Number 8,32,33,34,44 please. I dont know how to do any of them.

Fundamentals of Finance (FIN305) Problem Set 4 Part I Take your time to work through the questions presented below to make sure you have a solid understanding of the concepts and ideas presented. You will submit your problems sets for grading by entering your answers to these questions in quiz format in Canvas. Please note: the question numbers should remain the same, however, questions and answer choices may be scrambled. Be sure to carefully read your selections as you will not be able to make changes once the quiz has been submitted. You will receive your grade immediately after submission. Once the quiz has closed, the correct answers will be made available to aid you in studying for the exam. No late submissions will be accepted under any circumstances, so plan accordingly!!!!!! 1. What is the relevant cash flow in year 3 for the following projected cash flows of a new and an old machine? Year 0 1 2 3 New 0 $100,000 123,672 125,000 Old 0 $75,000 70,000 70,000 A) $25,000 B) $50,000 C) $125,000 D) $55,000 2. Which of the following items would not represent an incremental cash flow? A) shut-down cash flow B) existing overhead expense C) change in operating cash flow D) initial investment cash flow 3. Depreciation associated with a project will: A) cause incremental operating cash flows to decrease B) have no effect on incremental cash flows C) cause incremental cash flows to increase D) only affect the fixed asset account as depreciation is a sunk cost 4. An externality can best be described as: A) something that should not be considered in the capital budgeting process. B) something that always represents a negative impact C) an example of opportunity costs D) an impact, positive or negative, that a new project would have on existing projects Spring\t2016 5. The change in net working capital is measured by the change in: A) current assets minus current liabilities B) total assets minus total liabilities C) total assets minus (total liabilities plus total equity) D) (current assets plus fixed assets) minus current liabilities Use the following to answer questions 6-9. Recall our beach resort example. You have been asked to analyze data for the new coffee shop, Sand in Your Shorts. A recently completed guest survey demonstrates high demand for project. The cost of the survey was $20,000. The machines, refrigerators and other needed equipment is estimated to cost $40,000. Delivery and installation will be an additional $5,000. Based on the survey results, you expect new sales from the coffee shop to be $20,000 per year, with new operating expenses totaling $5,000 per year. The equipment will be depreciated over 8 years (your resort uses straight-line depreciation). Your firm's marginal tax rate is 30%. You expect to use the equipment for 10 years. After year 10, the salvage value of your equipment is $10,000. 6. The $20,000 cost of the guest survey is an example of ____________________ A) A sunk cost B) An opportunity cost C) An externality D) An incremental cash flow 7. How much are the initial cash flows for Sand in Your Shorts? A) $40,000 B) $45,000 C) $60,000 D) $65,000 8. How much are operating cash flows for the coffee shop? A) $7,000 B) $10,000 C) $12,000 D) $25,000 9. What is the shut-down cash flow for Sand in Your Shorts? A) $3,000 B) $3,500 C) $7,000 D) $10,000 Spring\t2016 10. Which of the following describes the impact of a real option on the value of an investment opportunity? A) real options are always included in incremental cash flow estimates. B) real options add value to investment opportunities C) real options are already included in the discount rate and should not be added to incremental cash flows D) (a) and (b) above 11. Cost of capital can best be defined as: A) compensation demanded by the investor of a firm before taxes and transaction costs are considered B) compensation demanded by the investor of a firm after taxes and transaction costs are considered C) compensation demanded by the investor of a firm before taxes only are considered D) compensation demanded by the investor of a firm before taxes, transaction costs, and interest expense are considered 12. All else equal, a firm with low levels of debt may prefer debt financing because: A) before tax income is definitely increase B) leverage will decrease C) net income will definitely increase D) of tax advantages that come with debt financing Use the following to answer questions 13-18. No-No Bad Dog (NNBD) Training School wants to maintain its current capital structure of 50% common equity, 10 % preferred stock, and 40 % debt. Its cost of common equity is 13%, and the cost of preferred stock is 12%. The cost of issuing new common stock is 13.8%. The bank charges an annual rate of interest of 11% for amounts borrowed that are less than or equal to $1 million, and 13% for amounts between $1 million and $2 million. If more than $2 million is borrowed, they charge a 15% annual rate of interest. No-No's tax rate is 40%. The firm expects to net $2,750,000 in income after paying preferred dividends this year. 13. How many total break points does this No-No Bad Dog have (both debt and equity)? A) 1 B) 2 C) 3 D) 4 14. How much total capital can NNBD raise before reaching their equity break point? A) $2,000,000 B) $2,750,000 C) $5,000,000 D) $5,500,000 Spring\t2016 15. What is NNBD's WACC if they finance with retained earnings and borrow $900,000? A) 6.6% B) 10.34% C) 11% D) 12.1% 16. Suppose NNBD's owner leaves a pizza box on the stove in the break room. While they are busy taking a phone call, their bloodhound steals the pizza and starts the building on fire. The firm will need to borrow funds to rebuild their facility. This is likely to affect which of the following? A) Maturity B) Coupon rate C) Discount rate D) Dividends 17. What is NNBD's MCC if $3,000,000 is needed for an upcoming expansion? A) 10.34% B) 10.82% C) 11.30% D) 13% 18. NNBD has the opportunity to purchase a competitor's business that will make them the only training school within a 50 mile radius. The competitor has agreed to sell the business for $5,005,000. What is the MCC for this project? A) 10.34% B) 10.82% C) 11.30% D) 13.9% 19. You are the financial manager for an engineering firm. Three engineers come to you with projects. Adam's project is expected to generate an IRR of 8.75% and costs $10,000,000. Barbara's project is expected to generate an IRR of 10% and costs $20,000,000. Chris' project is expected to generate an IRR of 8.25% and costs $30,000,000. Which of the projects should you accept according to the IRR decision method? Hint: Try ranking the projects and plotting the MCC schedule. A) You should accept Barbara's project and Adam's project B) You should accept Barbara's project and Chris' project C) You should accept Adam's project and Chris' project D) You should accept all of the projects 20. The component cost of capital is best described as: A) cost of capital issued by a creditor B) cost of capital demanded by the stockholder C) cost of capital provided by a given source D) determined by interest charged Spring\t2016 21. A zero-coupon bond will have a price: A) equal to par B) less than par C) greater than par D) equal to the market rate 22. If the yield-to-maturity of a bond is less than the coupon rate, the bond will sell at: A) a discount B) a premium C) par value D) its call price Use the following to answer questions 23-24. Use the following information to answer the next two questions. Suppose Minion Childcare Service, has earnings per share of $1.38. The average P/E of the home daycare services industry is 21.3. The average P/E ratio for child safety equipment is 27. 23. Estimate a value for Minion Childcare Services stock using the correct P/E as a valuation multiple. A) $29.39 B) $15.43 C) $21.38 D) $37.26 24. What are the assumptions underlying the estimate found using the P/E valuation multiple. A) Minions Childcare Services will have similar future risk as other firms in the childcare industry. B) Minions Childcare Services will have different future risk as other firms in the childcare industry. C) Minions Childcare Services will have similar future risk as other firms in child-safety related industries. D) Minions Childcare Services will have similar growth rates as other firms in child-safety related industries. E) All of the above Spring\t2016 Fundamentals of Finance (FIN305) Problem Set 4 Part II Take your time to work through the questions presented below to make sure you have a solid understanding of the concepts and ideas presented. You will submit your problems sets for grading by entering your answers to these questions in quiz format in Canvas. Please note: the question numbers should remain the same, however, questions and answer choices may be scrambled. Be sure to carefully read your selections as you will not be able to make changes once the quiz has been submitted. You will receive your grade immediately after submission. Once the quiz has closed, the correct answers will be made available to aid you in studying for the exam. No late submissions will be accepted under any circumstances, so plan accordingly!!!!!! 25. The amount that each common stockholder would receive if the firm shut down is called the: A) going-concern value B) liquidation value C) salvage value D) future value 26. Which valuation model, commonly referred to as a "method of comparables," is often used to value stocks for business that are not publicly traded? A) Liquidation model B) P/E model C) Book value model D) DCF model 27. The price of a preferred stock is $42. It pays a dividend of $5. Calculate the required return: A) 11.9% B) 8.4% C) 0.119% D) 8% 28. Given the following information, calculate the price paid for this common stock: Expected growth rate = 4% Dividend at t1 = $2.50 Required rate of return = 7% A) $83.33 B) $22.73 C) $8.33 D) $23.33 Use the following to answer questions 29-34. Relive the Fight, is a company that takes Capital citizens on tours of former Hunger Games arenas. The current owner, Effie Trinket has decided she no longer wants anything to do with The Hunger Games and has decided to sell the company. Caesar Flickerman is very excited when he finds out about her decision and has hired you to determine whether Effie's asking price of $5 million is fair. With the Quarter Quell coming up, sales are not expected to slow to the long-run growth rate until 2020, after which time they are projected to grow at a constant rate of 1% (characteristic of the industry). The appropriate discount rate (WACC) is 10%. If Caesar purchases the firm, he will close (become the new owner) on January 1, 2017. Use the firm's financial data provided below to answer the following questions. Round answers to the nearest dollar. *note: increase in NWC= CA-CL Financial Data 2016 Total Revenue .............................$1,000,000 Cost of Goods Sold........ ................$300,000 Other general expenses...............$200,000 Depreciation and amortization.......$50,000 Capital Expenditures................... $10,000 Income Tax Rate............................30% Current Assets ............................. $300,000 Current Liabilities.......................... $80,000 Long-term debt...............................$500,000 29. You have forecasted an increase in the firm's total revenue of $121,429 for 2017. The firm's income tax bill will change accordingly, but the firm's other financial data is expected to remain unchanged in 2017. What are the firm's free cash flows for 2017? A) $205,000 B) $305,000 C) $315,000 D) $355,000 30. Assume you're forecasted FCF as follows: 2018 2019 2020 $380,000 $400,000 $425,000 What is the firm's terminal value? A) $429,050 B) $3,902,272 C) $4,292,500 D) $4,769,444 31. What is the PV of the firm's 2017 FCF? A) $355,000 B) $322,728 C) $380,000 D) $277,273 32. What is the firm's enterprise value? A) $4,448,749 B) $4,451,891 C) $4,485,179 D) $4,893,464 33. What is the market value of the firm's common equity? A) $4,205,179 B) $4,485,179 C) $4,785,179 D) $4,705,179 34. Should Caesar Flickerman proceed with purchasing the business? A) Yes B) No 35. Firms with relatively low fixed operating costs and high variable operating costs can best be described as having: A) a high degree of operating leverage B) a low degree of operating leverage C) a normal degree of operating leverage D) no operating leverage 36. Whenever fixed costs are greater than zero, DOL is: A) less than 1 B) equal to 0 C) greater than 1 D) nonexistent 37. If sales increases by 12% EBIT increases by 15% Net Income increases by 25% Interest expense increases by 10% Calculate DFL. A) 1.67 B) 1.12 C) 1.05 D) 1.00 38. The mixture of long-term funding sources that a firm uses to finance its assets is: A) capital structure B) financial leverage C) operating leverage D) debt operations Use the following to answer questions 39-43. Tony Stark has decided his job is too stressful and he needs to take some time off from saving the world. After reading an article in the Wall Street Journal, Mr. Stark has decided that running a hot dog stand would be a perfect fit. Mr. Stark has designed and manufactured his own cart, using only scrap parts he had sitting around his workshop. He estimates he could sell the cart for $5,000. Necessary licenses and fees will cost $2,000. He plans to pay a sign spinner $15/hour to stand on the street corner. Hot dog buns cost 10 cents each and hot dogs will cost him 60 cents each. Tony Stark plans to sell his "Ironman Dogs" for $4 each. Use this information to answer the following questions. 39. Which of the Mr. Stark's would be considered variable? A) The licenses and fees B) The sign spinner C) Hot dogs and hot dog buns D) Only the sign spinner and the hot dogs and buns E) All of the above are variable costs 40. Assume he has not purchased hot dogs, buns or hired a sign spinner yet. At this point, how much are Mr. Stark's fixed costs? A) $0 B) $2,000 C) $5,000 D) $7,000 41. Tony Stark has decided his hot body is enough to drive business and is not going to employ a sign spinner or do any other advertising. How many hot-dogs will he need to sell to breakeven? (Round up to the nearest whole number). A) 500 B) 606 C) 1,750 D) 2122 42. If he sells 1,000 "Ironman Dogs" what will be Tony Starks total costs? A) $700 B) $2000 C) $2,700 D) $3,000 43. If he sells 4,000 Ironman Dogs, what is Tony Stark's degree of operating leverage? (Round to two decimal places) A) 1 B) 1.18 C) 2 D) 2.76 Use the following to answer questions 44-45. You idolize Tony Stark and are excited that you can finally "be just like him" by opening your own hot dog stand. You have saved $1,000 and will get a loan to pay for the rest of your fixed start up expenses. You approach a local bank and they have agreed to loan you the remaining $6,000. Your interest expense will be $800. Your variable costs will be identical to Mr. Stark's and you will also charge $4 per hot dog. 44. If you also sell 4,000 Ironman Dogs, what is your DOL? (Round to two decimal places). A) 1.18 B) 1.61 C) 2.13 D) 2.50 45. The fact that you are getting a bank loan to pay for some of your start up costs will affect which of the following? A) DOL B) DFL C) DCL D) Both A and B E) Both B and C 46. What is the capital structure that maximizes firm value? A) More debt than equity B) More equity than debt C) The combination that results in the minimal WACC. D) The combination that results in zero MCC. 47. Which of the following statements about leverage is not true? A) Leverage can help the firm B) Leverage can hurt the firm C) If EBIT decreases, financial leverage will magnify the change in net income D) Managers that are risk averse are likely to prefer lower amounts of leverage E) All of the above are true 48. Debt is cheaper than equity A) True B) False 49. Which of the following statements best describes a firm's financial risk? It: A) decreases with an increase in long-term debt B) increases with an increase in long-term debt C) decreases with a decrease in stockholder's equity D) is unaffected by long-term debt 50. Your firm has a DOL of 1.25 and an EBIT of $500,000. If sales increase by 10%, calculate the percent change in EBIT. A) 12% B) 12.5% C) 1.25% D) 0.125%