Wood Products Ltd manufactures a standard design dining room table. It prepares

annual budgets based on previous financial information and current market

indications of demand for the product. It is now preparing the budget for 2010

and has collected the following external information:

(i) Sales in the UK are expected to remain at 700 tables per month.

(ii) Due to an extensive marketing operation, the company anticipates sales

in the USA during the year. The directors consider that table sales will be

300 tables per month from July, with a further increase to 500 for October

and November. After that date, sales are expected to increase by 15 percent

per month.

Required:

(a) You are required to prepare sales budget showing the expected number of

tables to be sold for the six months ending December 2010.

(b) Wood Products Ltd prepares cash, production, sales, and stock budgets.

These budgets need to be prepared in a certain order. Indicate this order

with reasons for your answer

Question:

You are a very powerful institutional investor that holds 1 million shares of Cisco System, Inc., purchased on April 29, 2016. In researching Cisco, you discovered that they are holding a large amount of cash. Additionally, you are upset that the Cisco stock price has been somewhat stagnant as of late. You are considering approaching Cisco's Board of Directors with a plan to payout half of the cash the firm has accumulated, but can't decide whether a share repurchase or a special dividend would be best. Because both dividends and capital gains are taxed at the same rate (20%), at the first glance there seems to be no difference between the two options. To confirm, however, you need to "run the numbers" for each scenario. Assume that the current stock price is $50 and the number of shares outstanding for Cisco's stock is 4,220,000,000 shares.

1. Go to http://finance.yahoo.com, enter the symbol for Cisco (CSCO) into the "Quote Lookup" box.

a. Click "Financials", "Balance Sheet, "Annual," and i) record one-half of the most recent "Cash and Cash Equivalents" reported on the balance sheet (*Note that this number is in thousands. Multiply this number by 1000 to convert it into dollars). This is the dollar amount of cash available for payout. Using this amount, compute iii) the dividend per share that could be paid in the dividend scenario, and iii) the number of shares that would be repurchased (at the current market price) in the repurchase scenario.

b. To obtain the initial purchase price at which you bought the stock on April 29, 2016, click "Historical Prices," enter the date you purchased the stock as the start date and end date, choose "Daily" frequency, and hit "Get Prices." Record the "Adj Close" price. This is your initial purchase price.

2. Let's compute the after-tax payout proceeds that you would receive in each scenario.

a. Find the after-tax payout proceeds you will receive under the dividend scenario. Taxes you will pay on the dividend income can be computed as: Dividend income taxes = Dividend per share Number of shares that you are holding Dividend tax rate

b. If the cash is (indirectly) paid through stock repurchase instead, payout proceeds are a little bit indirectly realized. Let's assume that you will make a 'home-made dividend' by selling some number of shares from your initial holdings. The number of shares that you can sell and still maintain the same proportion of ownership before and after repurchase program is XX shares (the number to be given in class). Assuming that you can sell these shares at the current market price, compute the after-tax payout proceeds from this home-made dividend under the repurchase scenario. Note that home-made dividends, unlike actual dividends, are realized by selling stock and therefore are subject to capital gain taxes: Capital gain taxes = (Selling price - Initial purchase price) Number of shares soldCapital gain tax rate

3. The calculation in Question 2 reflects your immediate proceeds arising from the payout event itself, but it does not consider the consequences on any remaining shares in your portfolio. To incorporate this feature, you first decide to see what happens if you sells all remaining shares of stock immediately after the payout (either after dividend or after the repurchase). Let's call this liquidation proceeds. Again, note that these liquidation proceeds are subject to capital gain taxes. Also note that the stock price will fall by the amount of the dividend per share immediately after the dividend payment.

a. Calculate the after-tax liquidation proceeds from immediately selling any remaining shares after the dividend scenario.

b. Calculate the after-tax liquidation proceeds from immediately selling any remaining shares after the repurchase scenario.

c. Compute the total after-tax proceeds by adding up after-tax payout proceeds and after-tax liquidation proceed in each scenario, and compute the difference between the two scenarios. d. Under which scenario would you be better off after taxes?

4. Rather than selling all remaining shares today, now you decide to consider a longer holding period. That is, you will sell all remaining shares 5 years later rather than immediately. Assume that the stock price will grow at 10% rate per year going forward, regardless of what the starting price is today. Also assume that Cisco will pay no other dividend over the next 5 years. a. What would be the stock price after 5 years under each scenario?

b. Calculate the after-tax liquidation proceeds from selling remaining shares 5 years after the dividend scenario.

c. Calculate the after-tax liquidation proceeds from selling remaining shares 5 years after the repurchase scenario.

d. Note that these liquidation proceeds are occurring at time 5 instead of time 0. Calculate the present value (PV) of the after-tax liquidation proceeds in each scenario using discount rate of 10%.

e. Compute the total after-tax proceeds ( = after-tax payout proceeds + PV of after-tax liquidation proceeds) in each scenario, and compute the difference between the two scenarios, evaluated at time 0.

f. Which scenario would you prefer now? 5. Do you think your preference changes depending on your investment horizon? If so, how?

Complete this table. Maturity Discount Time in Value Rate Days Proceeds Date Made Due Date Discount 11. $24,000 2/4 180 12. $8275 7% 9/10 120 13. $14,400 8/7 1/4 150 $660 14. $8200 2/9 5/10 $205 15. 11/12 90 $108 $7092 16. 12/2 8/11 $1372 $18,228Based on the first section of Alvin... PeopleSoft session expir Mathematics for Business Homework: Section 6.1 Homework Score: 0 of 1 pt 1 of 14 (1 complete) X) Warm-Up Question 6.1.1 In how many ways can two variables be chosen from x, . X2. S, , $2, s, and assigned the value 0? ways (Type a whole number.) eding List itemsThis Question: 3 pts 40 of 48 The distribution of B.A. degrees conferred Major Frequency by a local college is listed, by major. English 2073 Mathematics 2164 What is the probability that a randomly Chemistry 318 selected degree is not in English? Physics 856 Liberal Arts 1358 Business 1676 Engineering 868 9313 O A. 7240 Chi O B. 0.223 O.C. 0.777 OD. 0.857Task 4: Answer the following: a. Suppose that the grades of Business Mathematics and Statistic module is modeled well by a normal probability distribution with mean (150 + A) and standard deviation (60 + A). Let X be the random variable representing this distribution. Find two symmetric values "a" and "b" such that Probability [ a