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Submitted by SolutionGuru on Thu, 2013-08-15 13:35
due on Mon, 2013-08-19 13:35
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FIN 2030 Final Project

Part One:  Final Project 3: Cost of capital

 

Barbow Enterprises, Inc., is considering an expansion in their operations. One of the first items they want to examine is their cost of capital. According to the accounting department, the following items and their respective costs have been identified:

The cost of Common Equity: 15% The before tax cost of debt: 12% No Preferred stock They have also calculated the marginal tax rate to be 40% and the stock sells at its book value. Barbow Enterprises Inc. Balance Sheet Assets Liabilities and Owners’ Equity Cash $240 Long Term Debt $2,304 Accounts Receivable 480 Equity 3,456 Inventories 720 Net P&E 4,320 Total Assets $5,760 Total Liabilities and owners’ Equity $5,760 Required: Calculate Barbow’s after-tax weighted average cost of capital, using the data in the balance sheet above.

 

Deliverable: By Tuesday, July 2, 2013, submit the completed assignment to the W4: Assignment 2 Dropbox. Use a Microsoft Excel spreadsheet that illustrates your calculations. You may use the formulas embedded in Microsoft Excel and/or a financial calculator for these calculations. Name your document SU_FIN2030_W4_A2_part1_LastName_FirstInitial.

Part Two:  Final Project 3: Government

Securities

In this part of your Final Project, you will research and analyze current

information (that is, within the past two months) on government securities.

 

Step 1: Go to a financial Web site to do your research. The

following are three suggested sites, but you may use others. Be sure to cite

your sources!

Step 2: Research current information (within the last two

months) on the yields and maturity for:

  1. U.S. treasuries
  2. Municipal bonds
  3. Corporate bonds

Required:

  • Discuss what the pure expectations theory would imply about the yield curve.
  • Compare and contrast the yields and maturities for each of the securities.
  • Discuss which you would hold and why relative to interest rate risk.

 

Answer
Submitted by SolutionGuru on Thu, 2013-08-15 13:37
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FIN 2030 Final Project

body preview (3 words)

xxx 2030 xxxxx xxxxxxxxxxxxxxxxxxx

file1.docx preview (309 words)

Part One:  xxxxx xxxxxxx 3: Cost of xxxxxxx

Barbow Enterprises, xxxxx is considering an expansion in xxxxx operations. One of the xxxxx items xxxx xxxx xx examine is xxxxx xxxx of xxxxxxxx According xx xxx accounting department, the xxxxxxxxx xxxxx and their xxxxxxxxxx costs xxxx xxxx xxxxxxxxxxx

The xxxx of xxxxxx Equity: xxx The before tax xxxx of xxxxx xxx No Preferred xxxxx They xxxx also xxxxxxxxxx the marginal xxx xxxx xx be xxx and xxx stock xxxxx at its xxxx value. xxxxxx Enterprises Inc. xxxxxxx xxxxx xxxxxx Liabilities xxx Owners' Equity xxxx $240 xxxx xxxx Debt $2,304 xxxxxxxx xxxxxxxxxx 480 xxxxxx 3,456 Inventories 720 xxx P&x 4,320 Total xxxxxx $5,760 xxxxx xxxxxxxxxxx and xxxxxxx xxxxxx $5,760 xxxxxxxxx xxxxxxxxx xxxxxx’s after-tax xxxxxxxx average xxxx of xxxxxxxx using the data in xxx xxxxxxx xxxxx above.

Deliverable: xx xxxxxxxx xxxx 2, xxxxx xxxxxx xxx completed assignment xx the W4: Assignment x Dropbox. Use x xxxxxxxxx Excel xxxxxxxxxxx that xxxxxxxxxxx xxxx

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file2.xls preview (48 words)

Sheet1

xxxxxxxxxxxxxxxxxxxxxxx
US xxxxxxxx Bonds xxxxxxxxx xxxxxxxxxxxxxx Bonds
Maturity This month xxxx xxxxxxxxx xxxxxxxxx xxxxx This monthLast month
2 Yearxxxxxxxx 0.47 0.41 0.47xxxx
x Year xxxx0.88 xxxx xxxx0.92 xxxx
10 Year1.752.041.77xxxxxxxx 2.55
xx xxxx2.953.26xxxxxxxx xxxx3.62

Sheet1

xx xxxxxxxx xxxxx
xxxxxxxxx xxxxx
Corporate Bonds
xxxxx xxxxxxxxxxx xxxxx

Sheet2

x
US Treasury xxxxx
xxxxxxxxx Bonds
Corporate Bonds
Yeild xxxxxxxxxxx xxxxx

xxxxxx

x

file3.doc preview (545 words)

Government Securities

Part One: xxxxxxxxxxxx Exercises

xxxxxx Enterprises Inc. is xxxxxxxxxxx xx xxxxxxxxx in their xxxxxxxxxxx xxxxxxxx xxxxxxxxxxx xx xxxxxxx xxxxx xxxx of xxxxxxx xx the xxxx xx Common Equity x 15%, the before xxx xxxx xx xxxx = xxx and xxx xxxxxxxx xxx rate x 40%. xxxx xx xxx xxxxxxxxx the xxxxxx xxx both Equity and xxxx xxxx xxxxx xxxxxxx xxxxx information of total xxxxxx x xxxxxx and xxxxx xxxx = xxxxxxx

Hence,weight of xxxxxx = $3,456 / xxxxxxx + $2,304) x xxx xx 60% and weight xx Debt = $2,304/ ($3,456 + $2,304) = 0.4 or xxxx So, after- xxx xxxxxxxx xxxxxxx xxxx of xxxxxxx xxxxxx x [(0.15 x xxxx + xxxxx x (1 x xxxx x 0.4}] = xxxxxx xx 11.88%.

Part Two: Government Securities

xx conduct x xxxxxxxx xx xxxxxxxxxx xxxxxxxxxxx xxxxx xx xxx I go xx a financial Web xxxx ‘finance.yahoo.com’ xxx collected xxx following xxxxxxx information on the yields and xxxxxxxx for U.S. Treasuries, Municipal Bondsand Corporate xxxxx xx x xxxxx x xxxx xx xxxx xxx xx year xxxxxxxxxxx

xxxxxxxxxxxxxxxxxx

US xxxxxxxx Bonds

Municipal Bonds

Corporate Bonds

Maturity

This month

Last month

This month

xxxx xxxxx

xxxx xxxxx

xxxx month

x xxxx

0.23

xxxx

0.47

xxxx

0.47

xxxx

5 Year

xxxx

0.88

0.92

xxxx

xxxx

xxxx

xx xxxx

1.75

xxxx

xxxx

1.84

2.28

xxxx

xx xxxx

xxxx

3.26

xxxx

xxxx

3.30

3.62

xxx xxxx xxxxxxxxxxxx theory: xxxxx are xxx xxxxx factors xxxxxxxxx xxx slope of xxx xxxxx xxxxx those xxx the xxxxxxxxx’ expectations xxx xxxxxx interest rates and xxxx

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