Homework Help for Finance

Achieving a lower inventory balance through working capital management can result in savings from both carrying costs and losses associated with obsolete inventory. True or false?

Discuss examples of successful and unsuccessful international mergers and acquisitions. What factors made each case successful or unsuccessful? Was there expected synergy? Did synergy materialize?

Primus is a firm of consultants that focuses on process reengineering and quality improvement initiatives. Northwood industries have asked Primus to conduct a study aimed at improving on- time delivery. Normal practice for Primus is to bill for consultant time at standard rates plus actual travel cost and estimated overhead. However, Northwood has offer a flat $70,000 for the job. Currently, Primus has excess capacity so it can take on the Northwood job without turning other business and without hiring additional staff. If normal practices were followed, the bill would be: Classification Hours Rate Amount Partner 90 $260 $23,400 Senior consultant 125 $160 20,000 Staff consultant 60 $ 90 14,400 Travel costs 18,000 Overhead at $30 per non-partner hour 8,500 Total $84,350 Overhead (computer cost, rent, utilities, paper, copying etc.) is determined at the start of the year by dividing estimated annual overhead cost ($2,400,000) by total estimated non-partner hours (80,000 hours). Approximately 20 percent of the total amount is variable costs. All Primus employees receive a fixed wage (i.e., there is no compensation for overtime). Annual compensation in the previous year amounted to the following: Per Hour Partner $250 Senior consultant $150 Staff consultant $ 80 Required What will be the effect on company profit related to accepting the Northwood Industries job? What qualitative factors should be considered in the decision whether to accept the job or not?

Lisa is considering making a 6-year loan of $15,000 to Carmax Inc. To repay Lisa, Carmax will pay $500 at the end of Year 1, $2,000 at the end of Year 2, and $2,500 at the end of Year 3, plus a fixed but currently unspecified cash flow, Y, at the end of Years 4 through 6. Lisa regards 10% compounding annually as a rate of return for Carmax. What cash flow must the investment provide at the end of each of the final 3 years, that is, what is Y? (4 points) Hints: Draw a time line. Then, recall the simple formula: 15,000 is the loan that Carmax receives today. It equals to the present values of all the future cash flows. But hard to solve for Y in this way, so we use PVA as an alternative. Starting the end of the fourth period, the beginning of the fifth year, you pay equal amount of Y for four times, so it is an annuity due problem, so you can assume PVA at point 4 can be calculated from the four payments with amount of X.

if you want to buy 20,000 stocks at $10 on share but you wanted to only invest $12,000 AND you would borrow $8000 from the broker then the margin would be equal to? Assume that you sold the above shares after at $12 per share then your return would be? (show work please)

Identify a merger/acquisition that has been completed within the past 10 years. What has been reported or suggested as the basis of the merger? What is your assessment regarding degree of success? To what do you attribute the success or failure?

You and two friends, Pat and Ron, have decided to form a new business, running a restaurant. Your friends, pat and Ron, bring the following to the business: Pat is something of an entrepreneur. He has several ventures and ready access to financing for your business. Because of his varied interests, however, he doesn’t want to be an employee of the business. He does, however, want to have some input into the management of the business. Ron has a full time job, which she is willing to leave to make a full time commitment to running this restaurant. She has limited funds available and hopes to develop “sweat equity” in the restaurant through her work effort. She is a skilled chef who will manage the kitchen and the food production. You are the “idea person”. You have conceived of this enterprise, and are charged with getting everything lined up. You will be involved in the day-to-day running of things, and will be the manager of the business side of the restaurant.

II. Having chosen the form of business, you also need to arrange financing to obtain all of the kitchen equipment, dining room equipment, stock the bar, purchase food, pay rent, get operating capital for the first two months of operation, and a million other details. A arranges through his sources to get financing. The lender requires that you do whatever is necessary to minimize his risk and each of the three of you to be responsible for the loan. Include all of the forms of financing and lending that we have discussed in this case. What are the options, which ones are best, and how do they work?

Related to Regardless of Your Major: Welcome to the World of Finance on page 4) In the Regardless of Your Major feature box at the beginning of this chapter, we discussed how the topic of Principle 1, the time value of money, is relevant to both your personal and professional lives. Describe a decision you might face in the future that will require you to consider the future value of money received (or invested). For example, how might the time value of money enter into a decision to push back your graduation date by one year?

How does a leveraged buyout work? What does the debt structure of the firm normally look like after a leveraged buyout? What might be done to reduce the debt?

True or False and explain answer

As the number of compounding periods increases, the difference between the nominal and effective rates will also increase.

You are the CEO of a small pharmaceutical company. Your company is privately held, with 75 shareholders; however, you own a majority of the shares and thus, you maintain control over the Board of Directors. Your company successfully developed and patented a drug to treat a rare blood disease. You have recouped your research and development costs on the drug and are making a profit by selling the pills at $10 each. Because the number of people with the disease is very small, no other companies have entered into the market for this drug. Big Drugs, Inc. has approached you about acquiring the rights to the drug. Big Drug’s offer is substantial and if you were to accept it, you would likely be able to fund research for a drug for a related, and also rare and debilitating disease. However, you have heard speculation by many in the industry that Big Drug has been implementing a strategy of buying up the patents on rare disease/small market drugs in order to raise the prices significantly. The last purchase of this type by another big pharma company resulted in an increase in the price from $15.00 per pill to $500 per pill. Meanwhile, the FDA is investigating the price hikes of certain drugs. The agency is considering a program to subsidize the prices through an arrangement with insurance companies. The proposed subsidy would allow you to increase the price to approximately $14.00 per pill. Even with this increase, however, your profits will fall far short of the amount to be gained from the Big Drug purchase offer. You need to respond to the offer from Big Drug. You are pretty confident that selling will result in a price hike that will create an immense hardship on the patients using the drug. Your investors are anxious for you to seize the opportunity to turn a tidy profit and have sufficient resources to boost your R&D. As you consider how to advise the Board of Directors, what are the ethical considerations involved in this decision? Choose two ethical theories that you studied this term that you think can help you make the “right” decision. Describe how those theories apply to this situation, and what decision would be ethical using each of the theories. Finally, what is your recommendation to the Board of Directors? Use the IRAC format to respond to the question.

You want to go to Europe 5 years from now, and you can save $3,100 per year, beginning one year from today. You plan to deposit the funds in a mutual fund that you think will return 8.5% per year. Under these conditions, how much would you have just

To calculate the number of years until maturity, assume that it is currently May 2013.

Required: In the above table, find the Treasury bond that matures in May 2021. What is the coupon rate for this bond?