Question: Repeat Study Problem 20–1, but this

> Emily’s Soccer Mania is considering building a new indoor soccer facility for local soccer clubs to rent. This project will require an initial cash outlay of $10 million and will generate annual cash inflows of $3 million per year for Years 1 through 5.

> Go to the Motley Fool website (www.fool.com), and under the tab “Guides,” click on “Retirement.” Describe the information available here for planning for your retirement.

> Go to the Market Watch website (www.marketwatch.com), and click on “Sections” then on “Personal Finance.” This is a great resource for information and help in managing your personal finances. Find an article you like, read it, and write a summary of it.

> Go to Yahoo Finance (http://finance.yahoo.com), and enter “GOOG” (the ticker symbol for Alphabet, formerly Google) in the “Enter Symbol(s)” box at the top of the page. What is the price at which the stock last traded? What is the last trade time, and how

> What are the two types of private equity funds? What does each do with the money it raises from investors?

> What is a hedge fund, and how is it different from a mutual fund?

> The distribution of financial assets around the world is described in Finance in a Flat World: Where’s the Money Around the World on page 32. What country dominates in terms of the stock market and total financial assets? Of the United Kingdom, Germany,

> In Finance for Life: Controlling Costs in Mutual Funds on page 24, the importance of keeping expenses down is discussed. The Financial Industry Regulatory Authority website provides an easy way to compare mutual funds. Go to the website, http:// apps.fin

> Why is maximizing a firm’s accounting profits not an appropriate goal for the firm?

> What goal do the owners of a for-profit business generally strive for?

> If the Marifield Steel Fabrication Company earned $500,000 in net income and paid a cash dividend of $300,000 to its stockholders, what are the firm’s earnings per share if the firm has 100,000 shares of stock outstanding?

> What are the IRRs for the following projects? a. An initial outlay of $10,000 resulting in a single cash inflow of $17,182 in 8 years b. An initial outlay of $10,000 resulting in a single cash inflow of $48,077 in 10 years c. An initial outlay of $10,0

> If GMT Transport Company (from the previous problem) plans to reinvest $1 million of its earnings back in the firm and pay out the remainder in cash dividends to the firm’s shareholders, what is the total amount of the cash dividend?

> In the year just ended, Callaway Lighting had sales of $5,000,000 and incurred a cost of goods sold of $4,500,000. The firm’s operating expenses were $130,000, and its increase in retained earnings was $40,000 for the year. There are currently 100,000 co

> Last year thea. Assuming the firm’s earnings are taxed at 35 percent, construct the firm’s income statement. b. Compute the firm’s operating profit margin. P. M. Postem Corporation had sales of $400,000, with a cost of goods sold of $112,000. The firm’s

> ALei Industries has credit sales of $150 million a year. ALei’s management reviewed its credit policy and decided that it wants to maintain an average collection period of 40 days. a. What is the maximum level of accounts receivable that ALei can carry a

> As the newest hire to the financial analysis group at Patterson Printing Company, you have been asked to perform a basis financial analysis of the company’s most recent financial statements.  The 2016 balance sheet and incom

> Following you will find the income statements and balance sheets for Sears Holdings (SHLD) and Target Corporation (TGT). Assume that you are a financial manager at Sears and want to compare your firm’s situation with that of Target. Cal

> On May 25, 2009, the stock of Emerson Electric (EMR) was trading for $32.18 per share, whereas the stock of its larger rival, General Electric Corporation (GE), was trading for only $13.11. Interpret the relative pricing of the two firmâ€&#153

> On August 1, 2007, Dell Computer Corporation’s stock closed trading at $27.76 per share, whereas the stock of Apple Corporation (AAPL) closed at $133.64 per share. Does this mean that because Apple’s stock price is rou

> The T. P. Jarmon Company manufactures and sells a line of exclusive sportswear. The firm’s sales were $600,000 for the year just ended, and its total assets exceeded $400,000. The company was started by Mr. Jarmon just 10 years ago an

> The annual sales for Salco, Inc., were $4.5 million last year. The firm’s end-of-year balance sheet was as follows: Salco’s income statement for the year was as follows: a. Calculate Salco’s total

> The Templeton Manufacturing and Distribution Company of Tacoma, Washington, is contemplating the purchase of a new conveyor belt system for one of its regional distribution facilities. Both the alternatives it is considering will accomplish the same task

> The Brenmar Sales Company had a gross profit margin (gross profits ÷ sales) of 30 percent and sales of $9 million last year. Seventy-five percent of the firm’s sales are on credit, and the remainder is cash sales. Brenmar’s current assets equal $1.5 mill

> The R. M. Smithers Corporation had an operating profit margin of 10 percent based on sales of $10 million and total assets of $5 million last year. a. What was Smithers’s total asset turnover ratio? b. The company’s president has set a goal for the comi

> The last two years of financial statements for Blunt Industries are as follows: a. Calculate the following financial ratios for 2015 and 2016: b. Evaluate the firm’s financial position at the end of 2015 in terms of its liquidity,

> The balance sheet and income statement for the J. P. Robard Manufacturing Company are as follows: J. P. Robard Manufacturing Company Balance Sheet ($ thousands) Cash $ 500 Accounts receivable 2,000 Inventory 1,000 Total current assets 3,500 Net fix

> When a firm enters into a loan agreement with its bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So it is important that the firm be aware of the effects of its decisions on the curr

> The Mitchem Marble Company has a target current ratio of 2.0 but has experienced some difficulties financing its expanding sales in the past few months. At present, the firm has a current ratio of 2.5 and current assets of $2.5 million. If Mitchem expand

> Lei Materials’ balance sheet lists $1 billion in total assets, $100 million in current liabilities, $400 million in long-term debt, $500 million in common equity, and 50 million shares of common stock. If Lei’s current stock price is $50, what is the fir

> The balance sheet for Larry’s Discount Tire Company shows a book value of stockholders’ equity (book value per share * total shares outstanding) of $23,500,000. Furthermore, the firm’s income statement for the year just ended has net income of $500,000,

> Greene, Inc.’s balance sheet indicates that the book value of stockholders’ equity (book value per share * total shares outstanding) is $750,500. The firm’s earnings per share are $3, which produces a price-earnings ratio of 12.25. If there are 50,000 sh

> Look up the statement of cash flows for both Home Depot and Lowe’s using either Google Finance or Yahoo Finance. a. Compute the quality of earnings ratio for the latest three years for both firms. b. Compare the quality of earnings ratios for the two fir

> Barry Boswell is a financial analyst for Dossman Metal Works, Inc., and he is analyzing two alternative configurations for the firm’s new plasma cutter shop. The two alternatives, denoted A and B below, will perform the same task, but a

> The Caraway Seed Company grows heirloom tomatoes and sells their seeds. Heirloom tomato plants are preferred by many growers for their superior flavor. At the end of the most recent year, the firm had current assets of $50,000, net fixed assets of $250,0

> Last year the commercial real estate firm Kelly and Co., Inc., earned taxable income of $19 million. a. Calculate Kelly’s federal income taxes. b. Now calculate Kelly’s average and marginal tax rates.

> Meyer Inc. has taxable income (earnings before taxes) of $300,000. Calculate Meyer’s federal income tax liability using the tax table in this chapter. What are the firm’s average and marginal tax rates?

> G. R. Edwin Inc. had sales of $6 million during the past year. The cost of goods sold amounted to $3 million. Operating expenses totaled $2.6 million, and interest expense was $30,000. Determine the firm’s tax liability. What are the firm’s average and m

> Sales for J. P. Hulett Inc. during the past year amounted to $4 million. Gross profits totaled $1 million, and operating and depreciation expenses were $500,000 and $350,000, respectively. Dividend income for the year was $12,000, which was paid by a fir

> The Robbins Corporation is an oil wholesaler. The firm’s sales last year were $1 million, with the cost of goods sold equal to $600,000. The firm paid interest of $200,000, and its cash operating expenses were $100,000. Also, the firm received $40,000 in

> Last year Sanderson, Inc., had sales of $3 million. The firm’s cost of goods sold came to $2 million; operating expenses, excluding depreciation of $100,000, were $400,000; and the firm paid $150,000 in interest on its bank loans. Also, the corporation r

> Minelli Enterprises uses large amounts of copper in the manufacture of ceiling fans. The firm has been very concerned about the detrimental impact of rising copper prices on its earnings and has decided to hedge the price risk associated with its next qu

> Currently, a put contract with an exercise price of $5 on a share of Mily be Aerospace’s common stock is selling for (i.e., has a premium of) $1. What does the profit or loss graph look like for this option? In drawing this graph, assume that the option

> Draw a profit or loss graph for a put contract with an exercise price of $45 for which a $5 premium is paid. You may assume that the option is being evaluated on its expiration date. Identify the break-even price of the underlying stock. What is the maxi

> Big Steve’s Swizzle Sticks is considering the purchase of a new plastic-stamping machine. This investment will require an initial outlay of $100,000 and will generate net cash inflows of $18,000 per year for 10 years. a. What is the project’s NPV using a

> Currently, a call contract with an exercise price of $10 on a share of List Aerospace’s common stock is selling for (i.e., has a premium is of) $2. What does the profit or loss graph look like for this option? In drawing this graph, assume that the optio

> Draw a profit or loss graph for a call contract with an exercise price of $50 for which a $5 premium is paid. You may assume that the option is being evaluated on its expiration date. Identify the break-even point, maximum profit, and maximum loss. Now d

> Discuss how the exchange requirements that mandate traders to put up collateral in the form of a margin requirement and to use this account to mark their profits or losses for the day serve to eliminate credit or default risk.

> The Specialty Chemical Company operates a crude oil refinery located in New Iberia, Louisiana. The company refines crude oil and sells the by-products to companies that make plastic bottles and jugs. The firm is currently planning for its refining needs

> The Prince Racket Company manufactures a line of tennis and raquet ball equipment. The firm recently entered into a loan agreement for $20 million that carries a floating rate of interest equal to LIBOR plus 100 basis points (1 percent). The loan has a f

> Marx and Winter, Inc., operates a chain of retail clothing stores throughout the U.S. Midwest. The firm recently entered into a loan agreement for $20 million that carries a floating rate of interest equal to LIBOR plus 50 basis points (1/2 percent). The

> You’ve just been introduced to the Black-Scholes option pricing model and would like to use it to calculate the value of a call option on TriHawk stock. Currently, TriHawk’s common stock is selling for $25.00 per share, and the call option you are consid

> Consider the following call option: • The current price of the stock on which the call option is written is $20.00; • The exercise or strike price of the call option is $18.00; • The maturity of the call option is 90 days or .25 years; • The (annualized)

> Construct a delivery date profit or loss graph similar to Figure 20.2 for a long position in a forward contract with a delivery price of $65. Analyze the profit or loss for values of the underlying asset ranging from $40 to $80.

> Garmen Technologies Inc. operates a small chain of specialty retail stores throughout the U.S. Southwest. The company markets technology-based consumer products both in its stores and over the internet, with sales split roughly equally between the two ch

> On July 1, 2016, the Southwest Forging Corporation arranged for a line of credit with the First National Bank (FNB) of Dallas. The terms of the agreement call for a $100,000 maximum loan with interest set at 1 percent over prime. In addition, the firm ha

> Calculate the annualized cost of the following trade credit terms when payment is made on the net due date (assume a 365-day year): a. 2/15, net 30 b. 3/15, net 30 c. 3/15, net 60 d. 2/10, net 60

> Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan carries a rate of 12 percent per annum with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum deman

> The Caraway Seed Company has for many years cultivated and sold what are known as heritage plants and seeds. For example, it has sought out older varieties of tomato plants that are no longer grown by commercial vegetable farmers because they take too lo

> Network Solutions just introduced a new, fully automated manufacturing plant that produces 2,000 wireless routers per day with a materials cost of $50 per router and no other costs. The average number of days a router is held in inventory before being s

> Classify each of the following sources of new financing as spontaneous, temporary, or permanent, and explain your choice: a. A manufacturing firm enters into a loan agreement with its bank that calls for annual principal and interest payments spread over

> Classify each of the following investments in assets as either permanent or temporary, and explain your choice: a. A seasonal increase in a card shop’s inventory of Valentine cards. b. The acquisition of a new forklift truck that is expected to have a us

> Determine the annualized cost of foregoing the trade credit discount on the following terms (assume a 365-day year): a. 1/10, net 20 b. 2/10, net 30 c. 3/10, net 30 d. 3/10, net 60 e. 3/10, net 90 f. 5/10, net 60

> If a firm buys on trade credit terms of 2/10, net 50 and decides to forego the trade credit discount and pay on the net day, what is the annualized cost of foregoing the discount (assume a 365-day year)?

> You plan to borrow $20,000 from the bank to pay for inventories for a gift shop you have just opened. The bank offers to lend you the money at 10 percent annual interest for the six months the funds will be needed (assume a 365-day year). a. Calculate

> You are considering two independent projects, Project A and Project B. The initial cash outlay associated with Project A is $50,000, and the initial cash outlay associated with Project B is $70,000. The discount rate on both projects is 12 percent. The

> CL Marshall Liquors owns and operates a chain of beer and wine shops throughout the Dallas–Fort Worth metro plex. As a result of the rapidly expanding population of the area, the firm requires a growing amount of funds. Historically, it

> Harrison Electronics, Inc., operates a chain of electrical lighting and fixture distribution centers throughout northern Arizona. The firm is anticipating expansion of its sales in the coming year as a result of recent population growth trends. The firm

> Bates Fabricators, Inc., estimates that it invests $0.25 in assets for each $1 of new sales. However, $0.05 in profits is produced by each $1 of additional sales, of which $0.01 can be reinvested in the firm. If sales rise by $750,000 next year from thei

> The most recent balance sheet for the ADB Distribution Company is shown in the following table. The company is about to embark on an advertising campaign that is expected to raise sales from the current level of $5 million to $7 million by the end of nex

> The current balance sheet Murphy Forklifts, Inc., is as follows: Murphy Forklifts, Inc. Balance Sheet, December 31, 2016 ($ millions) Murphy had sales for the year ended December 31, 2016, of $50 million. The firm follows a policy of paying all net ear

> Which of the following accounts will most likely vary directly with the level of firm sales? Discuss each briefly. Yes No Cash Notes payable Marketable securities Plant and equipment Accounts payable Inventories || | | | |||

> Use the following industry average ratios to construct a pro forma balance sheet for Mendoza Distributors, Inc. Total asset turnover 2 times Average collection period (assume a 365-day year) 9 days Fixed asset turnover 5 times Inventory turnover (ba

> Tulley Appliances, Inc., projects next year’s sales to be $20 million. Current sales are at $15 million, based on current assets of $7 million and fixed assets of $8 million. The firm’s net profit margin is 5 percent after taxes. Tulley forecasts that cu

> Beason Manufacturing forecasts its sales next year to be $6 million and expects to earn 5 percent of that amount after taxes. The firm is currently in the process of projecting its financing needs and has made the following assumptions (projections): • C

> Harrison Printing has projected its sales for the first eight months of 2017 as follows: Harrison collects 20 percent of its sales in the month of the sale, 50 percent in the month following the sale, and the remaining 30 percent two months following t

> You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash flows: If the appropriate discount rate on these projects is 10 percent, which would be chosen and why? Year Project A Cash Flow Project

> The Sharpe Corporation’s projected sales for the first eight months of 2017 are as follows: Of Sharpe’s sales, 10 percent are for cash, another 60 percent are collected in the month following the sale, and 30 percent

> In the spring of 2016, the Caswell Publishing Company established a custom publishing business for its business clients. These clients consisted principally of small- to medium-size companies in Round Rock, Texas. However, the company’s

> Zapatera Enterprises is evaluating its financing requirements for 2017. The firm has been in business for only one year, but its CFO predicts that the firm’s operating expenses, current assets, net fixed assets, and current liabilities

> Marshall Pottery Barn is a privately owned importer of Mexican pottery and garden supplies. The firm plans on paying a $1.50 per share dividend on each of its 5,000 shares of common stock. The firm’s most recent balance sheet just befo

> Chaney’s Fatburner Gyms, Inc., operates a chain of exercise facilities throughout the Midwest. The firm appeals to middle-aged men who suffer from obesity problems and want to improve their health by entering an exercise program. The firm has 8,000,000 s

> Reconsider the problem faced by Templeton Care Facilities, Inc., from Study Problem 16–6. If the firm’s board of directors decides to use a stock split rather than a stock dividend, how many new shares should the firm issue for each outstanding share? D

> Templeton Care Facilities, Inc., is contemplating a stock dividend. The firm’s stock price had risen over the last three years and is trading at $150 per share. The firm’s board of directors feels that the trading range should be around $50 to $100, so t

> The stock price of Perkiman Go Inc. is currently $40 a share. If the firm announces a 10 percent stock dividend, what do you expect the ex-dividend stock price to be? What about a 20 percent stock dividend?

> Kingwood Corporation has a stock price of $120 per share and is contemplating the payment of a large, one-time cash dividend of $40 per share. The underlying motivation for the large payout comes from management’s belief that the firm has more cash than

> Dimmick Skate Boarding Enterprises has declared a $3 dividend for its common stock. On the day before the ex-dividend date, the firm’s shares are trading for $40 a share. What do you expect the price of Dimmick’s shares to be on the day following the ex

> You are considering a project with an initial cash outlay of $80,000 and expected cash flows of $20,000 at the end of each year for six years. The discount rate for this project is 10 percent. a. What are the project’s payback and discounted payback peri

> The Welmar Corporation operates membership warehouses that offer a wide variety of branded and private-label products in no-frills, self-service warehouse facilities. In 2016, the company paid total cash dividends of $265,029,000 and had net income of $1

> After more than 40 years of operation, the Tyler Brick Manufacturing Company has decided it is time to shut down the business. The firm has $125,000 available for distribution as a cash dividend immediately and plans to shut down its business at the end

> (The Caraway Seed Company sells specialty gardening seeds and products primarily to mail-order and internet customers. The firm has $200,000 available for distribution as a cash dividend immediately and plans to shut down its business at the end of one y

> The Barry man Drilling Company from Study Problem 16–10 is reconsidering its plan to repurchase $1 million of its common stock and instead plans to pay a $1 million cash dividend, which amounts to $2 per share of common stock. If dividends are taxed at 1

> The Barry man Drilling Company is planning on repurchasing $1 million worth of the company’s 500,000 shares of stock, which is currently trading at a price of $10 per share. Stan Barry man is the founder of the company and still holds 10,000 shares of co

> Calculate the cash dividend paid per share for each of the firms in the following table using their earnings per share and dividend payout ratio: Company Dividend Payout Ratio Earnings per Share Emerson Electric Co (EMR) 85% $2.23 Intel Corporation

> The income statements for Home Depot, Inc. (HD), spanning the period 2014–2016 (just before the housing crash, so these are representative years) are as follows: a. Calculate the times interest earned ratio for each of the years for w

> Presently, H. Swank, Inc., does not use any financial leverage and has total financing equal to $1 million. It is considering refinancing and issuing $500,000 of debt that pays 5 percent interest and using that money to buy back half the firmâ&#128

> Dharma Supply has earnings before interest and taxes (EBIT) of $500,000, interest expenses of $300,000, and a corporate tax rate of 35 percent. a. What is Dharma Supply’s net income? b. What would Dharma’s net income be if it didn’t have any debt (and, c

> Lowe’s Companies, Inc. (LOW), and its subsidiaries operate as a home improvement retailer in the United States and Canada. As of February 1, 2008, they operated 1,534 stores in 50 states and Canada. The company’s balan

> Plato Energy is an oil-and-gas exploration and development company located in Farmington, New Mexico. The company drills shallow wells in hopes of finding significant oil and gas deposits. The firm is considering two different drilling opportunities that

> Home Depot, Inc. (HD), operates as a home improvement retailer primarily in the United States, Canada, and Mexico. The balance sheet for Home Depot for February 3, 2008, included the following liabilities and owners’ equity: a. What a