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FIN 486 Entire Course

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This Tutorial contains 2 Set of Papers for All Assignments (Week 4 contains only 1 Set) FIN 486 Week 1 DQ 1 FIN 486 Week 1 DQ 2 FIN 486 Week 1 Individual Assignment Business Ethics (2 Papers) FIN 486 Week 2 DQ 1 FIN 486 Week 2 DQ 2 FIN 486 Week 2 Learning Team Assignment Department Budgets (2 Papers) FIN 486 Week 3 DQ 1 FIN 486 Week 3 DQ 2 FIN 486 Week 3 Individual Assignment Long-Term Financial Needs (2 Papers) FIN 486 Week 4 DQ 1 FIN 486 Week 4 DQ 2 FIN 486 Week 4 Individual Assignment Capital Budgeting Scenarios FIN 486 Week 5 Learning Team Assignment Strategic Financial Plan (2 Papers) ==============================================

FIN 486 Week 1 Assignment Part 1 Financial Statement Construction and Part 2 Cash Flow Reconciliation


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Part 1: Financial Statement Construction Exercise Take the following results for JJ’s Jammers and create a Balance Sheet and Income Statement in the 2012 columns of the template showing JJ’s Jammers 2011 results (In alphabetical order). Make sure you make the embedded calculations for the caption accounts (like total Current Assets or Gross Profit) Accounts Receivable 77251: Cash and Securities 315954: Goodwill and Other Assets 448484: Inventories 40712: less: Accumulated Depreciation -594200: Other Current Assets 21349: Plant & Equipment 1023458: Accounts payables and accruals 373807: Accrued Taxes 19: Additional Paid in Capital 842967: Common Stock 179798: Long Term Debt 563748: Notes payable 10578: Retained Earnings 166634: Treasury stock (571,320) shares -25303. Cost of Goods sold 1158228: Depreciation and Amortization 83729: Dividends 5310: Interest (5.5%) 56000: Net Sales 1701013: Selling and Admin Expenses 247637: Taxes (33%) 51287. Part 2: Cash Flow Reconciliation Now that you have completed the Balance Sheet and Income Statement portion of the assignment, conduct a Cash Flow Reconciliation. You will need to use net figures as indicated by the line items. ==============================================

FIN 486 Week 1 Assignment Part 3 JJ’s Jammers Summary

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Write a 525- to 700-word summary that includes the following: Explain how the three different parts of the Financial Statement work together to provide a picture of how the business is operating. Explain the role of the Financial Manager in stewarding the company’s resources. Formulate and write your opinion as to whether the market for JJ’s Jammers is good based on the financial results depicted in the 2011 and 2012 results. ==============================================

FIN 486 Week 1 DQ 1 FOR MORE CLASSES VISIT www.fin486paper.com

FIN 486 Week 1 DQ 1 What are a chief financial officer’s (CFO) two roles? Use real-world examples to explain why these roles are important to a company’s success. ==============================================

FIN 486 Week 1 DQ 2


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FIN 486 Week 1 DQ 2 Explain business ethics in your own words. Why are business ethics important in strategic planning?Howdobusinessethicsaffecttheworkplace? ==============================================

FIN 486 Week 1 Individual Assignment Business Ethics

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This Tutorial contains 2 Different Papers

Write a 700- to 1,050-word paper describing the demise of Enron Corporation速 and WorldCom速. Identify major factors that led to the dissolution of Enron Corporation速 and WorldCom速.


Explain specific ethical violations in accounting practices at Enron Corporation® and WorldCom®. Describe the role of business ethics in strategic financial planning. Cite readings and at least one other source, including the Internet. Format your paper consistent with APA guidelines. Click the Assignment Files tab to submit your assignment. ==============================================

FIN 486 Week 1 JJ’s Jammer Assignment

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Read the attached documents for assignment instructions. Click the Assignment Files tab to submit your assignment. a. Compute the 13 ratios for both companies. (Use a 360-day year. Do not round intermediate calculations. Input your profit margin, return on assets, return on equity, and debt to total assets answers as a percent rounded to 2 decimal places. Round all other answers to 2 decimal places.) b. Provide what each ratio represents to each of the two companies. a. Compute the following 13 ratios for both companies. (Use a 360-day year. Do not round intermediate calculations. Input your profit margin, return on assets, return on equity, and debt to total assets answers as a percent rounded to 2 decimal places. Round all other answers to 2 decimal places.) b. Compute the following 13 ratios for both companies. (Use a 360-day year. Do not round intermediate calculations. Input your profit margin return on assets return on equity and debt to total assets answers as a percent rounded to 2 decimal places. Round all other


answers to 2 decimal places.) c. Provide what each ratio represents to each of the two companies. ==============================================

FIN 486 Week 1 Video Summary (350 Words)

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FIN 486 Week 1 Video Summary ==============================================

FIN 486 Week 2 Apply Gale Force Surfing Case Study

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FIN 486 Week 2 Apply: Gale Force Surfing Case Study Purpose This assignment allows students to view the impact of level versus seasonal production on inventory levels, bank loan requirements, and profitability. In addition, it allows students the opportunity to demonstrate the ability to apply profitability analysis activities used in financial decision making. Assignment Instructions Review the Week 2 Case Study. Complete the required activities using the Student


Worksheet. Click the Assignment Files tab to submit your completed worksheet. ==============================================

FIN 486 Week 2 DQ 1

FOR MORE CLASSES VISIT www.fin486paper.com FIN 486 Week 2 DQ 1 Why are financial ratios used to assess a company’s financial performance? Why are sales reports, profits, debts, or current liability reports insufficient? How have financial ratios been used in your company? Do you think they are an effective assessment of financial performance? If so, why? If not, why? ==============================================

FIN 486 Week 2 DQ 2

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If you had to pick three commonly calculated ratios to analyze the financial health of a company, which would you analyze? Why would you choose those ratios? ==============================================

FIN 486 Week 2 Individual Assignment (Chapter 5, Chapter 8)

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FIN 486 Week 2 Individual Assignment (5-1,5-4,5-5,5-8,5-10,5-17,521,P8-3,P8-4,P8-9,P8-10,P8-13,P8-24,P8-25,P8-26) P8–3 Risk preferences Sharon Smith, the financial manager for Barnett Corporation, wishes to evaluate three prospective investments: X, Y, and Z. Sharon will evaluate each of these investments to decide whether they are superior to investments that her company already has in place, which have an expected return of 12% and a standard deviation of 6%. The expected returns and standard deviations of the investments are as follows: a. If Sharon were risk neutral, which investments would she select? Explain why. b. If she were risk averse, which investments would she select? Why? c. If she were risk seeking, which investments would she select? Why? d. Given the traditional risk preference behavior exhibited by financial managers, which investment would be preferred? Why? Investment Expected return Standard deviation X 14% 7% Y 12 8 Z 10 9 P8–4 Risk analysis Solar Designs is considering an investment in


an expanded product line. Two possible types of expansion are being considered. After investigating the possible outcomes, the company made the estimates shown in the following table. Expansion A Expansion B Initial investment $12,000 $12,000 Annual rate of return Pessimistic 16% 10% Most likely 20% 20% Optimistic 24% 30% a. Determine the range of the rates of return for each of the two projects. b. Which project is less risky? Why? c. If you were making the investment decision, which one would you choose? Why? What does this decision imply about your feelings toward risk? d. Assume that expansion B’s most likely outcome is 21% per year and that all other facts remain the same. Does your answer to part c now change? Why? P8–9 Rate of return, standard deviation, and coefficient of variation Mike is searching for a stock to include in his current stock portfolio. He is interested in Hi-Tech, Inc.; he has been impressed with the company’s computer products and believes that Hi-Tech is an innovative market player. However, Mike realizes that any time you consider a technology stock, risk is a major concern. The rule he follows is to include only securities with a coefficient of variation of returns below 0.90. Mike has obtained the following price information for the period 2012 through 2015. HiTech stock, being growth-oriented, did not pay any dividends during these 4 years. ==============================================

FIN 486 Week 2 Learning Team Assignment Department Budgets

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This Tutorial contains 2 Different Papers


Your Learning Team is the financial management team for Huffman Trucking, responsible for creating the financial portion of a strategic plan. You must obtain information from the marketing, sales, operations, and human resources departments to complete it. Resource: Virtual Organizations Review Huffman Trucking's financial information within the Virtual Organizations web link located on the course materials page. Create a spreadsheet for each department manager to complete his or her budget. Refer to the finance and accounting information for budget examples. Include an area in each spreadsheet for managers to list major assumptions. Draft a memo directed to department managers, containing the following information: ¡ A summary of team players and their role in creating a strategic plan ¡ Instructions explaining how managers should complete their budgets in the spreadsheets, including information needed to prepare a cash flow budget, and to time cash coming in and going out Create a sales forecast predicting sales over the next 2 years. Use financial information available on the Huffman Trucking Web site to create the forecast. Format the memo consistent with APA guidelines. Click the Assignment Files tab to submit your assignment. ==============================================

FIN 486 Week 2 Team Assignment (P4-6, P4-19)

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P4–6 Finding operating and free cash flows Consider the following balance sheets and selected data from the income statement of Keith Corporation. Keith Corporation Balance Sheets December 31 Assets 2015 2014 Cash $ 1,500 $ 1,000 Marketable securities 1,800 1,200 Accounts receivable 2,000 1,800 Inventories 2,900 2,800 $ 8,200 $ 6,800 Gross fixed assets $29,500 $28,100 Less: Accumulated depreciation 14,700 13,100 Net fixed assets $14,800 $15,000 Total assets $23,000 $21,800 Total current assets Liabilities and stockholders’ equity Keith Corporation Balance Sheets December 31 Assets 2015 2014 Cash $ 1,500 $ 1,000 Accounts payable $ 1,600 $ 1,500 Notes payable 2,800 2,200 200 300 $ 4,600 $ 4,000 5,000 5,000 $ 9,600 $ 9,000 $10,000 $10,000 3,400 2,800 Total stockholders’ equity $13,400 $12,800 Total liabilities and stockholders’ equity $23,000 $21,800 Accruals Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Keith Corporation Income Statement Data (2015) Keith Corporation Balance Sheets December 31 Assets Cash 2015 2014 $ 1,500 $ 1,000 Depreciation expense $1,600 Earnings before interest and taxes (EBIT) 2,700 Interest expense 367 Net profits after taxes 1,400 Tax rate 40% a. Calculate the firm’s net operating profit after taxes (NOPAT) for the year ended December 31, 2015, using Equation 4.1. b. Calculate the firm’s operating cash flow (OCF) for the year ended December 31, 2015, using Equation 4.3. c. Calculate the firm’s free cash flow (FCF) for the year ended December 31, 2015, using Equation 4.4. d. Interpret, compare, and contrast your cash flow estimates in parts b and c. P4–19 Integrative: Pro forma statements Red Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided below to prepare the financial plans. The following financial data are also available: (1) The firm has estimated that its sales for 2016 will be $900,000. (2) The firm expects to pay $35,000 in cash dividends in 2016. (3) The firm wishes to maintain a minimum cash balance of $30,000. (4) Accounts receivable


represent approximately 18% of annual sales. (5) The firm’s ending inventory will change directly with changes in sales in 2016. (6) A new machine costing $42,000 will be purchased in 2016. Total depreciation for 2016 will be $17,000. (7) Accounts payable will change directly in response to changes in sales in 2016. (8) Taxes payable will equal onefourth of the tax liability on the pro forma income statement. (9) Marketable securities, other current liabilities, long-term debt, and common stock will remain unchanged. a. Prepare a pro forma income statement for the year ended December 31, 2016, using the percent-ofsales method. b. Prepare a pro forma balance sheet dated December 31, 2016, using the judgmental approach. c. Analyze these statements, and discuss the resulting external financing required. Red Queen Restaurants Income Statement for the Year Ended December 31, 2015 ==============================================

FIN 486 Week 2 Video Summary

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FIN 486 Week 2 Video Summary ==============================================

FIN 486 Week 3 Apply Berkshire Instruments Case Study

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FIN 486 Week 3 Apply: Berkshire Instruments Case Study Purpose This assignment allows students to work with issues related to the cost of capital. In addition, students will practice calculations related to capital structure and use them in making financial decisions. Assignment Instructions Review the Week 3 Case Study. Complete the required activities 1 to 3 in Microsoft® Excel® or Microsoft® Word. Click the Assignment Files tab to submit your assignment. ==============================================

FIN 486 Week 3 DQ 1

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FIN 486 Week 3 DQ 1 In your own words, explain capital budgeting. Why is it important to a company’s long-term success? Provide an example of poorly performed capital budgeting. How does this affect a company’s long-term success? ==============================================

FIN 486 Week 3 DQ 2

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FIN 486 Week 3 DQ 2 Why is capital budgeting part of a company’s long-term strategic planning process? What are the pros and cons of these methods: o NPV o Simple payback o IRR ==============================================

FIN 486 Week 3 Individual Assignment (P10–2,P10–7, P10–10, P10–14, P10–21, P11–1, P11–4, P11–7, P11–8, P11–9)

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P10–2 Payback comparisons Nova Products has a 5-year maximum acceptable payback period. The firm is considering the purchase of a new machine and must choose between two alternative ones. The first machine requires an initial investment of $14,000 and generates annual after-tax cash inflows of $3,000 for each of the next 7 years. The second machine requires an initial investment of $21,000 and provides an


annual cash inflow after taxes of $4,000 for 20 years. a. Determine the payback period for each machine. b. Comment on the acceptability of the machines, assuming that they are independent projects. c. Which machine should the firm accept? Why? d. Do the machines in this problem illustrate any of the weaknesses of using payback? Discuss. P10–7 Net present value: Independent projects Using a 14% cost of capital, calculate the net present value for each of the independent ==============================================

FIN 486 Week 3 Individual Assignment Long-Term Financial Needs

FOR MORE CLASSES VISIT www.fin486paper.com This Tutorial contains 2 Different Papers You are the head of the Huffman Trucking accounting department. The chief executive officer (CEO) has asked you to prepare a financial report addressing long-term financial needs. Resource: Virtual Organizations Examine financial information for Huffman Trucking, within the Virtual Organization web link located on the course materials page. Read the New Strategic Directions Memo. Calculate external funds needed (EFN) to create the pro forma balance sheet. Calculate the following year-end ratios for the pro forma statements: · Profit as a percentage of sales · Current ratio · Asset ratio


Prepare a 500- to 850-word financial report for the CEO containing the EFN calculation, the ratio calculations, and an explanation of how you reached the calculations. Explain which income statement and balance sheet items you assumed were variable instead of fixed. Format your paper consistent with APA guidelines. Click the Assignment Files tab to submit your assignment. ==============================================

FIN 486 Week 3 Team Assignment

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a) Calculate the after-tax cost of debt b) Calculate the cost of preferred stock c) Calculate the cost of retained earnings d) calculate the cost of common stock e) calculate the firms weighted average cost of capital using retained earnings and the capital structure weights f) calculate the firms weighted average cost of capital using new common stock and the capital structure weights a. Cost of debt: Proceeds from sale of $1,000 par value bond: b. Cost of preferred stock: rp = Dp ÷ Np c. Cost of common stock: rj = RF + [bj × (rm − RF)] d. Weighted average cost of capital: ra = (wi × ri) + (wp × rp) + (ws × rn) e. 1. Change in risk Premium: Change in beta × market risk premium Note: 17.5% − 15.7% = 1.8% 2. Revised weighted average cost of capital: ra = (wi x ri) + (ws x rn) ==============================================

FIN 486 Week 3 Video Summary Short Term Finance


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FIN 486 Week 3 Video Summary Short Term Finance ==============================================

FIN 486 Week 4 DQ 1

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FIN 486 Week 4 DQ 1 What are major areas of risk in financial management? What are major areas of financial risk in your company? Which risk management techniques are important to your company? Why? ==============================================

FIN 486 Week 4 DQ 2

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FIN 486 Week 4 DQ 2 What is capital structure? Why does it matter in terms of a company’s financial performance? How does a company’s capital structure affect overall risk? ==============================================

FIN 486 Week 4 Individual Assignment (P12-1, P12-3, P12-6, P12-17, P12-19)

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P12–1 Recognizing risk Caradine Corp., a media services firm with net earnings of $3,200,000 in the last year, is considering the following projects. LG 1 The media services business is cyclical and highly competitive. The board of directors has asked you, as chief financial officer, to do the following: a.Evaluate the risk of each proposed project and rank it “low,” “medium,” or “high.” b.Comment on why you chose each ranking. P12–3 Breakeven cash inflows and risk Blair Gasses and Chemicals is a supplier of highly purified gases to semiconductor manufacturers. A large chip producer has asked Blair to build a new gas


production facility close to an existing semiconductor plant. Once the new gas plant is in place, Blair will be the exclusive supplier for that semiconductor fabrication plant for the subsequent 5 years. Blair is considering one of two plant designs. The first is Blair’s “standard” plant, which will cost $30 million to build. The second is for a “custom” plant, which will cost $40 million to build. The custom plant will allow Blair to produce the highly specialized gases that are required for an emerging semiconductor manufacturing process. Blair estimates that its client will order $10 million of product per year if the traditional plant is constructed, but if the customized design is put in place, Blair expects to sell $15 million worth of product annually to its client. Blair has enough money to build either type of plant, and, in the absence of risk differences, accepts the project with the highest NPV. The cost of capital is 12%. LG 2 a.Find the NPV for each project. Are the projects acceptable? b.Find the breakeven cash inflow for each project. c.The firm has estimated the probabilities of achieving various ranges of cash inflows for the two projects as shown in the following table. What is the probability that each project ==============================================

FIN 486 Week 4 Individual Assignment Capital Budgeting Scenarios

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FIN 486 Week 4 Individual Assignment Capital Budgeting Scenarios Choose a scenario from the Capital Budgeting Worksheet to review and analyze. Using net present value, determine the proposal’s appropriateness and economic viability.


Prepare a 500-word report explaining your calculations and conclusions. Answer the following in your report:  

Explain the effect of a higher or lower cost of capital on a firm’s long-term financial decisions. Analyze the use of capital budgeting techniques in strategic financial management.

Format your report consistent with APA guidelines. ==============================================

FIN 486 Week 4 KFC and the Colonel Case Study

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FIN 486 Week 4 Apply: KFC and the Colonel Case Study Purpose This assignment allows students to provide practical business strategies. Assignment Instructions Review the Week 4 Case Study. Summarize the following in 2 to 3 pages:  Discuss issues raised concerning Sanders’ approach in connection with the sale to Brown and Massey.  Include some of the other options that Sanders may have considered other than the $2,000,000 cash price.  Explain the reasons for regulatory control over financial markets. Let’s assume Colonel Sanders obtained a six-month loan of $150,000 Canadian dollars from an American bank to finance the acquisition of a building for another Canadian franchise in Quebec province. The loan will be repaid in Canadian dollars. At the time of the loan, the spot exchange rate was


U.S. $0.8995/Canadian dollar and the Canadian currency was selling at a discount in the forward market. The contract after six months (face value = C$150,000 per contract) was quoted at U.S. $0.8930/Canadian dollar.  Explain how the American bank could lose on this transaction assuming no hedging.  Assume the bank does hedge with the forward contract, what is the maximum amount it can lose? Format your paper to current APA standards. Click the Assignment Files tab to submit your Microsoft® Word assignment. ==============================================

FIN 486 Week 4 Risk and Return Summary

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FIN 486 Week 4 Risk and Return Summary ==============================================

FIN 486 Week 4 Signature Assignment Capital Budgeting Scenarios (New Factory)

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FIN 486 Week 4 Signature Assignment Capital Budgeting Scenarios About Your Signature Assignment Signature/Benchmark Assignments are designed to align with specific program student learning outcome(s) in your program. Program Student Learning Outcomes are broad statements that describe what students should know and be able to do upon completion of their degree. Signature/Benchmark Assignments are graded with a grading guide or an automated rubric that allows the University to collect data that can be aggregated across a location or college/school and used for course/program improvements. Resource: Capital Budgeting Worksheet Choose a scenario from the Capital Budgeting Worksheet to review and analyze. Using Net Present Value (NPV), determine the proposal’s appropriateness and economic viability. Prepare a 700- to 1,050-word report explaining your calculations and findings. Answer the following in your report:  Apply calculations to determine the proposal’s appropriateness and economic viability.  Explain the effect of a higher or lower cost of capital on a firm’s long-term financial decisions.  Analyze the use of capital budgeting techniques in strategic financial management. Format your report consistent with APA guidelines. Click the Assignment Files tab to submit your assignment. ==============================================

FIN 486 Week 4 Team Assignment Case Study O’Grady Apparel Company

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O’Grady Apparel Company was founded nearly 160 years ago when an Irish merchant named Garrett O’Grady landed in Los Angeles with an inventory of heavy canvas, which he hoped to sell for tents and wagon covers to miners headed for the California goldfields. Instead, he turned to the sale of harder-wearing clothing. Today, O’Grady Apparel Company is a small manufacturer of fabrics and clothing whose stock is traded in the OTC market. In 2015, the Los Angeles–based company experienced sharp increases in both domestic and European markets resulting in record earnings. Sales rose from $15.9 million in 2014 to $18.3 million in 2015 with earnings per share of $3.28 and $3.84, respectively. European sales represented 29% of total sales in 2015, up from 24% the year before and only 3% in 2010, 1 year after foreign operations were launched. Although foreign sales represent nearly onethird of total sales, the growth in the domestic market is expected to affect the company most markedly. Management expects sales to surpass $21 million in 2016, and earnings per share are expected to rise to $4.40. (Selected income statement items are presented in Table 1.) Because of the recent growth, Margaret Jennings, the corporate treasurer, is concerned that available funds are not being used to their fullest potential. The projected $1,300,000 of internally generated 2016 funds is expected to be insufficient to meet the company’s expansion needs. Management has set a policy of maintaining the current capital structure proportions of 25% long-term debt, 10% preferred stock, and 65% common stock equity for at least the next 3 years. ==============================================

FIN 486 Week 5 Individual Assignment Eboy Corporation

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The current balance in accounts receivable for Eboy Corporation is $443,000. This level was achieved with annual (365 days) credit sales of $3,544,000. The firm offers its customers credit terms of net 30. However, in an effort to help its cash flow position and to follow the actions of its rivals, the firm is considering changing its credit terms from net 30 to 2/10 net 30. The objective is to speed up the receivable collections and thereby improve the firm’s cash flows. Eboy would like to increase its accounts receivable turnover to 12.0. The firm works with a raw material whose current annual usage is 1,450 units. Each finished product requires one unit of this raw material at a variable cost of $2,600 per unit and sells for $4,200 on terms of net 30. It is estimated that 70% of the firm’s customers will take the 2% cash discount and that, with the discount, sales of the finished product will increase by 50 units per year. The firm’s opportunity cost of funds invested in accounts receivable is 12.5%. In analyzing the investment in accounts receivable, use the variable cost of the product sold instead of the sale price because the variable cost is a better indicator of the firm’s investment. TO DO Create a spreadsheet similar to Table 15.3 to analyze whether the firm should initiate the proposed cash discount. What is your advice? Make sure that you calculate the following: • a. Additional profit contribution from sales. • b. Average investment in accounts receivable at present (without cash discount). • c. Average investment in accounts receivable with the proposed cash discount. • d. Reduction in investment in accounts receivable. • e. Cost savings from reduced investment in accounts receivable. • f. Cost of the cash discount. • g. Net profit (loss) from initiation of proposed cash discount. ==============================================

FIN 486 Week 5 Learning Team Assignment Strategic Financial Plan

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This Tutorial contains 2 Different Papers Resource: The previously completed budgeting spreadsheets Create the financial portion of the strategic plan. The plan must include 3 years of income statements, balance sheets, and cash flow statements. Write a 700- to 1,050-word memo that explains the plan’s major assumptions and identifies areas of risk. The memo must include the following: · A review of cash flow statements and a recommendation of implementing new short-term working capital strategies on long-term cash flow · An explanation of corporate risk mitigation techniques used in capital budgeting · An analysis of the effect of a company’s capital structure on strategic financial planning and how it affects risk Refer to the Mergent Online database available in the University Library for financial plan examples. Format your memo consistent with APA guidelines. Click the Assignment Files tab to submit your assignment. ==============================================

FIN 486 Week 5 Signature Assignment Harrod’s Sporting Goods Case Study

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FIN 486 Week 5 Apply: Signature Assignment: Harrod’s Sporting Goods Case Study About Your Signature Assignment Harrod’s Sporting Goods Case Study is designed to align with specific program student learning outcome(s) in your program. Program Student Learning Outcomes are broad statements that describe what students should know and be able to do upon completion of their degree. Signature/Benchmark Assignments are graded with a grading guide or an automated rubric that allows the University to collect data that can be aggregated across a location or college/school and used for course/program improvements. Review the Week 5 Case Study. Complete the required activities 1 to 8 in Microsoft® Word or Microsoft® Excel®. Click the Assignment Files tab to submit your assignment. ==============================================

FIN 486 Week 5 Summary Long Term Financing

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FIN 486 Week 5 Summary Long Term Financing ==============================================

FIN 486 Week 5 Team Assignment Asor Products, Inc

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Jenny Rene, the CFP of Asor Products, Inc. has just completed an evaluation of a proposed capital expenditure for equipment that would expand the firm's manufacturing capacity. Using the traditional NPV methodology, she found the project unacceptable because NPV traditional = -$1,700 < $0 Before recommending rejection of the proposed project, she has decided to assess whether there might be real options embedded in the firm's cash flows. Her evaluation uncovered three options: Option 1; Abandonment; The project could be abandoned at the end of 3 years, resulting in an addition to NPV of $1,200. Option 2; Expansion; If the project outcomes occurred, an opportunity to expand the firm's product offerings further would become available at the end of 4 years. Exercise of this option is estimated to add $ 3,000 to the projects NPV. Option 3: Delay; Certain phases of the proposed project could be delayed if market and competitive conditions caused the firm's forecast revenues to develop more slowly than planned. Such a delay in implementation at that point has a NPV of $10,000. Jenny estimated that there was a 25% chance that the abandonment option would need to be exercised, a 30% chance that the expansion option would be exercises, and only a 10% chance that the implementation of certain phases of the project would have to be delayed. a) use the information provided to calculate the strategic NPV, NPV strategic , for Asor Products' proposed equipment expenditure. b) judging on the basis of the findings in part a, what action should jenny recommend to management with regard to the proposed equipment expenditure? c) In general, how does this problem demonstrate the importance of considering real options when making capital budgeting decisions? ==============================================

FIN 486 Week 5 Team Assignment Case Study Casa de Diseno


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Chapter 16 Case Study: Casa de Diseno In January 2012, Teresa Leal was named treasurer of Casa de Diseno. She decided that she could best orient herself by systematically examining each area of the company’s financial operations. She began by studying the firm’s short-term financial activities. Casa de Diseno is located in Southern California and specializes in a furniture line called “Ligne Moderna.” Of high quality and contemporary design, the furniture appeals to the customer who wants something unique for his or her home or apartment. Most Ligne Miderna furniture is built by special order because a wide variety of upholstery, accent trimming, and colors is available. The product line is distributed through exclusive dealership arrangements with wellestablished retail stores. Casa de Diseno’s manufacturing process virtually eliminates the use of wood. Plastic and metal provide the basic framework, and wood is used only for decorative purposes. Casa de Diseno entered the plastic-furniture market in late 2004. The company markets its plastic-furniture products as indoor-outdoor items under the brand name “Futuro.” Futuro plastic furniture emphasizes comfort, durability, and practicality and is distributed through wholesalers. The Futuro line has been very successful, accounting for nearly 40 percent of the firm’s sales and profits in 2011. Casa de Diseno anticipates some additions to the Futuro line and also some limited change of direction in its promotion in an effort to expand the applications of the plastic furniture. Leal has decided to study the firm’s cash management practices. To determine the effects of these practices, she must first determine the current operating and cash conversion cycles. In her


investigations, she found that Casa de Diseno purchases all of its raw materials and production supplies on open account. The company is operating at production levels that preclude volume discounts. Most suppliers do not offer cash discounts, and Casa de Diseno usually receives credit terms of net 30. An analysis of Casa de Disenoâ&#x20AC;&#x2122;s accounts payable showed that its average payment period is 30 days. Leal consulted industry data and found that the industry average payment period was 39 days. Investigation of six California furniture manufacturers revealed that their average payment period was also 39days. Next, Leal studied the production cycle and inventory policies. Casa de Diseno tries not to hold any more inventory than necessary in either raw materials or finished goods. The average inventory age was 110 days. Leal determined that the industry standard, as reported in a survey done by Furniture Age, the trade association journal, was 83 days. ==============================================

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FIN 486 PAPER Lessons in Excellence--fin486paper.com  
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