Question 1
ok, I just want to get this problem answered, I dont want you to do it for free, as I will pay you $20 for the solution to this problem. Ken "The balance sheet that follows indicates the capital structure for Nealon Inc. Flotation costs are (a) 15 percent of market value for a new bond issue, and (b) $2.01 per share for preferred stock. The dividends for common stock were $2.50 last year and are projected to have an annual growth rate of 6 percent. The firm is in a 34 percent tax bracket. What is the weighted average cost of capital if the firm's finances are in the following proportions? Type of financing % of future financing Bonds (8%, $1000 par, 16-yr mat) 38% Preferred stock (5,000 shares outstanding, $50 par, $1.50 dividend) 15% Common equity 47% Total 100% a. Market prices are $1,035 for bonds, $19 for preferred stock, and $35 for common stock. There will be sufficient internal common equity funding (i.e., retained earnings) available such that the firm does not plan to issue new common stock. Calculate the firm's weighted average cost of capital using Excel. b. In part a we assumed that Nealon would have sufficient retained earnings such that it would not need to sell additional common stock to finance its new investments. Consider the situation now, when Nealon's retained earnings anticipated for the coming year are expected to fall short of the equity requirement of 47 percent of new capital raised. Consequently, the firm foresees the possibility that new common shares will have to be issued. To facilitate the sale of shares, Nealon's investment banker has advised management that they should expect a price discount of approximately 7 percent, or $2.45 per share. What is Nealon's cost of equity capital when new shares are sold, and what is the weighted average cost of the added funds involved in the issuance of new shares? Please use Excel to calculate. "
Question 2
Calculate the estimated operating cash flow and net present value for this project. Explain how these calculations may impact the project. Based on the above information, recommend whether or not the project should be pursued. Provide a detailed rationale. Suppose you believe that the accounting department?s initial cost and salvage value projections are accurate only to within + or ? 15%; the marketing department?s price estimate is accurate only to within + or ? 10%; and the engineering department?s net working capital estimate is accurate only to within + or ? 5%. Discuss the best and worst case scenarios for this project. Based on the above information, recommend whether or not to pursue the project. Provide a detailed rationale.,Consider a project to supply Detroit with 55,000 tons of machine screws annually for automobile production. You will need an initial $1,700,000 investment in threading equipment to get the project started; the project will last for five years. The accounting department estimates that annual fixed costs will be $520,000 and that variable costs should be $220 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the five-year project life. It also estimates a salvage value of $300,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $245 per ton. The engineering department estimates you will need an initial net working capital investment of $600,000. You require a 13 percent return and face a marginal tax rate of 38 percent on this project. 1. Calculate the estimated operating cash flow and net present value for this project. 2. Explain how these calculations may impact the project. 3. Based on the above information, recommend whether or not the project should be pursued. Provide a detailed rationale. 4. Suppose you believe that the accounting department?s initial cost and salvage value projections are accurate only to within + -15 percent; the marketing department?s price estimate is accurate only to within + -10 percent; and the engineering department?s net working capital estimate is accurate only to within + -5 percent. What is your worst-case scenario for this project? Your best-case scenario? Do you still want to pursue the project?
Question 3
Could you please help me solve this question. Target Costing. Baker Plumbing Fixtures is developing a preplumbed acrylic shower unit. The team developing the product includes representatives from marketing, engineering, and cost accounting. To date, the team has developed a set of features that it plans on incorporating in the unit, including a seat, two shower heads, four body sprays, and a steam unit. With this set of features, the team believes that a price of $5,000 will be attractive in the marketplace. Baker seeks to earn a per unit profit of 30 percent of selling price. a. Calculate the target cost per unit. b. The team has estimated that the fixed production costs associated with the product will be $2,000,000 and variable costs to produce and sell the item will be $2,500 per unit. In light of this, how many units must be produced and sold to meet that target cost per unit? c. Suppose the company decides that only 1,400 units can be sold at a price of $5,000 and, therefore, the target cost cannot be reached. The company is considering dropping the steam feature, which adds $600 of variable cost per unit. With this feature dropped, the company believes it can sell 2,500 units as $4,000 per unit. Will Baker be able to produce the item at the new target cost or less?
Question 4
"2. Van Den Borsh Corp. has annual sales of $50,735,000, an average inventory level of $15,012,000, and average accounts receivable of $10,008,000. The firm's cost of goods sold is 85% of sales. The company makes all purchases on credit and has always paid on the 30th day. However, it now plans to take full advantage of trade credit and to pay its suppliers on the 40th day. The CFO also believes that sales can be maintained at the existing level but inventory can be lowered by $1,946,000 and accounts receivable by $1,946,000. What will be the net change in the cash conversion cycle, assuming a 365-day year? 3. Buskirk Construction buys on terms of 2/15, net 60 days. It does not take discounts, and it typically pays on time, 60 days after the invoice date. Net purchases amount to $450,000 per year. On average, how much ?free? trade credit does the firm receive during the year? (Assume a 365-day year, and note that purchases are net of discounts.) 4. Ingram Office Supplies, Inc., buys on terms of 2/15, net 50 days. It does not take discounts, and it typically pays on time, 50 days after the invoice date. Net purchases amount to $450,000 per year. On average, what is the dollar amount of costly trade credit (total credit ? free credit) the firm receives during the year? (Assume a 365-day year, and note that purchases are net of discounts.) 5. Affleck Inc.'s business is booming, and it needs to raise more capital. The company purchases supplies on terms of 1/10 net 20, and it currently takes the discount. One way of getting the needed funds would be to forgo the discount, and the firm's owner believes she could delay payment to 40 days without adverse effects. What would be the effective annual percentage cost of funds raised by this action? (Assume a 365-day year.) 6. Weiss Inc. arranged a $9,000,000 revolving credit agreement with a group of banks. The firm paid an annual commitment fee of 0.5% of the unused balance of the loan commitment. On the used portion of the revolver, it paid 1.5% above prime for the funds actually borrowed on a simple interest basis. The prime rate was 3.25% during the year. If the firm borrowed $6,000,000 immediately after the agreement was signed and repaid the loan at the end of one year, what was the total dollar annual cost of the revolver? 7. Edwards Enterprises follows a moderate current asset investment policy, but it is now considering a change, perhaps to a restricted or maybe to a relaxed policy. The firm?s annual sales are $400,000; its fixed assets are $100,000; its target capital structure calls for 50% debt and 50% equity; its EBIT is $35,000; the interest rate on its debt is 10%; and its tax rate is 40%. With a restricted policy, current assets will be 15% of sales, while under a relaxed policy they will be 25% of sales. What is the difference in the projected ROEs between the restricted and relaxed policies?
Question 5
If a company's control risk is low, the auditor needs to gather evidence on the operating effectiveness of the controls. Required a. For each of the following control activities, indicate the audit procedure the auditor would use to determine its operating effectiveness. b. Briefly indicate the audit implication; that is, how would direct tests of account balances need to be modified if the auditor finds that the control procedure is not working as planned? Controls: 1. Credit approval by the credit department is required before salespersons accept orders of more than $5,000 and for all customers who have a past-due balance higher than $3,000. 2. All merchandise receipts are recorded on prenumbered receiving slips. The controller's department periodically accounts for the numerical sequence of the receiving slips. 3. Payments for goods received are made only by the accounts payable department on receipt of a vendor invoice, which is then matched for prices and quantities with approved purchase orders and receiving slips. 4. The accounts receivable bookkeeper is not allowed to issue credit memos or to approve the write-off of accounts. 5. Cash receipts are opened by a mail clerk, who prepares remittances to send to accounts receivable for recording. The clerk prepares a daily deposit slip, which is sent to the controller. Deposits are made daily by the controller. 6. Employees are added to the payroll master file by the payroll department only after receiving a written authorization from the personnel department. 7. The only individuals who have access to the payroll master file are the payroll department head and the payroll clerk responsible for maintaining the payroll file. Access to the file is controlled by computer passwords. 8. Edit tests built into the computerized payroll program prohibit the processing of weekly payroll hours in excess of 55, and the payment to an employee for more than three different job classifications during a one-week period. 9. Credit memos are issued to customers only on the receipt of merchandise or the approval of the sales department for adjustments. 10. A salesperson cannot approve sales return or price adjustment that exceeds 5 percent of the cumulative sales for the year for any one customer. The divisional sales manager must approve any subsequent approvals of adjustments for such a customer. 5-68 (Tests of Controls) If a company’s control risk is low, the auditor needs to gather evidence on the operating effectiveness of the controls. Required a. For each of the following control activities, indicate the audit procedure the auditor would use to determine its operating effectiveness. b. Briefly indicate the audit implication; that is, how would direct tests of account balances need to be modified if the auditor finds that the control procedure is not working as planned? Controls: 1. Credit approval by the credit department is required before salespersons accept orders of more than $5,000 and for all customers who have a past-due balance higher than $3,000. 2. All merchandise receipts are recorded on prenumbered receiving slips. The controller’s department periodically accounts for the numerical sequence of the receiving slips. 3. Payments for goods received are made only by the accounts payable department on receipt of a vendor invoice, which is then matched for prices and quantities with approved purchase orders and receiving slips. 4. The accounts receivable bookkeeper is not allowed to issue credit memos or to approve the write-off of accounts. 5. Cash receipts are opened by a mail clerk, who prepares remittances to send to accounts receivable for recording. The clerk prepares a daily deposit slip, which is sent to the controller. Deposits are made daily by the controller. 6. Employees are added to the payroll master file by the payroll department only after receiving a written authorization from the personnel department. 7. The only individuals who have access to the payroll master file are the payroll department head and the payroll clerk responsible for maintaining the payroll file. Access to the file is controlled by computer passwords. 8. Edit tests built into the computerized payroll program prohibit the processing of weekly payroll hours in excess of 55, and the payment to an employee for more than three different job classifications during a one-week period. 9. Credit memos are issued to customers only on the receipt of merchandise or the approval of the sales department for adjustments. 10. A salesperson cannot approve sales return or price adjustment that exceeds 5 percent of the cumulative sales for the year for any one customer. The divisional sales manager must approve any subsequent approvals of adjustments for such a customer.
