...Integrative Problem 3 1. If interest rates are expected to increase, the sale of bonds and its proceeds can be used in buying short-term securities as the market value will not be greatly affected by interest rate fluctuations. If interest rates are expected to decline, bonds can be extended to capitalize on expectations. 2. As Japan withdraws their U.S. investment and moves into increased Japanese investments, inflation may occur, as the money supply will decrease in the U.S. market. Market liquidity will be affected which will hinder economic growth 3. The flow of funds between US and Japan will be affected causing a minimal transfer of funds causing the dollar price to decrease. The exchange rate will decrease in the motive to encourage Japanese investment in the U.S. 4. Liquidity in the money market will decrease as Japan reduces their U.S. investment. Bond prices and the yield to maturity will be affected as well. The yield to maturity on bonds will decrease which will decrease the prices of the bonds. 5. The prices of risky securities will be affected more compared to less risky securities, as the prices of the securities are highly dependent on the beta and market conditions. 7. I recommend low risk money market securities as well as low risk bonds. Japanese investors will stop investing in treasury bills causing inflation and a decrease in the money supply, which will affect the securities as well as the bond market. 8. I would recommend the bulk...
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...Caledonia Products Integrative Problem FIN/370 September 11, 2011 12a. Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows: YEAR PROJECT A PROJECT B 0 −$100,000 −$100,000 1 32,000 0 2 32,000 0 3 32,000 0 4 32,000 0 5 32,000 $200,000 The required rate of return on these projects is 11 percent. a. What is each project’s payback period? Ans. Project A – need 32,000, made 100,000 1st year 100,000/32000 = 3.125 years | Project B – need 20,0000, made 20,000 5th year 20,000/10000=.50 = 4.5 years | 12b. What is each project’s net present value? Project A Project B -100,000 -100,000 32,000 0 32,000 0 32,000 0 32,000 0 32,000 0 32,000 200,000 R = .11 Project A NPV 32,000/1.11+32,000/(1.11)²+32,000/(1.11)³+32,000/(1.11)4+32,000/(1.11)5+32,000/(1.11)6 28,828.83+25,971.92+23,398.12+21,079.39+18,990.44+= 118,268.7-100,000=18,268.7 Project B NPV -100,000 + 200,000(1.11)5= 118,694.36-100,000=18,694.36 NPV Project A = $18,268.70 NPV Project B = $18,694.36 12c. Project A 100,000 = 32,000/(1+r) + 32,000/(1+r)2 + 32,000/(1+r)3 + 32,000/(1+r)4+...
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...Caledonia Products Integrative Problem FIN/370 February 11, 2014 Caledonia Products Integrative Problem It has been two months since team B has been hired as an assistant financial analyst at Caledonia Products; the company has been pleased with our work. They are still a little hesitant to give us work without supervision. Caledonia Products Company is introducing a new product, we have been given the assignment that involves both the calculation of the cash flows associated with a new investment and the evaluation of several mutually exclusive projects. The company is currently in the 34% tax bracket with a 15% discount rate because this project is considered a fad project it will only last five years then it will be terminated. This paper will focus on free cash flows, projection of cash flows during years 1-5, projects initial outlay, cash flow diagram, net present value, internal rate of return, and if the project should be accepted. Free Cash Flow Versus Profits Earned After reviewing the numbers for project Caledonia Products, it shows that the best route that Caledonia Products Company should focus on is free cash flows versus to the accounting profits that was obtained by the project itself. The numbers show that the accounting profits should be earned by this current project due to there is a positive rather than negative cash flow to the company shareholders. In this case, Caledonia’s free cash flow is its total cash available to the creditors...
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...Caledonia Products Integrative Problem As a newly assigned assistant financial analyst at Caledonia Products, Team B has been charged with calculating the cash flows associated with the production of a new fad product which is expected to last for a five year period, provide a recommendation and respond to a number of questions on the capital-budgeting process. They must also factor in whether it should lease versus buying the equipment. Cash Flows versus Accounting Profits Caledonia should focus on free cash flows opposed to the accounting profits earned by the project when analyzing whether to undertake the project because focusing on free cash flow will allow Caledonia to see what all funds they will have available after the project is complete. The company will have to sit down and see what all finances they will need and what all has to be done and see what funds they will have and where they will go and make the final decisions from there. Also by looking at the free cash flows it will allow the company to see if they will have any funds to place on other unrelated projects as well going to pay for other company expenses. The major thing is to really focus on one project at a time and go from there they do not want to have too much put on them at one time and focusing on free cash flows is a way to make that happen for the company. Many different projects require a certain amount of money and to make sure that you have the proper funds to take on all of the project...
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...Caledonia Products Integrative Problem Part A. What is each project’s payback period? Payback period = Investment required / Net Annual Cash Inflow Project A: 100,000 / 32,000 = 3.125 years Project B: 5 years. There is no cash inflow until the fifth year when an inflow of $200,000 comes in to offset the investment. To determine payback period it is the following: Payback Period = Y + ( A / B ) where Y = The number of years before final payback year. A = Total remaining to be paid back at the start of the payback year, to bring cumulative cash flow to B = Total (net) paid back in the entire payback year For first case Y=3 (we see in year 4 it is paid back so 3 is year before final payback year) A=100000-(32000*3)= 4000 B= 32000 3+ (4000/32000) 3.125 2nd case Y= 4 because we see the investment is paid in full in year 5 so year before is 4 A= 100000 B=200000 4+(100000/200000) 4.5 Your solutions were slightly off. Part B. What is each project’s net present value? Project A NPV is $18,268 Project B NPV is $18,690 Year Project A Project B At 11% Present value A Present value B 0 -100000 -100000 1 -100000 -100000 1 32000 0 0.900900901 28828.82883 0 2 32000 0 0.811622433 25971.91786 0 3 32000 0 0.731191381 23398.1242 0 4 32000 0 0.658730974 21079.39117 0 5 32000 200000 0.593451328 18990.4425 118690.2656 Part C. What is each project’s internal rate of return? The internal rate of return (IRR) is calculated using Excel with...
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...1 Caledonia Products Integrative Problem Christina Smith, Patricia Bryant, Kelley Randall, Ashley Irizarry FIN 370 Jan. 27th, 2014 Tarak Patel 2 Caledonia Products Integrative Problem 1. Caledonia should focus on project free cash flows because it is able to measure the company’s cash flows minus its capital expenditures. This can help a company determine the cash it is able to generate and see what cash is available to use for projects and expansion, pay dividends, or more. Looking at the company’s accounting profits will show the company’s earnings, but the cash flows will show the company’s overall financial health. The biggest reason to look at free cash flows opposed to projects accounting profits is that it will give the company the most accurate and valuable information for undergoing a new project. 2. Incremental Cash Flows (Year 1-5) Year 1: (Revenue: $21,000,000) – (Cost per Unit: $12,600,000) - ( Fixed Costs: $200,000) (Depreciation: $1,580,000) – (Taxes: $2,250,800) + (Depreciation: $1,5800) = $5,949,200 Year 2: (36,000,000) – (21,600,000) – ($200,000) – (1,580,000) – (4,290,800) + (1,580,000) = $9,909,200 Year 3: (42,000,000) – (25,200,000) – (200,000) – (1,580,000) – (5,106,800) + (1,580,000) = $11,493,200 Year 4: (24,000,000) – (14,400,000) – (200,000) – (1,580,000) – (2,658,800) + (1,580,000) = $6,741,200 Year 5: (15,600,000) – (10,800,000) – (200,000) – (1,580,000) – (1,026,800) + (1,580,000) = $3,573,200 The cash flows differ...
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...Caledonia Products Integrative Problem FIN/370 August 19, 2012 1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project? It is important that Caledonia Company should focus on the free cash flows instead of the accounting profits. With the free cash flows that the company receives they can reinvest. To accurately analyze the timing of the benefit or cost we can examine the cash flows. The only cash flows that the company should be interested in are the after-tax basis because these are the flows that are available to shareholders. When we look at the company as a whole, that shows us how important the incremental cash flow is and that interests the company. These incremental cash flows are the marginal benefits from the project and since the firm accepts the project they are the increased value to the firm. 2. What are the incremental cash flows for the project in years 1 through 5 and how do these cash flows differ from accounting profits or earnings? Incremental Cash Flows for Caledonia years 1 to 5 1YR 2YR 3YR 4YR 5YR 21,000,000 36,000,000 42,000,000 24,000,000 15,600,000 Project Revenue 200,000 200,000 200,000 200,000 200,000 Minus fixed expenses 12,600,000 21,600,000 25,200,000 14,400,000 10,800,000 Minus variable expenses 8,200,000 14,200,000 16,600,000 9,400,000 4,600,000 Equals gross...
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... few challenges are as daunting as preparing tomorrow’s leaders. Mentoring is one of the most powerful tools at their disposal. But not all mentoring programs are equally effective, and not all companies have learned how to sustain mentoring. IBM has done it — and offers specific guidance and best practices you can use to achieve equally powerful results. IBM use mentoring to strengthen organizational intelligence...build sustainable communities of mentors and mentees... promote collaboration across differences... and above all, link mentoring to strategy and use it to sustain competitive advantage. Business organizations are coming to view knowledge as their most valuable and strategic resource, and bringing that knowledge to bear on problems and opportunities as their most important capability. They are realizing that to remain competitive they must explicitly manage their intellectual resources and capabilities .To build their intellectual capital, those organizations are utilizing the social capital that develops from people interacting repeatedly over time. Lincoln Re has an early-warning process in place to monitor research in the medical field for anything that eventually may...
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...Integrative Problems and Virtual Organization Strategy FIN/370 Integrative Problems and Virtual Organization Strategy In this paper, Team C will discuss Huffman Trucking Company and recommend a strategy that is best for this company and what will benefit the company the most. It will discuss the strategies such as undertaking IPOs, merging with other companies and ways to get other companies, as a way to help their company to branch out. Some of the other things that will be discussed are the benefits and risks, the advantages and disadvantages of all the approaches that should be taken into consideration for what is the best way to strategy for the business, the strengths and weaknesses of each approach, and the opportunities that each one has to give. Finally, the last thing discussed is the globalization on financial decisions, factors of the exchange rate risks, and the mitigation of exchange rate risk. The one thing that Huffman Trucking Company has is strength and they can use this if they decide to go public through the IPO. By doing this Huffman Trucking will be able to raise extra capital for the company. This will then increase the liquidity of the stocks and it will increase the revenue to invest or it could extend the business. This will give the Huffman Trucking Company an opportunity to market the company to the public to extend the company’s service. This strength is to be able to limit their competition. Therefore, this will increase the business’s...
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...Integrative Therapy Djnj1102 Behavioral science research is a large, multifaceted field, encompassing a wide array of disciplines. The field makes use of a variety of mechanical approaches including: surveys and questionnaires, interviews, randomized clinical trials, direct observation, and field experiments. In spite of the techniques used in the research related to behavioral science, it is not restricted to a set of disciplines or mechanical approaches. Instead, the field is defined by substantive areas of research that go beyond disciplinary and practical boundaries. In addition, several key cross-cutting themes characterize behavioral sciences research. These include: an emphasis on theory-driven research; the search for general principles of behavioral and social functioning; the importance ascribed to developmental, lifespan perspective; an emphasis on individual distinction, and distinction across socio-demographic categories such as gender, age, and socio-cultural status; and a focus on both the social and biological contexts of behavior. With the information that is gained from research one can select a therapeutic approach that would seem to be most helpful. While all therapeutic systems have some common goals, they each have differences in the route that is used to achieve them. Some therapies insist on direct and active part of the counselor, while others place value on the client being the one who is active. Some therapies place their attention on what the...
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...1. Explain how the international trade flows should initially adjust in response to the changes in inflation (holding exchange rates constant). Explain how the international capital flows should adjust in response to the changes in interest rates (holding exchange rates constant). With the expectation of a decrease in the British inflation rate when compared to the United States, the response of international trade flows will be a decrease in British consumers’ interest in U.S. products. As a result, the U.S. will be able to export less into Britain. At the same time, British products exported to the U.S. will increase. Since the U.S. will be exporting less and importing more from the U.K., the U.S. trade deficit will increase, as prices will rise and U.S. exports will be more expensive for foreign countries. This will place upward pressure on the pound’s value and downward pressure on the U.S. dollar. However, if British interest rates are expected to decline and U.S. interest rates are expected to increase, then British investors will find the U.S. interest rates more appealing than their own and will move their capital from Britain to the U.S. As a result, international capital flows will flow in the U.S. and out from the U.K. The investors will receive a higher rate of return if their capital is invested in the U.S. The increase in interest rates will place downward pressure on the pound’s value and upward pressure on the U.S. dollar. The increase in interest...
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...Integrative Problems and Virtual Organization Strategy FIN/370 Integrative Problems and Virtual Organization Strategy The Huffman Trucking Company was founded by K. Huffman in Cleveland, Ohio in 1936 with one tractor-trailer. By 1945 the company grew to 16 tractors and 36 trailers. Some of the most important clients are the U.S. Government, automotive, electronic, and plastic industries. The company has four locations: Cleveland, OH, Los Angeles, CA, St. Louis, MO, Bayonne, NJ (Apollo Group, Inc. 2011). The company grew through the increase of internal sales, and the acquisition of five different carriers from the East. Up until now, this growth has enabled the Huffman Trucking to continue to be privately held. Huffman Trucking now wants to expand operations and is considering three separate options to do so. This paper will compare Huffman’s options to go public, acquire another organization within the same industry, or merge with another organization. Going Public By going public the Huffman trucking company will improve its liquidity, gain more acquisition opportunities, as well as the ability to gain capital at a lower cost ("Going Public Experts", nd). The process of going public is not all beneficial; some of the down sides are the extensive time needed to complete the process. Furthermore, the payments of millions of dollars in fees such as legal, accounting, printing, listing, filing, along with the government fees pay to meet the tough standards regulation...
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...Integrative Problems and Virtual Organization Strategy Paper Meline Constantin, Angela Currier, Brett Kinney, Nicole Mcclelland, James Schmidt, and Kevin Sult FIN 370 June 20, 2011 Cheryl Heath Integrative Problems and Virtual Organization Strategy The medical world has started to join corporate America. Large companies run multiple hospitals and medical facilities across the world and it puts smaller community hospitals in a position that is not always beneficial. Patton Fuller Community Hospital is no exception. They have decided to expand to help meet the demand of the public and to help their hospital make profits necessary to keep the facility running. However, there are some decisions that need to be made. The hospital could have an IPO or could merge or be acquired by another hospital. To decide which option is best, Team B will weight the pros and cons of each option by showing the strengths, weaknesses, opportunities, and threats created with each option. Strengths of an IPO, Acquisition and Merger The strengths of an IPO in a hospital would be to raise more capital for PFCH to use for their various corporate purposes such as working capital, acquisitions, and marketing, to name a few. With PFCH taking advantage of an IPO we can take advantage of new larger opportunities that can start building toward incorporation and statewide expansion. IPOs also allow the company to access their capital more rapidly, and are...
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...Integrative Problems & Virtual Organization Strategy Paper There are mainly three options for expansion when a company is privately held and wants to expand their operation. This paper will discuss three specific options that a privately held company would have if they were to expand. First of those options would be to go public through an IPO or Initial Public Offerings. The second option would be to acquire another organization in the same industry in order to expand the business. The third and final option being to merge with another organization. With all three of these options having strengths and weaknesses, this paper will discuss some of the strengths and weaknesses of each and what opportunities may arise from each approach as well as the threats. Other things that this company may want to consider when looking to expand are the effects of globalization on the company's financial decision as well as the factors that contribute to exchange rate risks. Finally ending the paper with mitigating the exchange rate risk. Going Public through an IPO Taking a business public or better known as participating in an initial public offering is a process where the business is offered to the public by selling stock of the company. In turn, these stocks represent a partial ownership in the company to the individuals that purchase the stock. One common step in deciding whether or not to take a company public it is always best to speak with an IPO consultant to help determine the...
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...FIN 370 Week 3 Team Assignment Caladonia Products Integrative Problems Get Tutorial by Clicking on the link below or Copy Paste Link in Your Browser https://hwguiders.com/downloads/fin-370-week-3-team-assignment-caladonia-products-integrative-problems/ For More Courses and Exams use this form ( http://hwguiders.com/contact-us/ ) Feel Free to Search your Class through Our Product Categories or From Our Search Bar (http://hwguiders.com/ ) Solutions Guide: 1. We focus on free cash flows rather than accounting profits because these are the flows that the firm receives and can reinvest. Only by examining cash flows are we able to correctly analyze the timing of the benefit or cost. Also, we are only interested in these cash flows on an after tax basis as only those flows are available to the shareholder. In addition, it is only the incremental cash flows that interest us, because, looking at the project from the point of the company as a whole, the incremental cash flows are the marginal benefits from the project and, as such, are the increased value to the firm from accepting the project. 2. Although depreciation is not a cash flow item, it does affect the level of the differential cash flows over the project’s life because of its effect on taxes. Depreciation is an expense item and, the more depreciation incurred, the larger are expenses. Thus, accounting profits become lower and in turn, so do taxes which are a cash flow item. 3. ...
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