end of year 5. The firm's investment banker has agreed to help the firm place the notes and has estimated that they can be sold for $800 each under today's market conditions. 1 a) What is the promised YTM based on the terms suggested by the investment banker? b) Refer to the appendix to this chapter for this analysis. The firm's management looked with dismay at the YTM estimated in problem4-9(a) because it was much higher than the 12% coupon rate, which is much higher than the yield to maturity currently paid on investment-grade debt. The investment banker explained that, for a small firm such as International Tile, the bond rating would probably be in the middle of the speculative grades, which requires a much higher yield to attract investors. The banker even suggested that the firm recalculate the expected YTM on the debt under the following assumptions: The risk of default in years 1 through 5 is 5% per year, and the recovery rate in the event of default is only 50%. What is the expected YTM under these conditions? QUESTION 3: PROBLEM 5-10 PROJECT SPECIFIC WACC USING CORPORATE FINANCING Lampkin Manufacturing Company has two projects. The first, Project A, involves the construction of an addition to the firm's primary manufacturing facility. The plant expansion will add fixed operating costs equal to $200,000 per year and variable costs equal to 20% of sales. Project B, on the other hand, involves outsourcing the added manufacturing to a specialty manufacturing firm in Silicon Valley. Project B has lower fixed costs of only $50,000 per year, and thus lower operating leverage than Project A, while its variable costs are much higher, at 40% of sales. Project A has an initial cost of $3.2 million, while Project B will cost $3.4 million. When the question arose as to what discount rates the firm should use to evaluate the two projects, Lampkin's CFO, Paul Keown, called his old friend Arthur Laux, who works for Lampkin's investment banker. Art, we're trying to decide which of two major investments we should undertake, and I need your assessment of our firm's capital costs and the debt capacities of both projects. I've asked my assistant to email you descriptions of each. We need to expand the capacity of our manufacturing facility, and these two projects represent very different approaches to accomplishing that task. Project A involves a traditional plant expansion totaling $3.2 million, while Project B relies heavily on outsourcing arrangements and will cost us a little more up front, $3.4 million, but will have much lower fixed operating costs each year. What I want to know is, How much debt can we use to finance each project without putting our credit rating in jeopardy? I realize that this is a very subjective thing, but I also know that you have some very bright analysts who can provide us with valuable insight. Art replied: Paul, I don't know the answers to your questions right off the top of my head, but I'll pit some of our analysts on it and get back to you tomorrow at the latest. The next day, Art left the following voice-mail message for Paul: Paul, I've got suggestions for you regarding the debt-carrying capacity of your projects and current capital costs for Lampkin. Our guys think that you've probably got room for about $1,200,000 in new borrowing if you do the traditional plant expansion project, in 2 other words, Project A. If you decide on Project B, we estimate that you could borrow up to $2,400,000 without realizing serious pressure from the credit rating agencies. If the credit agencies cooperate as expected, we can place that debt for you with a yield of 5%. Our analysts also did a study of your firm's cost of equity and estimate that it is about 10% right now. Give me a call if I can be of additional help to you. a. Assuming that Lampkin's investment banker is correct, use book value weights to estimate the project-specific cost of capital for the two projects. (Hint: The only difference in the WACC calculations relates to the debt capacities for the two projects. Also, the firm's tax rate is 35%). b. How would your analysis of project-specific WACCs be affected if Lampkin's CEO decided that he wanted to deliver the firm by using equity to finance the better of the two alternatives (i.e. Project A or Project B)? QUESTION 4: PROBLEM 6-7 COMMON SIZE FINANCIAL STATEMENTS The balance sheet and income statement for Webb Enterprises Inc. are found below: Balance Sheet Cash and marketable securities Accounts receivable Inventories Current assets Net property, plant, and equipment Total Accounts payable Short-term debt Current liabilities Long-term debt Total liabilities Total owners' equity Total liabilities and owners' equity $ $ $ $ $ $ Income Statement 2015 500 6,000 9,500 16,000 17,000 33,000 7,200 6,800 14,000 7,000 21,000 12,000 33,000 2015 Revenues Cost of goods sold Gross profit Operating expenses Net operating income Interest expense Earnings before taxes $ 30,000 (20,000) $ 10,000 (8,000) 2,000 $ (900)S 1,100 3 Taxes Net income (400) 700 a. Prepare a common size balance sheet for Webb Enterprises. b. Prepare a common size income statement for Webb Enterprises. c. Use your common size financial statements to respond to your boss' request that you write an assessment of the firm's financial condition. Specifically, write a brief narrative that responds to the following questions: 1. How much cash does Webb have on hand relative to its total assets? 2. What proportion of Webb's assets has the firm financed using short-term debt? Longterm debt? 3. What percentage of Webb's revenues does the firm have left over after paying all of its expenses (including taxes)? 4. Describe the relative importance of Webb's major expense categories, including cost of goods sold, operating expenses, and interest expenses. Free cash flow to the firm just takes care of the company or firm in particular. It does not consider market comparables and multiples. Market comparables and multiples help in understanding the industry as a whole. The simple assumption while valuing a company using market related indicators is that the market value of various stocks indicate the justification of market value. It helps in understand the value of a stock according to the investors and market. Using FCF with comparables is possible using Football field. A football field is basically a graph that shows the various valuation of a firm using different approach. Some of the approaches used in football field are DCF, FCF, Comparables, Market multiples, etc. In this graph, mean and median of all the valuation methods can be calculated and then the best valuation techniques can be determined. The valuation of the firm is then taken into account. This way FCF model is revised to take other models into account. 4