Bond Valuation and Financial Management

1. (Bond valuation) The 8-year $1,000 par bonds of Vail Inc. pay 11 percent interest. The market’s required yield to maturity on a comparable-risk bond is 7 percent. The current market price for the bond is $1,130. What is your yield to maturity on the Vail bonds given the current market price of the bonds? (Round to two decimal places.) What should be the value of the Vail bonds given the yield to maturity on a comparable risk bond? (Round to the nearest cent.) Should you purchase the bond at the current market price?   2. (Annuity interest rate) Your parents just called and would like some advice from you. An insurance agent just called them and offered them the opportunity…

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Manual Accounting MYOB

HOME GYM LTD 17 HALL STREET MOONEE PONDS 3039 Max Matters is a semi-retired physical education teacher and is starting a wholesale home gym sales business on the 1st September 2016, he is contributing the following assets and liabilities to commence the business: Cash at Bank $4,000, Motor Vehicles $60,000, Office Supplies $600, Motor Vehicles Financing Loan $20,000. The terms of the Loan are: interest rate of 12% per annum payable at the end of each month and repayment of principle of $180 at the end of each month. He has employed your accounting firm to design and set up the accounting journals and ledgers, and to complete the financial statements for the month ended 30th September 2016. Max supplies two…

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Journal Entries for Impairment Loss

Crossbow Ltd is an entity that specialises in the manufacture of leather footwear for women. It has aggressively undertaken a strategy of buying out other companies that had competing products. These companies were liquidated and the assets and liabilities brought into Crossbow Ltd. At 30 June 2015, Crossbow Ltd reported the following assets in its statement of financial position:                      Land                                                                      $200 000                    Inventory products                                                 180 000                    Brand ‘Crossbow Shoes’                                       160 000                    Shoe factory                                                            700 000                    Machinery for manufacturing shoes                    400 000                    Goodwill on acquisition of competing companies  40 000                                                                                                 $1 680 000 Because of the competition from overseas as customers pursue a strategy of buying online rather than visit Crossbow Ltd’s stores,…

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Financial Management – NPV, IRR and Sensitivity Analysis

Emu Electronics is an electronics manufacturer located in Box Hill, Victoria. The company’s managing director is Shelly Chan, who inherited the company from her father. The company originally repaired radios and other household appliances when it was founded more than 50 years ago. Over the years, the company has expanded, and it is now a reputable manufacturer of various specialty electronic items. Robert McCanless, a recent MBA graduate, has been hired by the company in the finance department. One of the major revenue-producing items manufactured by Emu Electronics is a smart phone. Emu Electronics currently has one smart phone model on the market and sales have been excellent. The smart phone is a unique item in that it comes in a…

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Investment appraisal

Investment appraisal The Company X. is considering tendering for a local authority contract to supply school snacks. If they decide to tender and are successful, this will be their first contract in the public sector. The contract is for a period of five years. The company has spent $2,500 on a feasibility study related to this contract. From this study, they have obtained the following estimates of costs, revenues and volumes. The initial cost of the investment for the necessary cooking equipment will be $30,000. This sum will be payable at the beginning of the contract. Selling price of snacks: $1.00 per snack for the first three years, than $1.20 for years four and five. Cost of snacks: $0.60 per snack…

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Portfolio, Bond and Share valuation

Question 1 Portfolio valuation Consider shares in two companies, JAY and KAY, as follows:   Expected Return E(R) Standard Deviation Correlation Coefficient Share JAY 12% 18% – 0.3 Share KAY 24% 32%   a) Calculate the covariance between Share JAY and KAY returns. b) What is the expected return and standard deviation of returns on a portfolio comprising 35% in Share JAY and 65% in Share KAY? c) If you wanted to create a portfolio consisting only of these two shares, how much would you need to invest (weights) in each share so that your portfolio return would be equal to 15.6%? Note: do not round. d) Using the weights calculated in part c), calculate the variance and standard deviation of…

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Variance Analysis

Question 1: Calculate the material purchase price variance, which is
(actual price – standard price) × actual quantity of materials used
Question 2: Work out the actual hours worked, to the nearest hour, remembering that the direct labour usage variance is equal to:
(actual labour hours – standard labour rate hours) × standard labour rate

 

 

Standard unit price of materials	£9.00
Actual unit price of materials	£8.68
Standard quantity of material for actual production (units)	3,300
Actual quantity of materials purchased and used (units)	3,600
Standard direct labour rate	£28.00
Actual direct labour rate	£24.40
Standard direct labour hours	24,000
Direct labour usage variance	£28,280 U = unfavourable or adverse

 

 

Calculate the monthly mortgage payment of principal and interest for a loan

Using MS Excel spreadsheet, create an assessment for each of the following problems: 1.Calculate the monthly mortgage payment of principal and interest for a loan with an initial balance of $250,000, an annual stated interest rate of 5%, and 30 years to maturity. Use Excel to develop this response and present your result within a separate page of the spreadsheet. Would only someone who makes a high income be able to afford this mortgage payment? Or would someone who makes the minimum wage be able to afford this mortgage payment? 2.Develop the amortization table for the loan outlined in problem 1. Use an Excel spreadsheet to develop and present this table. Present this result in a separate page of the spreadsheet.…

NPV decisions

You’ve been offered a full time position as an assistant financial analyst at Bathurst Metal Works. Your latest assignment involves the analysis of several risky projects. Because this is your first assignment dealing with risk analysis, you have been asked not only to provide a recommendation on the project in question but also respond to a number of questions aimed at judging your understanding of risk analysis and capital budgeting. The memorandum you received outlining your assignment follows: To: Assistant Financial Analyst From: Chief Financial Officer Re: Capital budgeting and risk analysis You are required to conduct a risk analysis of the following new project, as outlined below. This new project involves purchase of a new laser cutting tool that can…

FIN 320: Managerial Finance Capital Budgeting

FIN 320: Managerial Finance Capital Budgeting Consider the following two mutually exclusive projects Year CF of Project A CF of Project B 0 -$350,000 -$50,000 1 45,000 24,000 2 65,000 22,000 3 65,000 19,500 4 440,000 14,600 Whichever project you choose, if any, you require a 15 percent return on your investment. If you apply the payback criterion, which investment will you choose? Why? I would pick project B because the payback period is less. If you apply the NPV criterion, which investment will you choose? Why? If you apply the IRR criterion, which investment will you choose? Why? If you apply the profitability index criterion, which investment will you choose? Why? Based on your answers in (a) through (e ),…

The accounts of Antique Furniture Suppliers Ltd from 1st October 2013 to 30th September 2014

The accounts of Antique Furniture Suppliers Ltd from 1st October 2013 to 30th September 2014 Antique Furniture Supplies Ltd’s Cash book for September 2014 Ledger accounts for Antique Furniture Suppliers Ltd’s Ledger for the year ended 30 September 2014 Debit   Credit Date Details Fo £ Date Details Fo £ Delivery van account 01-Oct-13 Balance b/d 82000 30-Sep-14 balance c/d 82000 01-Oct-14 Balance b/d 82000 Accumulated depreciation DV 30-Sep-14 Balance c/d 11500 01-Sep -13 Balance b/d 11500 01-Oct-14 Depreciation 11500 Fittings account 01-Oct-13 Balance b/d 16000 31/09/2014 balance c/d 16000 01-Oct-14 Balance b/d 16000 Accumulated depreciation fittings 30-Sep-14 Balance c/d 2000 01-Sep-13 Balance b/d 2000 01-Oct-14 Balance b/d 2000 Premises Account 01-Oct-13 Balance b/d 200000 30-Sep-14 Balance c/d 200000 01-Oct-14 Balance…

Job Order Costing Assignment

Job order costing                                                                          40 marks Your friend has his own business (Sisulu Ltd). He is currently using job order costing and is applying a plant-wide overhead rate. At the beginning of March, Sisulu Ltd had two jobs in process: Job 24 and Job 25, with the following accumulated cost information:   Job 24 $ Job 25 $ Direct materials 5 100 1 500 Direct labour 1 200 3 000 Applied overhead   780 1 950 Balance, 1 March 7 080 6 450   During March, two more jobs (26 and 27) were started. The following direct materials and direct labour costs were added to the four jobs during the month of March: Job 24 $ Job 25 $ Job…