MAF605 - Accounting And Finance For Managers Along With Net Operating Working Capital - Accounting Assignment Help

Assignment Task -                 
 

QUESTION 1 

Imagine that you are trying to evaluate the economics of purchasing a condominium to live in during college rather than renting an apartment. If you buy the?condo, during each of the next 4 years you will have to pay property taxes and maintenance expenditures of about $6,000 per?year, but you will avoid paying rent of $10,000 per year. When you graduate 4 years from?now, you expect to sell the condo for $125,000 after taxes. If you buy the?condo, you will use the money you have saved that is currently invested and earning a 4?% annual?after-tax rate of return. Assume for simplicity that all cash flows? (rent, maintenance, ? etc.) would occur at the end of each year.

• Draw a timeline showing the cash?flows, their?timing, and the required return applicable to valuing the condo.
• What is the maximum price you would be willing to pay to acquire the?condo? Explain.

QUESTION 2 

You are starting a new project. This project would last 4 years. The following is the input information that you have collected:

• What is the NPV of this project? (In your calculations use zero decimal spaces/round to the whole numbers).
• Explain briefly if you think that the project is viable. 
• Discuss the potential sources of long-term finance available to a large company.

QUESTION 3

You have been asked by your CEO to evaluate, analyze and calculate commonly used ratios relating to a company’s profitability, liquidity, solvency, and management efficiency.

Requirement:

Complete the balance sheet and sales data (fill in the blanks), using the following financial data:

Debit/net worth                                                        60%

              Acid test ratio                                                            1.2

              Asset turnover                                                           1.5 times

              Day sales outstanding in accounts receivable     40 days

              Gross profit margin                                                   30%

              Inventory turnover                                                    6 times

• Explain how do analysts use ratios to analyze a firm’s leverage?  Which ratios convey more important information to a credit analyst those revolving around the levels of indebtedness or those measuring the ability to service the debt?  What is the relationship between a firm’s level of indebtedness and risk?  What must happen in order for an increase in leverage to be successful? Discuss and illustrate all your answers.

QUESTION 4 

Zhen Yi Computers has an outstanding issue of bond with a par value of $1,000, paying 12 percent coupon rate semi-annually. The bond was issued 25 years ago and has 5 years to maturity. 

Required:

• What is the value of the bond assuming a 14 percent rate of interest? 
• What is the current yield? 

O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years.  Their nominal annual, not semi-annual yield to maturity is 9.25%, they pay interest semi-annually, and they sell at a price of $1,075.  What is the bond's nominal coupon interest rate?

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