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Warf Computers, Inc., was founded 15 years ago by Nick Warf, a computer programmer. The small initial investment to start the company was made by Nick and his friends. Over the years, this same group has supplied the limited additional investment needed by the company in the form of both equity and short- and long-term debt. Recently the company has developed a virtual keyboard (VK). The VK uses sophisticated artificial intelligence algorithms that allow the user to speak naturally and have the computer input the text, correct spelling and grammatical errors, and format the document according to preset user guidelines. The VK even suggests alternative phrasing and sentence structure, and it provides detailed stylistic diagnostics. Based on a proprietary, very advanced software/hardware hybrid technology, the system is a full generation beyond what is currently on the market. To introduce the VK, the company will require significant outside investment. Nick has made the decision to seek this outside financing in the form of new equity investments and bank loans. Naturally, new investors and the banks will require a detailed financial analysis. Your employer, Angus Jones & Partners, LLC, has asked you to examine the financial statements provided by Nick. Here are the balance sheets for the two most recent years and the most recent income statement:
3 years ago, Mr. Jones deposited $5,000 in Regional Bank’s money market account, which offers to pay 8 percent interest compounded annually. At the same time, Mrs. Jones deposited $5,000 in CBS Bank’s money market account, which pays interest of 7.9 ..
A lease is valued at $34000 requires payments of $5000 every three months. If the first payment is due two years after the lease was signed and the interst is 10% compounded quarterly, what is the term of the lease?
Dixie Tours Inc. buys on terms of 4/15, net 60. It does not take discounts, and it typically pays 35 days after the invoice date. Net purchases amount to $720,000 per year. What is the approximate percentage cost of its non-free trade credit?
A project that provides annual cash flows of $2,700 for nine years costs $8,800 today. At a required return of 28 percent, what is the NPV of the project? At what discount rate would you be indifferent between accepting the project and rejecting it?
Jim Lytle, a financial adviser, recommends that his clients invest in gold. Specifically, he is advising a client to invest $100,000 to purchase 175 ounces of gold bullion, with the expectation of holding the gold for a period of one year before sell..
Illinois Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of 9.0 percent, payable annually. The one-year interest rate is 9.0 percent. What will the market value of these bonds be if they are noncallable? What will..
You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 12 percent, –12 percent, 19 percent, 24 percent, and 10 percent. a. What was the arithmetic average return on Crash-n-Burn’s stock over this five-year pe..
Project K costs $50,000, its expected cash inflows are $14,000 per year for 6 years, and its WACC is 10%. What is the project's NPV? Project K costs $53,364.04, its expected cash inflows are $11,000 per year for 10 years, and its WACC is 13%. What i..
All of the following accounts are considered to be current liabilities on the balance sheet except:
Please provide the steps to solving this problem using a financial calculator: You just opened a brokerage account, depositing $3,500. You expect the account to earn an interest rate of 9.652%. You also plan on depositing $4,500 at the end of years 5..
On January 1, 2015, INK inc. borrowed $100,000 cash from fidelity bank on a note that had 6% annual interest rate and a five year term. The loan is to be repaid in annual payment on January 1 each year. Determine the annual payment to be made on the ..
Assume you import 1 million Euro of computer from Europe from France and you have to make the payment in Euro and pay in September. To hedge against rate uncertainty, you can buy a September option. If you buy the option, on the maturity date, the sp..
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