BUSINESS COLLEGE

Blitz Corp. had total sales of $3,010,000 last year and has 106,000 shares of stock outstanding. The benchmark PS is 1.6 times. What stock price would you consider appropriate?

Answers

Answer 1

Answer:

Answer:

the stock price is $45.44

Explanation:

The computation of the stock price is shown below:

Sales per share is

= Total sales ÷ stock outstanding shares

= $3,010,000 ÷ 106,000 shares

= $28.40

Now

Benchmark PS = Stock price ÷ Sales per share

Stock price = $28.40 × 1.6

= $45.44

hence, the stock price is $45.44

We simply applied the above formula so that the correct value could come

And, the same is to be considered

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The value of a listed call option on a stock is lower when: I. The exercise price is higher. II. The contract approaches maturity. III. The stock decreases in value. IV. A stock split occurs.

Answers

A call bond option is termed as the option that implies the bondholder the right to purchase the bonds at the prevailing price in the market. A buyer of a bond call option in the secondary market forecasts a drop in investment substantial rise in bond prices.

The correct option is a. I, II, and III only

Option a. I, II, and III only is correct because The contract value will decline as it reaches maturation because it will become less unpredictable.

The goal of purchasing a call option is to benefit if the price of the underlying stock rises. The attractiveness of the callable bond falls as the price of bitcoin declines, and the worth of the call option reduces as well.

The exercise price is the price where the individual who acquires a call option will be able to acquire the underlying shares. If this price is too high, the benefit from buying the stock at maturity will be too little, diminishing the value of the specified call option.

To know more about the listed call option, refer to the link below:

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Answer: a. I, II, and III only

Explanation:

The exercise price refers to the amount that the person who buys the call option will get to buy the underlying stock at. If this price is high, the profit from buying the stock at maturity will be less so the value of the listed call option reduces.

As the contract approaches maturity, the value will decrease because it will be less volatile as it approaches maturity.

The purpose of buying a call option is so that a profit can be made if the underlying stock increases in value. If the stock decreases in value, the allure of the call option decreases so therefore will the value.

The operations manager at a chemical company that produces insecticide for use in commercial applications is attempting to set a safety stock level for a key ingredient that is used in their most powerful product. She believes that demand during lead time for this ingredient is normally distributed based on past data. In addition, she believes that future use is accurately depicted by these historical demand-duringlead-time data (in gallons): 55, 75, 75, 70, 80, 60, 50, 70, 60, and 85. She estimates the standard deviation of demand during the lead time to be 8.5 gallons. a. What is the average demand during the lead time for this key ingredient?
b. What is the safety stock they need to provide a 95% service level?
c. What is the order point the company should use?

Answers

Answer:

a) Average demand during the lead time = Sum of all the historical demand during lead time / Number of periods

= (55+75+75+70+80+60+50+70+60+85) / 10

= 680 / 10

= 68 gallons

b) Standard deviation of demand during lead time(\sigmadL) = 8.5 gallons

At 95% service level,value of Z = 1.65

Safety stock = Z(\sigmadL) = 1.65(8.5) = 14.03 gallons

c) Reorder point = Average demand during the lead time + Safety stock

= 68 + 14.03

= 82.03 gallons

Suppose you invest equal amounts in a risky asset with an expected return of 16% and a standard deviation of returns of 18% and a risk-free asset with an interest rate of 4%. Calculate the standard deviation of the returns on the resulting portfolio.

Answers

Answer:

The answer is " $10\%$ ".

Explanation:

You are equivalent investors in 16 percent of a portfolio and 4 percent of a risk-free asset. A weighted mean of these two will become the predicted return.

$= \text{(Portfolio weight} * \text{Return portfolio)} + \text{(Portfolio weight}* \text{risk-free)}\n\n$

$= (0.5 * 16\%) + (0.5 * 4\%)\n\n= (0.5 * (16)/(100)) + (0.5 * (4)/(100))\n\n= (8)/(100) + (2)/(100)\n\n= (8+2)/(100)\n\n= (10)/(100)\n\n= (1)/(10)\n\n= (1)/(10) * 100\n\n=10\%$

Alpine Corporation reported the following information for fiscal 2017 and 2016. December 31 2017 2016
Operating assets $164,101 $153,211
Operating liabilities 120,785 114,836
Net cash flow from operations 46,709 39,540
Net operating profit after tax (NOPAT) 33,371 31,742
Discount factor 6.0% 6.0%

What are the company's free cash flows to the firm (FCFF) for 2017?

A. $28,430
B. $24,638
C. $28,907
D. $25,797
E. None of the above

Answers

Answer:

Option (A) is correct.

Explanation:

Net Operating assets in 2017:

= Operating assets - Operating liabilities

= $164,101 - $120,785

= $43,316

Net Operating assets in 2016:

= Operating assets - Operating liabilities

= $153,211 - $114,836

= $38,375

Increase in net operating assets:

= $43,316 - $38,375

= $4,941

Company's free cash flows to the firm (FCFF) for 2017:

= Net operating profit after tax 2017 - Increase in net operating assets

= $33,371 - $4,941

= $28,430

Your company is upgrading the breakroom and kitchen. It is going to include an expresso machine, a fridge with compartments for each employee, a sink, microwave, toaster oven, tables chairs, a rock wall, snacks for everyone, and maybe some other bells and whistles. Your managers think that by updating this area employees will not take as long of lunches. They understand this purchase will be at a cost. You are tasked with considering two different options and presenting them to management. Use a 5% interest rate. Walmart Kit Target First Cost $40,000 $65,000Annual Maintenance Cost $10,000 $12,000Salvage Value $12,000 $25,000Life Years 3 6 a. Using NPW (Net Present Worth Analysis) analysis determine which kitchen kit you should chooseb. Using EUAW (Equivalent Uniform Annual Worth) analysis determine which kitchen kit you should choose. C. You really want the Target kit because it looks nicer and has more bells and whistles. You are willing to keep these products around for longer and therefore extend the lives of these products. Perform the analysis to show that the Target option is the better choice. d. Now from your analysis in part b think about how ethical presenting this information to management would be. Write 2-3 sentences about how you would present this information in a way that showed your bias. You will be graded on your ability to consider two options in an ethical comparison and how you perceive your bias.

Answers

Answer:

1. In a Year 20,367 20,017

2. In a Year 21,333 21,917

3. In the case of NPW analysis Selected Target is best option because it is the better and cheaper investment while EUAM analysis states Walmart kit is better option,

4.Target is the best option because the cost difference is only around $600 which will last for 6 Years while in walmart case we will need to replace all the furniture in 3 Years .

Explanation:

1. Using NPW Analysis

Walmart Kit Target

Intial Cost 40000 65000

AMC 10000 12000

Salvage Value 12000 25000

Life Years 3 6

Total Cost

Intial Cost 40000 65000

Less Salvage 12000 25000

Balance 28000 40000

5% Interest 6000 19500

AMC PV 2.71 5.05

Amc 27100 60600

Total Cost 61100 120100

In a Year 20,367 20,017

2. Using EUAW Analysis

Walmart Kit

Target

Intial Cost 40000 65000

AMC 10000 12000

Salvage Value 12000 25000

Life Years 3 6

Total Cost

Intial Cost 40000 65000

Less Salvage 12000 25000

Balance 28000 40000

5% Interest 6000 19500

AMC 30000 72000

Total 64000 131500

In a Year 21,333 21,917

In the case of NPW analysis Selected Target is best option because it is the better and cheaper investment while EUAM analysis states Walmart kit is better option,

Target is the best option because the cost difference is only around $600 which will last for 6 Years while in walmart case we will need to replace all the furniture in 3 Years .

Hence Target product will be the best option we would advice the management to go for.

Final answer:

To determine which kitchen kit to choose, you can use NPW (Net Present Worth) analysis and EUAW (Equivalent Uniform Annual Worth) analysis. In NPW analysis, calculate the present worth of each option by subtracting the present value of the annual maintenance cost from the sum of the present value of the salvage value and the present value of the first cost. In EUAW analysis, divide the NPW by the present worth factor to calculate the equivalent uniform annual worth. You can extend the analysis to show the EUAW for an extended life of the products. Present the information ethically and transparently, addressing your bias towards the Target kit and presenting the analysis results objectively.

Explanation:

a. In order to determine which kitchen kit to choose using NPW analysis, we need to calculate the present worth of each option. The present worth is calculated by subtracting the present value of the annual maintenance cost from the sum of the present value of the salvage value and the present value of the first cost. You can use the formula: NPW = (-FC + PV(SV) + PV(AMC)) / (1 + i)^n, where FC is the first cost, PV(SV) is the present value of the salvage value, PV(AMC) is the present value of the annual maintenance cost, i is the interest rate, and n is the number of years.

b. To determine which kitchen kit to choose using EUAW analysis, we need to calculate the equivalent uniform annual worth of each option. The EUAW is calculated by dividing the NPW by the present worth factor. You can use the formula: EUAW = NPW / Present Worth Factor, where NPW is the net present worth, and the Present Worth Factor is calculated using the formula: Present Worth Factor = (1 - (1 + i)^-n) / i.

c. To show that the Target option is the better choice, you can extend the analysis from part b and calculate the EUAW for an extended life of the products. Simply substitute the new number of years into the formula and compare the EUAWs of the two options.

d. Since you have a bias towards the Target kit, it is important to present the information ethically and transparently. You can start by explaining your bias and personal preference, and then present the analysis results objectively, showcasing the financial aspects and consequences of each option. It is crucial to provide all the necessary information and allow management to make an informed decision based on the facts presented.

Learn more about Financial here:

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E9-14 Computing and Interpreting the Fixed Asset Turnover Ratio from a Financial Analysts Perspective [LO 9-7] The following data were included in a recent Papaya Inc. annual report (in millions): 2013 2014 2015 2016 Net revenue $ 82,225 $ 120,119 $ 163,500 $ 167,910 Net property, plant, and equipment 4,960 9,380 15,620 17,000 Required: Compute Papaya's fixed asset turnover ratio for 2014, 2015, and 2016. (Do not round intermediate calculations. Round your answers to 1 decimal place.)