8 HOURS DELIVERY: PLAGIARISM FREE AND QUALITY WORK GUARANTEED.

1. THE TIME VALUE OF MONEY Some financial advisors recommend you increase the am

1. THE TIME VALUE OF MONEY
Some financial advisors recommend you increase the amount of federal income taxes withheld from your paycheck each month so that you will get a larger refund come April 15th. That is, you take home less today but get a bigger lump sum when you get your refund. Based on your knowledge of the time value of money, what do you think of this idea? Explain.
2. INTEREST RATE RISK
Define what is meant by interest rate risk. Assume you are the manager of a $100 million portfolio of corporate bonds and you believe interest rates will fall. What adjustments should you make to your portfolio based on your beliefs?
Please number each of your answers. This is very important so that I understand which questions you are responding to.

MINICASE: The Nom-Nom Cake Company Danh and Linh Nguyen formed the Nom-Nom Cake

MINICASE: The Nom-Nom Cake Company
Danh and Linh Nguyen formed the Nom-Nom Cake Company in Los Angeles, CA in 2013. Their company produced a variety of specialty cakes. While getting their new company off the ground, Danh and Linh continued to work at their primary jobs. Linh handled marketing and distribution while Danh performed all of the baking. The company grew rapidly and was featured three years later on a popular cooking show, followed by interviews in trendy magazines. Sales really took off after that, and the company began receiving orders from all across the United States and also from overseas customers.
Thanks to this explosive sales growth, Danh and Linh left their “regular” jobs behind and began producing specialty cakes full time. They also hired additional workers to help them keep up with orders. However, the influx of orders has created more demand than they can manage with their current capacity. They are producing as many cakes as they can, but demand for their cakes continues to grow, and they are becoming swamped by larger and increased numbers of orders. A national supermarket chain and a famous restaurant recently contacted Nom-Nom Cake Company about selling their cakes in the supermarkets and featuring them in restaurants all across America.
Danh and Linh have operated the company as a sole proprietorship thus far. Assume they have approached you as a consultant to help manage and direct the company’s future growth. Specifically, they have asked you to advise them on the following questions:
What are the advantages and disadvantages of changing the company organization from a sole proprietorship to an LLC?
What are the advantages and disadvantages of changing the company organization from a sole proprietorship to a corporation?
Ultimately, what action(s) do you recommend Danh and Linh take regarding the company and why?

(Answer All Questions; Submit as One Essay) 1. AGENCY PROBLEMS Who owns a corpor

(Answer All Questions; Submit as One Essay)
1. AGENCY PROBLEMS
Who owns a corporation? Describe the process whereby the owners control the firm’s management. Describe the main reason why an agency relationship exists in the corporate form of organization. In this context, describe the types of problems that can arise.
2. ENTERPRISE VALUE
A firm’s enterprise value is equal to the market value of its debt and equity, less the firm’s holdings of cash and cash equivalents. This figure is particularly of interest to potential purchasers of the firm. Why?
3. CURRENT RATIO
Explain what it means for a firm to have a current ratio of .50. Would the firm be better off with a current ratio of 1.50? What if it were 15.0? Explain your answers.
4. PEER GROUP ANALYSIS
As a financial manager, how might you use the results of peer group analysis to evaluate the performance of your firm? How is a peer group different from an aspirant group?
Please number each of your answers. This is very important so that I understand which questions you are responding to.

Please show calculations/equations used to solve. Problem 5-22: Arnot Internati

Please show calculations/equations used to solve.
Problem 5-22: Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price 5 $1,090).
a. What is the yield to maturity?
b. What is the yield to call if they are called in 5 years?
c. Which yield might investors expect to earn on these bonds, and why?
d. The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
Problem 7-17: What is the required rate of return on a preferred stock with a $50 par value, a stated annual dividend of 7% of par, and a current market price of (a) $30, (b) $40, (c) $50, and (d) $70? (Assume the market is in equilibrium with the required return equal to the expected return.)
Mini Case Study
During the last few years, Jana Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Jana’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task:
* The firm’s tax rate is 25%.
* The current price of Jana’s 12% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,153.72. There are 70,000 bonds. Jana does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost.
* The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $116.95. There are 200,000 outstanding shares. Jana would incur flotation costs equal to 5% of the proceeds on a new issue.
* Jana’s common stock is currently selling at $50 per share. There are 3 million outstanding common shares. Its last dividend (D0) was $3.12, and dividends are expected to grow at a constant rate of 5.8% in the foreseeable future. Jana’s beta is 1.2, the yield on T-bonds is 5.6%, and the market risk premium is estimated to be 6%. For the own-bond-yield-plus-judgmental-risk-premium approach, the firm uses a 3.2% risk premium.
a. (1) What sources of capital should be included when you estimate Jana’s weighted average cost of capital?
(2) Should the component costs be figured on a before-tax or an after-tax basis?
(3) Should the costs be historical (embedded) costs or new (marginal) costs?
b. What is the market interest rate on Jana’s debt, and what is the component cost of this debt for WACC purposes?
d. (1) What are the two primary ways companies raise common equity?
(2) Why is there a cost associated with reinvested earnings?
(3) Jana doesn’t plan to issue new shares of common stock. Using the CAPM approach, what is Jana’s estimated cost of equity?
f. What is the cost of equity based on the own-bond-yield-plus-judgmental-risk-premium method?
m. Jana is interested in establishing a new division that will focus primarily on developing new Internet-based projects. In trying to determine the cost of capital for this new division, you discover that specialized firms involved in similar projects have, on average, the following characteristics: Their capital structure is 10% debt and 90% common equity; their cost of debt is typically 12%; and they have a beta of 1.7. Given this information, what would your estimate be for the new division’s cost of capital?
n. What are three types of project risk? How can each type of risk be considered when thinking about the new division’s cost of capital?

Reply to each question with a minimum of 350 words and have at least one relevan

Reply to each question with a minimum of 350 words and have at least one relevant reference for each question.
1. If you were able to put together a portfolio that completely eliminated all risk, what return would you expect to earn and why?
2. If someone called you and told you that he/she could guarantee you high returns on your investments with little or no risk, what would you do and why.
3. When there is uncertainty in the marketplace, what happens to yield spreads and why?
4. Your grandfather has great faith in bonds and has heard about some “high yield bonds” that are available. He has asked you for your opinion. What advice will you give him?

1. THE TIME VALUE OF MONEY Some financial advisors recommend you increase the am

1. THE TIME VALUE OF MONEY
Some financial advisors recommend you increase the amount of federal income taxes withheld from your paycheck each month so that you will get a larger refund come April 15th. That is, you take home less today but get a bigger lump sum when you get your refund. Based on your knowledge of the time value of money, what do you think of this idea? Explain.
2. INTEREST RATE RISK
Define what is meant by interest rate risk. Assume you are the manager of a $100 million portfolio of corporate bonds and you believe interest rates will fall. What adjustments should you make to your portfolio based on your beliefs?
Please number each of your answers. This is very important so that I understand which questions you are responding to.

MINICASE: The Nom-Nom Cake Company Danh and Linh Nguyen formed the Nom-Nom Cake

MINICASE: The Nom-Nom Cake Company
Danh and Linh Nguyen formed the Nom-Nom Cake Company in Los Angeles, CA in 2013. Their company produced a variety of specialty cakes. While getting their new company off the ground, Danh and Linh continued to work at their primary jobs. Linh handled marketing and distribution while Danh performed all of the baking. The company grew rapidly and was featured three years later on a popular cooking show, followed by interviews in trendy magazines. Sales really took off after that, and the company began receiving orders from all across the United States and also from overseas customers.
Thanks to this explosive sales growth, Danh and Linh left their “regular” jobs behind and began producing specialty cakes full time. They also hired additional workers to help them keep up with orders. However, the influx of orders has created more demand than they can manage with their current capacity. They are producing as many cakes as they can, but demand for their cakes continues to grow, and they are becoming swamped by larger and increased numbers of orders. A national supermarket chain and a famous restaurant recently contacted Nom-Nom Cake Company about selling their cakes in the supermarkets and featuring them in restaurants all across America.
Danh and Linh have operated the company as a sole proprietorship thus far. Assume they have approached you as a consultant to help manage and direct the company’s future growth. Specifically, they have asked you to advise them on the following questions:
What are the advantages and disadvantages of changing the company organization from a sole proprietorship to an LLC?
What are the advantages and disadvantages of changing the company organization from a sole proprietorship to a corporation?
Ultimately, what action(s) do you recommend Danh and Linh take regarding the company and why?

(Answer All Questions; Submit as One Essay) 1. AGENCY PROBLEMS Who owns a corpor

(Answer All Questions; Submit as One Essay)
1. AGENCY PROBLEMS
Who owns a corporation? Describe the process whereby the owners control the firm’s management. Describe the main reason why an agency relationship exists in the corporate form of organization. In this context, describe the types of problems that can arise.
2. ENTERPRISE VALUE
A firm’s enterprise value is equal to the market value of its debt and equity, less the firm’s holdings of cash and cash equivalents. This figure is particularly of interest to potential purchasers of the firm. Why?
3. CURRENT RATIO
Explain what it means for a firm to have a current ratio of .50. Would the firm be better off with a current ratio of 1.50? What if it were 15.0? Explain your answers.
4. PEER GROUP ANALYSIS
As a financial manager, how might you use the results of peer group analysis to evaluate the performance of your firm? How is a peer group different from an aspirant group?
Please number each of your answers. This is very important so that I understand which questions you are responding to.

Please show calculations/equations used to solve. Problem 5-22: Arnot Internati

Please show calculations/equations used to solve.
Problem 5-22: Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price 5 $1,090).
a. What is the yield to maturity?
b. What is the yield to call if they are called in 5 years?
c. Which yield might investors expect to earn on these bonds, and why?
d. The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
Problem 7-17: What is the required rate of return on a preferred stock with a $50 par value, a stated annual dividend of 7% of par, and a current market price of (a) $30, (b) $40, (c) $50, and (d) $70? (Assume the market is in equilibrium with the required return equal to the expected return.)
Mini Case Study
During the last few years, Jana Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Jana’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task:
* The firm’s tax rate is 25%.
* The current price of Jana’s 12% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,153.72. There are 70,000 bonds. Jana does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost.
* The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $116.95. There are 200,000 outstanding shares. Jana would incur flotation costs equal to 5% of the proceeds on a new issue.
* Jana’s common stock is currently selling at $50 per share. There are 3 million outstanding common shares. Its last dividend (D0) was $3.12, and dividends are expected to grow at a constant rate of 5.8% in the foreseeable future. Jana’s beta is 1.2, the yield on T-bonds is 5.6%, and the market risk premium is estimated to be 6%. For the own-bond-yield-plus-judgmental-risk-premium approach, the firm uses a 3.2% risk premium.
a. (1) What sources of capital should be included when you estimate Jana’s weighted average cost of capital?
(2) Should the component costs be figured on a before-tax or an after-tax basis?
(3) Should the costs be historical (embedded) costs or new (marginal) costs?
b. What is the market interest rate on Jana’s debt, and what is the component cost of this debt for WACC purposes?
d. (1) What are the two primary ways companies raise common equity?
(2) Why is there a cost associated with reinvested earnings?
(3) Jana doesn’t plan to issue new shares of common stock. Using the CAPM approach, what is Jana’s estimated cost of equity?
f. What is the cost of equity based on the own-bond-yield-plus-judgmental-risk-premium method?
m. Jana is interested in establishing a new division that will focus primarily on developing new Internet-based projects. In trying to determine the cost of capital for this new division, you discover that specialized firms involved in similar projects have, on average, the following characteristics: Their capital structure is 10% debt and 90% common equity; their cost of debt is typically 12%; and they have a beta of 1.7. Given this information, what would your estimate be for the new division’s cost of capital?
n. What are three types of project risk? How can each type of risk be considered when thinking about the new division’s cost of capital?

Reply to each question with a minimum of 350 words and have at least one relevan

Reply to each question with a minimum of 350 words and have at least one relevant reference for each question.
1. If you were able to put together a portfolio that completely eliminated all risk, what return would you expect to earn and why?
2. If someone called you and told you that he/she could guarantee you high returns on your investments with little or no risk, what would you do and why.
3. When there is uncertainty in the marketplace, what happens to yield spreads and why?
4. Your grandfather has great faith in bonds and has heard about some “high yield bonds” that are available. He has asked you for your opinion. What advice will you give him?