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Topic:
finance
Description
Ford Company's cost of capital is 13%. It has invested x (million dollars) in current assets. The following function represents the shortage cost of its current assets:
S = 9 ex/3
Find the following:
(a) The optimal level of current assets.
(b) Total annual cost of these assets at the optimal level.
Hudson Corporation needs a machine that costs $60,000 and is expected to run for 5 years. Hudson will depreciate it completely in 4 years on a straight-line basis. The tax rate of the company is 33%, and the proper discount rate is 13%. Find the minimum annual earnings before taxes that this machine should have to justify its purchase.

Daly Company has the following information for 2008.

Cost of goods sold
$88 million
Dividend per share
$0.20
Earnings before interest and taxes
$13 million
Income tax rate
35%
Interest expense (at average interest rate 10%)
$1 million
Inventory turnover ratio
5
No of shares
5 million
Price per share
$13
Weighted average cost of capital
12%

Find its (a) Earnings per share, (b) Interest coverage ratio, (c) Dividend payout ratio, (d) P-E ratio, and (e) Average inventory.
In the previous problem, find the cost of equity of the Daly Company.

Anderson Company has the following information for 2009.

Total sales
$783 million
Accounts receivable (average)
$82 million
Accounts payable (average)
$75 million
Inventory (average)
$100 Million
Cost of Goods Sold
$616 million
Cost of Capital
11%
Income Tax Rate
32%

Find the NPV of one cycle of the company. Find the value of Anderson based on its operations.

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