SHOW YOUR WORK on EXCEL and EXPLAIN ANSWERS on all problems.

1)You are thinking of buying a miniature golf course to operate. It is expected to generate cash flows of $45,000 per year in years one through three and $55,000 per year in years four through eight. If the appropriate discount rate is 12%, what is the most you would pay for this golf course?

2)Your team is evaluating two mutually exclusive projects.The initial cost of each investment is $50,000.The probability of the cash flows is shown below. If the project will have a 5 year life and the appropriate cost of capital is 9% calculate the following:

Probability

CF(A)

CF(B)

10%

(34,000)

(13,500)

25%

(8,500)

2,125

30%

17,000

19,000

25%

42,500

31,875

10%

68,000

46,750

a)Expected value

b)NPV

c)Standard deviation

d)IRR

e)MIRR

Use the information below for the next problem

Depreciation

34,000

EBIT

179,000

Investment in Operating Assets

69,000

Tax Rate

34%

Find the free cash flow

3. Calculate the free cash flow

Use the following information for the next problem

The Security Market Line

Security X

Market

Beta

0.76

1

Expected Return

?

12%

If the risk free rate is

2.80%

Find the expected return on security X

4. What is the expected return for Security X?

Use the following information for the next three problems,

Year

Cash Flow

1

$12,500

2

$14,000

3

$10,000

4

$11,000

5

$16,000

5. What is the NPV of above project if the initial investment was $35,000?

6. Calculate the IRR assuming a cost of capital of 11%.

7. Calculate the MIRR of the project assuming a cost of capital of 11%.___________________________________________________________________________

8. Suppose that you are approached with an offer to purchase an investment that will provide cash flows of $1,600 per year for 18 years. The cost of purchasing this investment is $9,200. You have an alternative investment opportunity, of equal risk, that will yield 9% per year. What is the NPV that makes you indifferent between the two options?

___________________________________________________________________

9.The Claustrophobic Solution, Inc., a residential window and door manufacturer, has the following historical record of earnings per share (EPS) from 2015 to 2007:

2015

2014

2013

2012

2011

2010

2009

2008

2007

EPS

$1.28

$1.22

$1.18

$1.13

$1.10

$1.05

$1.00

$0.95

$0.90

The companys payout ratio has been 57% over the last nine years and the last quoted price of the firms share of stock was $15. Flotation costs for new equity will be 7%. The company has 34,000,000 of common shares of stock outstanding and a debt-equity ratio of 0.45.

If dividends are expected to grow at the same arithmetic average growth rate of the last nine years, what is the dividend payment per share in 2016?

_________________________________________________________________________-

Use the following data for the next 3 questions

The following are the company sales from 2000-2015

Year

Xylophone

2000

$230

2001

$573

2002

$994

2003

$1,683

2004

$3,192

2005

$6,140

2006

$8,892

2007

$13,586

2008

$18,376

2009

$29,476

2010

$33,598

2011

$44,208

2012

$58,473

2013

$96,368

2014

$149,306

2015

$209,397

10.Fit an exponential trend curve to the data- show the equation

11.Calculate the projected sales in 2016

12.What is the CAGR over the 2000-2015 period?

____________________________________________________________-

Use the following data for the next 3 problems

Roxies Surf Shop is expanding their product line, adding a high end surf board to their existing basic product.

Their fixed costs for the equipment needed for the new boards is $5700 per month.

The new board will cost $278 per board and they can be sold for $450.

13.How many new boards per month will they need to sell to breakeven quantity per month?

14.If the fixed costs are reduced to $4800 per month what is the new breakeven quantity?

15.If the fixed costs stay at $5300 and they want to have at least $1000 per month in profit how many boards should they sell?

Use the information below for the next 4 answers

Debt 5,000 bondspar $1,000 with a maturity 20 years; semi annual compounding. Coupon rate 8%. Price $1,310.

Preferred 50,000 shares of 3% par value $100 stock. Current price $63.00.

Common stock 72,000 shares currently selling for $87.00.The beta of the firm is 1.17, the risk free rate is 2.78%, Market return (Rm) =8.6%.

16.Cost of debt

17.Cost of preferred

18.Cost of equity

19.WACC

Use the following data for the remaining problems.

Capstone Quarry is analyzing whether a new contract proposal will be a good idea.The relevant data is shown below.The net working capital will be paid in the same time period as the cost of the equipment and will be recovered at the end of the project.Remember to calculate the after-tax gain or loss of salvage as part of your terminal cash flow.

Capstone Quarry Company Contract Analysis

Amount of Rock Salt per Year

23,000 Tons

Revenue per Ton

$145

Cost of Equipment

$2,750,000

Life(years)

5

MACRS Class

5

Fixed Cost per year

$475,000

Var Cost/Ton

$85

Actual Salvage

$105,000

Change in NWC

$85,000

Required Return

12%

Tax Rate

34%

20.Find the cash flows for each year

21.Net present value

22.Payback period

23.Discounted payback

24.IRR

25.MIRR

Hint:

Annual Cash Flows for Capstone Quarry

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Initial Outlay

Unit Sales

Sales

Variable Costs

Fixed Costs

Depreciation

Taxable Cash Flows

Taxes

Add: Depreciation

Annual After-Tax Cash Flow

Terminal Cash Flow

Total Annual Cash Flows