Jan-Stone Limited is looking into the following two

Jan-Stone Limited is looking into the following two (2) investment projects:

Project A B
Cost of Investment $450,000 $560,000
Estimated net cash flows
Year $ $
1 180,000 220,000
2 160,000 200,000
3 130,000 170,000
4 110,000 150,000
5 90,000 120,000
6 60,000 80,000
730,000 940,000

The company’s required rate of return for both projects is 15%.

Required:
a. Calculate the net present value (NPV) for both projects.

b. Evaluate and advise the management which one of the projects to opt for, if any.

The following summary of information extracted from Jan-Stones Limited

The following summary of information extracted from Jan-Stones Limited, are for a typical month:

Total Sales Revenue:
Total Variable cost:
Fixed costs per month:
Units sold per month:
$82,000
$36,000
$16,000
5,000

(i) Calculate the contribution per unit.
(ii) Compute the monthly break-even point in units.
(iii) If a monthly net profit of $40,000 is to be achieved, how many units would have to be sold?

Jan-Stones Limited has compiled the 4-month data below

Jan-Stones Limited has compiled the 4-month data below:

Units Total Costs
May 1,200 $39,400
June 1,600 $43,200
July 1,400 $41,800
August 1,100 $37,000

 

Applying the high-low method, answer the following questions:

(i) Calculate the variable cost per unit.

(ii) Calculate the fixed cost portion of the total costs.

(iii) If the company uses 1,800 units in September, how much will the total costs be?

Healthy Foods Company (HFC) currently processes seafood

Healthy Foods Company (HFC) currently processes seafood with a unit it purchased several years ago. The unit, which originally cost $500,000, has a current book value of $250,000. HFC is considering replacing the existing unit with a newer, more efficient one. The new unit will cost $750,000 and will also require an initial increase in net working capital of $40,000.  The new unit will be depreciated on a straight‐line basis over five years to a zero balance. The existing unit is being depreciated at a rate of $50,000 per year. HFC expects to sell the existing machine today for $275,000. HFC’s tax rate is 30%. If HFC purchases the new unit, annual revenues are expected to increase by $100,000 (due to…

The table below gives the amount invested and betas for three stocks

The table below gives the amount invested and betas for three stocks.

Stock       Amount Invested          Beta

GM            K10, 000                     1.2

IBM           K10, 000                     1.0

WMT         K20, 000                     0.7

 

REQUIRED:

  1. Using the CAPM, if the expected return for the market is 6% and the risk-free rate is 1.5%, what is the expected return for each stock?
  2. What is the beta for this portfolio based on the invested amounts?
  3. Using the CAPM, what is the expected return for this portfolio?

New Horizon Ltd is an Australian company. The Australian dollar

New Horizon Ltd is an Australian company. The Australian dollar is its functional currency. On 1 October 2018, New Horizon Ltd entered into a binding agreement with a German company to construct a plant for New Horizon. The cost of the plant was U.S. $2 750 000. The plant was completed on 17 October 2019 and shipped FOB Hamburg on that date. New Horizon made the full payment for the plant on 31 October 2019. Each year New Horizon’s financial year ends on 31 December. Assume the following were the exchange rates on different dates: 1 October 2018: Aus $1 = U.S. $0.6975 31 December 2018: Aus $1 = U.S. $0.7105 1 October 2019: Aus $1 = U.S. $0.6825 17 October…

The following data available for ABC company

The following data available for ABC company.

Account Beginning balance Ending Balance Use/source of cash
Accounts payable 20,300 24,400
Inventory 60,600 67,200
Long term debts 127,500 125,800
Common stock 200,400 215,900

 

Required:

  1. Calculate and identify the source of cash or the use of cash for each account change by filling into the column next to the ending balance.
  2. Assume that beginning balance of accounts receivable is $23 400 and ending balance of accounts receivable of $22 300, total revenue is $237 000, total cost of sales is $ 165 000 and all sales are on credit. Calculate the operating cycle and cash cycle.

Big Water Ltd currently has the following capital structure

Big Water Ltd currently has the following capital structure:

Debt: $4,500,000 paying 9.5% coupon bonds outstanding with 12 years to maturity, an annual before-tax yield to maturity of 8% on a new issue. The bonds currently sell for $1,113 per $1,000 face value.

Ordinary Shares: 65,000 shares outstanding currently selling for $75 per share. The company just paid a $6.50 dividend per share and is experiencing a 6% growth rate in dividends, which it expects to continue indefinitely.

(Note – The firm’s marginal tax rate is 30%.)

 

Required:

  1. Calculate the current total market value of the company.
  2. Calculate the capital structure of the company.
  3. Calculate the weighted average cost of capital (WACC) for the firm.

Alice has an investment portfolio that paid

Alice has an investment portfolio that paid the rate of return of 23%, 12%, – 34%, 18% and 10% over the last five (5) years. Required: a. Calculate the arithmetic average return and the geometric average return of this portfolio? b. If the following information is available for Alice’s portfolio in the forecast for next year, calculate the expected return and identify the risk of return by computing the variance and the standard deviation. State of economy Probability of the economic state Rate of Return Boom 0.55 25% Normal 0.30 17% Recession 0.15 -8%   c. If the beta of this portfolio is 1.2, the risk-free rate of return is 7%, how much is the risk premium applied in calculating the…