Business Finance - Management Week 10 Assignment- Managerial Finance
CJones65
MBAX6070_Module03_Part1assignment.xlsxCash Conversion Cycle
| Cash Conversion Cycle | ||
| (a) | Enter figures below | |
| Inventory Conversion Period | 64 | days |
| Average Collection Period | 28 | days |
| Payables Deferral Period | 41 | days |
| Cash Conversion Cycle | days | |
| (b) | ||
| Annual Sales | $2,578,235 | |
| divided into 365 days | 365 | days |
| Average Sales per Day | ||
| Average Collection Period | days | |
| Investment in Receivables | ||
| (c) | ||
| Step 1: Inventory Balance | ||
| Annual Sales | ||
| Cost of Goods Sold | 75% | percent of sales |
| divided into 365 days | 365 | days |
| Inventory Conversion Period | days | |
| Inventory | ||
| Step 2: Inventory Turnover Ratio | ||
| Annual Sales | ||
| Inventory | ||
| Turnover Ratio | times a year | |
| (d) | ||
| Competitor A | 88 | days |
| 54 | days | |
| 30 | days | |
| days | ||
| Competitor B | 90 | days |
| 44 | days | |
| 30 | days | |
| days |
Additional Funds Needed
| Additional Funds Needed | |
| Last year's Sales | $5,000,000 |
| Sales to Increase (in percent) | 20.00% |
| Total Liabilities and Equity = Assets | $3,000,000 |
| Accounts Payable | $250,000 |
| Notes Payable | $500,000 |
| Accrued Liability | $250,000 |
| Profit Margin | 3.00% |
| Retained | 30.00% |
| Required increase in Assets | |
| Spontaneous increase in Payables and Accruals | |
| Increase in Retained Earnings | |
| Assets/Sales | |
| Next year's Sales (forecasted) | |
| Change in Sales | |
| Additional Funds Needed | |
Cross-Exchange Rate
| Cross-Exchange Rate | ||
| $1 to Israeli shekels | 3.58 | |
| $1 to Japanese Yen | 109 | |
| Cross-Exchange Rate | Yen/Shekel |
FV & PV Lump Sum
| Future Value | Present Value | ||||
| Interest Rate | 6.00% | Interest Rate | 6.00% | ||
| # of Periods | 5 | # of Periods | 5 | ||
| Starting Value | $10,000 | Lump Sum in the Future | $10,000 | ||
| Future Lump Sum | Present Value |
Required Interest Rates
| Required Interest Rates | ||
| Present Value | $200,000 | in savings |
| Future Value | $500,000 | needed at retirement |
| Additional funds | $5,000 | |
| Number of Periods | 20 | years |
| Required Interest Rate | ||
FV & PV Annuity
| a) | Future Value of an Annuity | a) | Present Value of an Annuity | ||
| Interest Rate | 5.00% | Interest Rate | 5.00% | ||
| # of Periods | 10 | # of Periods | 10 | ||
| Payments (per period) | $1,000 | Payment per period | $1,000 | ||
| Future Value | Present Value | ||||
| b) | Future Value of an Annuity | b) | Present Value of an Annuity | ||
| Interest Rate | 6.00% | Interest Rate | 6.00% | ||
| # of Periods | 20 | # of Periods | 20 | ||
| Payments (per period) | $2,000 | Payment per period | $2,000 | ||
| Future Value | Present Value | ||||
| c) | Future Value of an Annuity | c) | Present Value of an Annuity | ||
| Interest Rate | 7.00% | Interest Rate | 7.00% | ||
| # of Periods | 5 | # of Periods | 5 | ||
| Payments (per period) | $1,500 | Payment per period | $1,500 | ||
| Future Value | Present Value |
Bond Valuation
| Bond Valuation | ||
| Face Value | $1,000 | |
| Yield to Maturity | 6.00% | |
| Coupon Bond C | 8.00% | |
| Coupon Bond Z | 4.00% | |
| Years to Maturity | Price of Bond C | Price of Bond Z |
| 4 | ||
| 3 | ||
| 2 | ||
| 1 | ||
| 0 |
YTM & YTC
| Price of each of the three bonds | |||
| Basic Input Data | Bond A | Bond B | Bond C |
| Years to maturity | 10 | 15 | 5 |
| Coupon rate | 8.00% | 7.00% | 6.00% |
| Par value | $1,000.00 | $1,000.00 | $1,000.00 |
| Periodic payment | |||
| Yield to maturity | 9.00% | 9.00% | 9.00% |
| Price | |||
| Current Yield | |||
| Bond A | Bond B | Bond C | |
| Current yield | |||
CAPM and Required Return
| CAPM and Required Return | |
| Market Beta | 1.00 |
| Required Return | 9.00% |
| Risk-Free Rate | 3.00% |
| Market Premium | |
| Your Company | |
| Risk-Free Rate | |
| Market Premium | |
| Company Beta | 1.20 |
| Required Return | |
| Closet Competitor | |
| Risk-Free Rate | |
| Market Premium | |
| Competitor's Beta | 0.90 |
| Required Return | |
| Difference in Required Return | |
Constant Growth Value
| Constant Growth Valuation | |
| Expected Dividend | $2.00 |
| Constant Growth | 4.00% |
| Required Rate of Return | 10.00% |
| Current Value per Share |
Non-Constant Growth Val
| Non-Constant Growth Valuation | ||||
| Paid Dividend | $1.50 | |||
| Non-Constant Growth x 2 years | 20.00% | |||
| Constant Growth thereafter | 5.00% | |||
| Required Rate of Return | 12.00% | |||
| Cash Flow at Horizon or Continuing Date | ||||
| Horizon Timeline Years | 0 | 1 | 2 | 3 |
| Dividends | ||||
| Cash Flow | ||||
| Present Value | ||||
| Intrinsic Stock Value | ||||
WACC
| Weighted Average Cost of Capital | |
| Debt | $2,000,000 |
| Common Equity | $3,000,000 |
| Cost of Debt | 6.00% |
| Tax Rate | 25.00% |
| Current Stock Price | $40.00 |
| Last Dividend Paid | $1.50 |
| Expected Constant Growth | 5.00% |
| Next Dividend | |
| Internal Equity | |
| WACC |
Capital Budgeting
| Capital Budgeting Criteria | ||||||||
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| Project A | -$500,000 | $120,000 | $120,000 | $120,000 | $120,000 | $120,000 | $120,000 | $120,000 |
| Project B | -$600,000 | $150,000 | $150,000 | $150,000 | $150,000 | $150,000 | $150,000 | $150,000 |
| Difference | ||||||||
| WACC | 11% | WACC | 18% | |||||
| NPV @ 11% | NPV @ 18% | |||||||
| Project A | Project A | |||||||
| Project B | Project B | |||||||
| IRR @ 11% | ||||||||
| Project A | ||||||||
| Project B | ||||||||
| MIRR @ 11% | MIRR @ 18% | |||||||
| Project A | Project A | |||||||
| Project B | Project B | |||||||
| Discount Rate | NPV-A | NPV-B | ||||||
| 0.0% | ||||||||
| 10.0% | ||||||||
| 11.0% | ||||||||
| 18.1% | ||||||||
| 20.0% | ||||||||
| 24.0% | ||||||||
| 30.0% | ||||||||
| Crossover Rate | ||||||||
Comparison Project A vs Project B
0 0 0 0 0 0 0 0 0 0 0 0 0 0
