If you have questions, please consult with me!
This project is not too dificult but it does take attention to detail.
The quantitative questions should show the computations/process not just an answer.
Please submit it in a Word document (do not use Excel please)
** I have posted the ENTIRE project below so you can read it first and decide whether you could do a perfect job on it before bidding.
1.Explain what you believe is the dividend policy for Kimberly-Clark Corporation (KMB), Energizer Holdings Inc. (ENR), and 3D Systems Corp. (DDD). In answering this question, discuss the concepts that were examined in class. The points earned depend on the depth of the discussion of the dividend policy for each of these three companies. Provide financial metrics as necessary.
2.In your role as a financial analyst, you have been asked to analyze certain aspects of working capital management for Kimberly-Clark Corporation (KMB), Energizer Holdings Inc. (ENR), and 3D Systems Corp. (DDD). In your analysis you should consider the following:
•Cash conversion cycle
•Net working capital.
•Short-term financing versus long-term financing.
Be sure that your computations are accompanied by discussion that relates to the material discussed in class.
3.You have just won the Powerball lottery, which had a prize that paid you a $150 million immediate, after-tax cash payout. You know that Proctor and Gamble is selling off many of its brands, including Braun Oral-B toothbrushes. You have always believed that Oral-B toothbrushes were by far the best in the market. You are going to prepare a bid for the brand. Discuss the course concepts that you would use so that you could prepare a bid. No calculations are necessary.
4. The Jackson Corporation, a firm in the 30% marginal tax bracket, with an 18% required rate of return or discount rate, is considering a new project. This project involves the introduction of a new product. This product is expected to last 5 years and then, because it is somewhat of a fad product, it will be terminated. Given the following information, determine the project’s net present value. Apply the appropriate decision criteria.
Cost of new plant and equipment:$198,000,000
Shipping and installation costs: 2,000,000
Yr Units Sold
Sales price per unit: $800/unit in years 1-3; $600/unit in years 4 and 5.
Variable cost per unit: $400/unit in years 1-3; $300/unit in years 4 and 5.
Annual fixed costs: $12,000,000.
There will be an initial working capital requirement of $2,500,000 just to get production started. At the conclusion of the project the plant and equipment can be sold for $17,000,000. The plant and equipment will be depreciated over five years on a straight-line basis to a zero-salvage value.
(10 pts) 5.Dolphin Inc. has annual sales of $700 million. Management has determined that an average of 9 days elapses between the time customers mail their payments and when the funds are available to the firm. Third National Bank has a program whereby the float can be reduced by 4 days. The program would cost Dolphin $200,000 in annual fixed fees to the bank, as well as a .05% fee on the annual volume of sales. Dolphin will also be required to have a compensating balance of $3,000,000 at Third National Bank.
Additionally, Dolphin will be able to reduce labor costs in its accounting department by $350,000. Dolphin can earn 9 percent (pretax) on its investments.
Show computations which would indicate whether or not Dolphin should accept Third National Bank’s proposal.
(12 pts) 6.Jamaica Corporation has compiled the data shown in the following table for the current costs of its three basic sources of capital-long term debt, preferred stock, and common equity-for various ranges of new financing.
Source of capital Range of new financing After-tax cost
Long term debt $0 and above 6%
Preferred stock $0 and above 11%
Common stock equity $0 and above 18%
The company's capital structure weights used in calculating its weighted average cost of capital are shown in the following table.
Source of capitalWeight
Long-term debt 30%
Preferred stock 10
Common stock equity 60
Jamaica has the following investment opportunities available.
InvestmentOpportunity Internal rate of Return Initial investment
A 19% $300,000
B 15 200,000
C 22 300,000
D 14 500,000
E 17 700,000
F 13 200,000
G 21 800,000
H 17 100,000
I 16 500,000
Projects C, E, and G are considered to be higher in risk than those in which they typically take on. For such projects, Gemstone adds a premium of 4% to its WACC. Determine the optimal capital budget. Show computations.
7.Jacobs Corporation predicts that net income in the coming year will be $120 million. There are 15 million shares of common stock outstanding and Jacobs maintains a debt-equity ratio of 2.0. The current market price per share for Jacobs is $75.
•If Jacobs wishes to maintain its present debt-equity ratio, calculate the maximum investment funds available without issuing new equity and the increase in borrowing that goes along with it.
•Suppose that the firm uses a residual dividend policy. Planned capital expenditures total $66 million. Based on this information, what will be the dividend yield and the dividend per share?
•Suppose Jacobs plans no capital outlays for the coming year. What will be the dividend yield and the dividend per share, assuming that Jacobs uses the residual dividend policy?
(9 pts) 8. Wilkins Inc.’s vendors offer credit terms of 3/10, n/40. Wilkins will typically
pay within the discount period. Wilkins buys an average of $50,000 of merchandise each day. What is the average balance that Wiggins will have for its accounts payable? What would be the cost to Wiggins, if they did not pay within the discount period?
(20 pts) 9.Monroe Corporation is considering whether to pursue an aggressive or conservative current asset policy, as well as an aggressive or conservative financing policy. The following information is available:
•Annual sales are $600,000.
•Fixed assets are $200,000.
•The debt ratio is 50 percent.
•EBIT is $45,000.
•Tax rate is 30 percent.
•With an aggressive policy, current assets will be 10 percent of sales; with a conservative policy, current assets will be 30 percent of sales.
•With an aggressive financing policy, short-term debt will be 60 percent of the total debt; with a conservative financing policy, short-term debt will be 30 percent of the total debt.
•Interest rate for short-term debt is 6 percent. Interest rate for long-term debt is 10 percent.
Determine the return on equity for the aggressive approach and for the conservative approach. Discuss which approach you would choose.
|Due By (Pacific Time)||08/21/2014 12:00 am|
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