Activity 7.3 - Group Activity: Episode 6
Your group has been hired by BluJay Aviation as business consultants.
BluJay Aviation, Inc. has been in business for three years. The business has been profitable enough that Wren
no longer works for the airport. S

P6-11: Bond prices and yields, p. 264
Assume that the Financial Management Corporations $1,000-par-value bond had a 5.700% coupon, matures on
May 15, 2023, has a current price quote of 97.708, and has a yield to maturity (YTM) of 6.034%. Given this
inform

Valuation for Annual Bond
Par Value
$
1,000
#
Coupon interest rate
12%
12%
Annual Interest payment
$
120 $
120
Required rate of return
10%
12%
Number of years to maturity
16
16
Bond Value
-$1,156.47 -$1,000.00
Yield to maturity
Par Value
$
Coupon Interest

1.
Calculate the level of EBIT associated with each of the three levels of
sales.
Probability
0.3
0.4
0.3
Sales
$60000 $900,00 $1,200,000
0
0
Variable
$240,00 $360,00 $480,000
Cost (40%
0
0
of sales)
Fixed Cost
$300,00 $300,00 $300,000
0
0
EBIT
$60,000 $2

1
If the price of the common stock into which the bond is
convertible rises to $30 per share after 5 years and the
issuer calls the bonds at $1,080, should Annie let the bond
be called away from her or should she convert it into
common stock?
Call price =

1.
P10-1: Payback period, p. 421
Jordan Enterprises is considering a capital expenditure that requires an initial investment of $42,000 and returns
after-tax cash inflows of $7,000 per year for 10 years. The firm has a maximum acceptable payback period of

1. How large a sum must Sunrise accumulate by the end of
year 12 to provide the 20-year, $42,000 annuity? Sunrise
would need to provide $2,085.33 to attain the required
future value of $42,000.
Present Value of an Annuity Due
Annual annuity payment
Annual

1
Use the historical and projected financial data provided to prepare a
pro forma income statement for the year ended December 31, 2015.
(Hint: Use the percent of sales method to estimate all values except
depreciation and interest expense, which have bee

P9-2: Cost of debt
a.
b.
c.
Find the net proceeds from sale of the bond, Nd.
Nd = $1,010-$30.00
= $980
Show the cash flows from the firms point of view over the maturity of the bond.
See attached spreadsheet
Calculate the before-tax and after-tax costs of

Year
Particular
Amount
0 Maturity Value
$980
1 Interest on 12% Bond
$120.00
2 Interest on 12% Bond
$120.00
3 Interest on 12% Bond
$120.00
4 Interest on 12% Bond
$120.00
5 Interest on 12% Bond
$120.00
6 Interest on 12% Bond
$120.00
7 Interest on 12% Bond
$

MGMT 332
Activity 6.5 - M6 Case Study
Junior Sayou, a financial analyst for Chargers Products, a manufacturer of stadium benches, must evaluate the risk and return of two assets, X and Y. The firm is considering adding these
assets to its diversified asse

MGMT 332
Activity 8.3 - M8 Assignment
P13-2
Breakeven comparisons: Algebraic Given the price and cost data shown in the accompanying table for each of the t
G, and H, answer the questions that follow.
Firm
F
Sale price per unit (P)
$
Variable operating co

MGMT 332
Activity 7.3 - M7a Assignment
P9-2
Cost of debt using both methods Currently, Warren Industries can sell 15-year, $1,000 par-value bonds paying annual
coupon rate. As a result of current interest rates, the bonds can be sold for $1,010 each; flot

4.3 - M4-Assignment
1. P6-11: Bond prices and yields, p. 264
Assume that the Financial Management Corporations $1,000-par-value bond had a 5.700% coupon, matures on May 15, 2023, has a current price quote of
97.708, and has a yield to maturity (YTM) of 6.

MGMT 332
Activity 5.3 - M5 Assignment
P7-6
Common stock value: Zero growth Kelsey Drums, Inc., is a well-established supplier of fine percussion instrument
the United States. The company's class A common stock has paid a dividend of $5.00 per share per ye

MGMT 332
Activity 7.5 - M7b Assignment
P10-1
Payback period Jordan Enterprises is considering a capital expenditure that requires an initial investment of $42,000
after-tax cash inflows of $7,000 per year for 10 years. The firm has a maximum acceptable pa

4.5 - Case Study
Evaluatng Annie Heggs Proposed Investment In Atlier Industries Bonds. Annie Hegg has been considering investng in the bonds of Atlier
Industries. The bonds were issued 5 years ago at their $1,000 par value and have exactly 25 years remain

P3-2
Financial statement account identification Mark each of the accounts listed in the following table as follows:
a. In column (1) indicate which statement income statement (IS) or balance sheet (BS) the account belongs.
b. In column (2), indicate wheth

MGMT 332 - Module 2 Case Study
Preparing MartinManufacturings2015 Pro Forma Financial Statements. To improve its competitive position, Martin
Manufacturing is planning to implement a major equipment modernization program. Included will be replacement and

P10-7: Net present value independent projects, p. 423
Determining the Net Present Value
Project B
Project C
Project D
Initial Investment Project A
CF0
$
26,000 $
500,000 $
170,000 $
950,000
Year (t)
Cash Inflows (CFt)
1
$
4,000 $
100,000 $
20,000 $
230,00

1
P8-5: Risk and Probability, p. 350
Micro-Pub, Inc., is considering the purchase of one of two microfilm cameras, R and S. Both should provide
benefits over a 10-year period, and each requires an initial investment of $4,000. Management has constructed
t

1
P7-6: Common stock valuation zero growth, p. 303
Kelsey Drums, Inc., is a well-established supplier of fine percussion instruments to orchestras all over
the United States. The companys class A common stock has paid a dividend of $5.00 per share per yea

Module 3 Case Study
Funding Jill Morans Retirement Annuity: Sunrise Industries wishes to accumulate
funds to provide a retirement annuity for its vice president of research, Jill Moran.
Ms. Moran by contract, will retire at the end of exactly 12 years. Up

Module 1 Homework
P1-3: Cash Flows, p. 28
a. Determine Janes total cash inflows and outflows.
Inflows: $4,950
Outflows: $4,357
b. Determine the net cash flow for the month of August.
Net cash flow=$4,950-$4,357
= $593 Profit for the month of August
c. Sin

Module 4 Homework
P6-11
A:
Dollar Price= Par Value x Current Price %
=$1,000 x 97.708%
=$977.08
B:
Annual Interest paid in dollars= Bond value x Rate of Interest
=$1,000 x 5.7
=$57
Current Yield=Interest/ Bond Value
=57/977.08
=5.83%
C:
The issue price of

Module 4 Case Study
Evaluating Annie Heggs Proposed Investment In Atilier Industries
Bonds. Annie Hegg has been considering investing in the bonds of
Atilier Industries. The bonds were issued 5 years ago at their $1,000
par value and have exactly 25 years

M5- Assignment
P7-6
Value of stock when purchased
$5
P0
16%
$31.25
Value of stock when sold
$5
P0
12%
$41.67
Capital gain per share = $41.67-$31.25
=$10.42
Total capital gain=100x$10.42
=$1,042
P7-7
A- Market value of the outstanding preferred stock
$

Module 3 Homework
P5-8 Excel Spreadsheet
P-5-12
A
6,000
(1 0.12)6
3,039.78
PV
B
6,000
(1 0.12)6
3.039.78
PV
C
6,000
(1 0.12)6
3,039.78
PV
D
The present value in all 3 cases is the same but the situations are different.
A- You calculate the investmen

Module 2 Case Study
1.
Pro Forma Income Statement for Years End December 31st, 2015
Sales Revenue
$6,500,000
Less: Cost of goods sold (.73)
$4, 744,039.41
Gross profits
$1,755,960.59
Less operating expense
Selling expense (.13)
$832,512.32
General and Adm