Project #95439 - Non Finance for Managers-NPV,IRR,WACC, & B/E Formulas

 

1)    Investment $2,000,000; repairs $ 1,000,000 ; salvage revenue at end of project (in 3 years) $500,000.  cost of capial 12%.

cashflows $1,000,000 in year #1, $2,000,000 in year #2, $1,000,000 in year #3.

 

Calculate NPV?

 

 

 

 

 

 

 

2)    Using the above information please calculate IRR.

 

 

 

 

 

 

 

 

 

3)    A building will sell for $4 million in 6 years to the police department. The cost of holding the building will be 8 % per year. The investment cashflow of this project is $3.2 million. What is this project's NPV ? Is the project worth taking?

 

 

 

 

 

 

 

 

 

4) Please calculate the IRR for the project described in question #3.

 

 

 

 

 

 

 

 

 

 

 

 

5)    A factory currently has a equity position of $ 4,000,000 with a cost of 10%, the preferred equity position is $2,000,000 with an annual cost of 15%, the company's debt cost is 6%. The company has assets worth $ 9,000,000. Please calculate the WACC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6)    The debt of this company is currently 60% of the total assets, the remainding capital structure is financed with common equity with a cost of 3%. The cost of the debt was $800,000 the entire $10,000,000 of the firm's liabilities. Please calculate the WACC with a tax rate of 40%.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7)    With a tax rate of 40% and a total capital structure of $10,000,000. We need to calculate the WACC for the following two scenarios.

A)                  

      composition of capital sttucture 

                                                  debt  10.0 %  with a cost of  8%

                                preferred equity  20.0 %  with a cost of 10%

                                 common equity  70.0 %  with a cost of   6%

 

 

 

 

 

      B)

       composition of capital sttucture 

                                                   debt  60.0 %  with a cost of  8%

                                preferred equity  10.0 %  with a cost of 10%

                                 common equity  30.0 %  with a cost of   3%

 

 

 

 

C)   Which is the best for option for the company? Explain.

 

 

 

 

 

 

 

8)    Break-even

 

A sandwich shop has been doing business for 10 years in Pinecrest. The shop currently operates out of a building that is paid for. The variable overhead expenses are 10% of the sales each sandwich. Each sandwich has a food cost of $1. All the sandwiches sell for $5 each.

        

             At the new location in the Falls area, the monthly cost of rent will be $6,000. The sales price will also be $5, with a food cost of $1 ,and 10% overhead expense of price of each sanchwich sold.

 

a)What is the break even in dollars and b) units for the new location?

 

 

 

 

 

 

 

 

 

 

c)     How much will the new shop need to sell to generate a monthly profit of $12,000.

 

 

 

 

 

 

 

 

 

 

 

9)    A seminar series has set up costs of $3,000; a rent per event of $1,000; plus a variable cost of $30 per attendee for food, supplies, and refreshments. The price of the seminar admission is $100 per person.

 

What is the break even in a) units{people} and   b) dollars for each seminar?

 

 

 

 

 

 

 

 

 

 

 

10) Please prepare a simple balance sheet for The BBQ Company before a) and after b) the change in capital structure.       

 

           The company currently has total assets of $12,000,000. They want to expand with an additional plant in West Palm Beach at a cost of $5,000,000. The new operation will be financed in its entirety with preferred equity from Miramar Trust. 

Miramar Trust will receive a $4 dividend on each share of its preferred stock of $50.00. The equity of the company is 40% with an annual cost of 4%, 50% of the original capital structure is in debt with a rate of 8% and the remainder is in preferred equity at the same rate as of the new preferred stock and also held by Miramar Trust.         

 

c) Calculate the WACC before c)  and after the  expansion d).       e) How many shares will Miramar Trust hold in The BBQ company?                                                                                                                                                                                                                                                                                                                                                                          

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Due By (Pacific Time) 11/23/2015 01:00 pm
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