1)Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $5
ID: 2724742 • Letter: 1
Question
1)Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $5.5 million. The machinery can be sold to the Romulans today for $7.7 million. Klingon’s current balance sheet shows net fixed assets of $4.3 million, current liabilities of $860,000, and net working capital of $145,000. If all the current assets were liquidated today, the company would receive $975,000 cash. (Enter your answer as directed, but do not round intermediate calculations.)
What is the book value of Klingon’s total assets today? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
What is the market value of Klingon's total assets? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
2)Hammett, Inc., has sales of $19,700, costs of $9,330, depreciation expense of $2,000, and interest expense of $1,490. Assume the tax rate is 40 percent. (Enter your answer as directed, but do not round intermediate calculations.)
What is the operating cash flow?
3)
Based on the above information, calculate the sustainable growth rate for Northern Lights Co. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)
5)You want to buy a new sports coupe for $74,000, and the finance office at the dealership has quoted you a loan with an APR of 6.4 percent for 48 months to buy the car.
What will your monthly payments be? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
What is the effective annual rate on this loan? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)
6)App Store Co. issued 16-year bonds one year ago at a coupon rate of 6.2 percent. The bonds make semiannual payments.
If the YTM on these bonds is 5.4 percent, what is the current bond price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
7)BDJ Co. wants to issue new 22-year bonds for some much-needed expansion projects. The company currently has 9.2 percent coupon bonds on the market that sell for $1,132, make semiannual payments, and mature in 22 years.
What coupon rate should the company set on its new bonds if it wants them to sell at par? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
What is the crossover rate for these two projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
What is the NPV of each project at the crossover rate? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
11)We are evaluating a project that costs $1,220,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 88,900 units per year. Price per unit is $35.20, variable cost per unit is $21.45, and fixed costs are $769,000 per year. The tax rate is 30 percent, and we require a return of 10 percent on this project.
Calculate the base-case cash flow and NPV. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations.Round your answer to 3 decimal places (e.g., 32.161).)
If there is a 500-unit decrease in projected sales, how much would the NPV drop? (Do not round intermediate calculations. Input your answer as a positive value. Round your answer to 2 decimal places (e.g., 32.16).)
What is the sensitivity of OCF to changes in the variable cost figure? (A negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)
If there is $1 decrease in estimated variable costs, how much would the increase in OCF be? (Round your answer to the nearest whole dollar amount (e.g., 1,234,567).)
12)We are evaluating a project that costs $908,000, has a four-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 87,200 units per year. Price per unit is $34.35, variable cost per unit is $20.60, and fixed costs are $752,000 per year. The tax rate is 30 percent, and we require a return of 12 percent on this project.
Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).)
WorksheetDifficulty: Basic
1)Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $5.5 million. The machinery can be sold to the Romulans today for $7.7 million. Klingon’s current balance sheet shows net fixed assets of $4.3 million, current liabilities of $860,000, and net working capital of $145,000. If all the current assets were liquidated today, the company would receive $975,000 cash. (Enter your answer as directed, but do not round intermediate calculations.)
Explanation / Answer
1)
Book Value = 4.3+.1450 = $4.445 mn
Market value =7.7+0.9750-0.860 = $7.815 million
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