# (solution) Hello. I need help with my finance test. The test is timed and

Hello.

I need help with my finance test. The test is timed and once I start it, it needs to be completed within 2.5 hours.

I can only send you the test’s excel file once I start the test, but the attached prep-questions file can give you an idea of the questions.

Please, reply confirming that you are online and can deliver the answers within 2.5 hours, so that I can immediately start my online test and submit you the excel file.

Common stock in Enck, Inc. is currently selling for a price of \$32.50 per share. Enck just paid a
\$1.75 dividend and that dividend has been growing at a steady rate of 2.75% per year and is
expected to grow at that same rate for the foreseeable future. As a shareholder in Enck, Inc.,
you intend to sell your stock ten years from today. What price per share do you antcipate
receiving in ten years? P0 \$32.50 P5 \$42.63 D0 \$1.50 P0 * (1 + 3.25%)10 g 2.75% n 10 In August 2002, DoubleDown, Inc. issued \$100 million in bonds. These bonds originally had a 20 year maturity, a
9.5% coupon rate, and semi-annual interest payments on a \$1,000 Par value. When they originated, the bonds sold
at par. Since originaton, the required rate of return on DoubleDown bonds has hovered between a low of 6.75% to a
high of 11.5% and currently sell at par value. What is the current cost of debt (r d)for DoubleDown? 20 year maturity, a
nated, the bonds sold
ween a low of 6.75% to a
own? The Gallagher Co. has a target capital structure of 65% debt and the remainder common equity. Gallagher?s cost of
debt is 8.5%, its tax rate is 35%, its most recent dividend was \$2.00 and that dividend has been growing at 3.5%
annually and is expected to contnue that growth. The current price of Gallagher stock is \$52.50 per share. Flotaton
costs on new equity are 8.5% and Gallagher has retained earnings of \$3.5 million. What is the WACC if Gallagher's
total capital expenditure is expected to be \$8.5 million? y. Gallagher?s cost of
n growing at 3.5%
50 per share. Flotaton
e WACC if Gallagher's You are considering an investment in two normal cash fow and mutually exclusive projects. Project Apple has an
internal rate of return of 13.6%, while Project Brewster has an internal rate of return of 15.75%. At a discount rate of
9.8% each project has the same net present value. If the appropriate weighted average cost of capital is 9.25%, which
project(s), if any, should be adopted? Explain your decision. Project Apple has an
%. At a discount rate of
f capital is 9.25%, which You are considering a new product line for your business. The new product line will require investment of \$3,000,000
in new equipment. The equipment will be trucked to your facility at a cost of \$25,000 and will require another
\$250,000 to modify that equipment for use in your facility. The new product line will require an increase in inventory
of \$200,000, an increase in accounts receivable of \$100,000, but you believe you will be able to get suppliers to offer
good credit terms which should increase accounts payable by \$250,000, and you will obtain a short term bank loan,
increasing notes payable by \$25,000. The equipment falls into the 3-year MACRS class (rates of 33%, 45%, 15%, and
7% in years 1-4, respectvely). You expect to operate the new product line for only three years and then shut down
operatons. The salvage value of the equipment at tme three is expected to be \$385,000. The new product line is
expected to lead to sales of \$1.4 million the first year with infaton of 3% per year for the following two years of
operaton and to incur annual operatonal costs of \$500,000 in year 1 with the same infaton rate for subsequent
years. Your business has a 35% tax rate and your WACC is 10%. Determine the tme two cash fow. nvestment of \$3,000,000
l require another
an increase in inventory
o get suppliers to offer
short term bank loan,
of 33%, 45%, 15%, and
s and then shut down
e new product line is
owing two years of
rate for subsequent
fow.