round D

ROUND D

1) Homework #6E (Before and after-tax cost of debt financing)

Black Hill Inc. sells $100 million worth of 19-year to maturity 9.56% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $995 for each $1,000 bond. What is the before-tax cost of capital for this debt financing?

Round the answer to two decimal places in percentage form. (Write the percentage sign in the "units" box)

You should use Excel or financial calculator.

Your Answer:

2) Homework #6F (Cost of equity financing)

Calculate the cost of new common equity financing of stock Q using Gordon Model

Round the answers to two decimal places in percentage form (Write the percentage sign in the "units" box)

	Last Year Dividend	Growth Rate of Dividends	Selling Price of Stock	Floatation Costs	Cost of Common Equity
Stock Q	$4.58	4%	$52.52	$4.14	?

 Your Answer:

3) Homework #6G (WACC)

Given the following information on Big Brothers, Inc. capital structure, compute the company’s weighted average cost of capital (WACC). The company’s marginal tax rate is 40%.

Round the answer to two decimal places in percentage form. (Write the percentage sign in the "units" box)

Type of Capital	Percent of Capital Structure	Before-Tax Component Cost
Bonds	45%	12.43%
Preferred Stock	18%	15.38%
Common Stock	Please calculate it	14.96%

4) Homework #7 A (Break-even point, Operating leverage)

The Poseidon Swim Company produces swim trunks. The average selling price for one of their swim trunks is $45.04. The variable cost per unit is $25.55, Poseidon Swim has average fixed costs per year of $20,082.

What is the break-even point in units for Poseidon Swim?

Round the answer to the whole number

5) Homework #7B (Financial leverage)

Irresistible Chips is reviewing its financial condition. The firm generated an operating profit of $4,303,220. The firm’s interest expense was $2,463,580.

 What is the firm’s degree of financial leverage? Round the answer to two decimals

Your Answer:

6) Homework #7C (Total (Combined) leverage)

La Cucaracha Pest Control, Inc. is reviewing its financial condition. The firm's operating leverage is 2.33. The firm’s financial leverage was of 2.06. What is the firm’s degree of combined (total) leverage of La Cucaracha Pest Control, Inc. ?

Your Answer:

7) Homework #7D (Project Initial Outlay and Operating cash flow)

Leaf It To Us Corporation is considering an expansion project. The necessary equipment could be purchased for $29,542,800 and shipping and installation costs are another $16,388. The project will also require an initial $231,645 investment in net working capital. What is the project’s initial investment outlay?

Round the answer to the whole $.

Your Answer:

8) Homework #7E (After-Tax cash flow from selling the old asset)

Genetic Insights Co. purchases an asset for $18,322. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. Genetic Insights has a tax rate of 30%. The asset is sold at the end of six years for $4,082.

 Calculate accumulated depreciation over 6 years. Round the answer to two decimals.

Your Answer:

9) Homework #8A (Lock-Box system, Cost of Trade credit)

Aqua System Inc. expects to have $4,623,780 in credit sales during the coming year. Currently all checks are sent to the home office. A proposed lockbox system can eliminate 2 days of float, releasing funds which, when invested, will earn 5.78 percent per year. What annual savings can Aqua System expect if the system is implemented? Use a 365-day year

Round the answer to two decimal places

Your answer

10) Homework #8B (Carrying Costs and Ordering Costs)

Post Card Depot, an large retailer of post cards, orders 5,929,470 post cards per year from its manufacturer. Post Card Depot plans on ordering post card 18 times over the next year. Post Card Depot receives the same number of post cards each time it orders. The carrying cost is $0.08 per post card per year. The ordering cost is $206 per order.

What is the annual carrying costs of post card inventory (round the answer to two decimal places)?

Your Answer:

11) Homework #8C (EOQ, Average Inventory)

Cheeseburger and Taco Company purchases 17,479 boxes of cheese each year. It costs $18 to place and ship each order and $7.85 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders.

 Calculate Economic Order Quantity.

Round the answer to the whole number.

Your Answer: