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ashworth college BU440 assignment 4 latest 2016 marchASSIGNMENT 04BU440 Financial Management IIDirections: Be sure to save an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English, spelling, and grammar.Respond to the items below.Part A: Cost of DebtKenny Enterprises has just issued a bond with a par value of $1,000, twenty years to maturity, and an 8% coupon rate with semiannual payments.a. What is the cost of debt for Kenny Enterprises if the bond sells at the following prices?1. $9202. $1,0003. $1,0804. $1,173b. What do you notice about the price and the cost of debt?Part B: Comparing NPV and IRRChandler and Joey were having a discussion about which financial model to use for their new business. Chandler supports NPV and Joey supports IRR. The discussion starts to get heated when Ross steps in and states, “Gentlemen, it doesn’t matter which method we choose, they give the same answer on all projects.”a. Is Ross correct?b. Under what three (3) conditions will IRR and NPV be consistent when accepting or rejecting projects?Part C: Production Cash OutflowThe Creative Products Corporation produces its products two months in advance of anticipated sales and ships to warehouse centers the month before sale. The inventory safety stock is 15% of the anticipated month’s sale. Beginning inventory in October 2009 was 120,000 units. Each unit costs $1.50 to make. The average selling price is $2.50 per unit. The cost is made up of 60% labor, 30% materials, and 10% shipping (to warehouse). Labor is paid the month of production, shipping the month after production, and raw materials the month prior to production. What is the production cash outflow for the month of October 2009 production, and in what months does it occur? Assume that the sales forecast for December 2009 is $2,500,000.ashworth college BU440 assignment 8 latest 2016 march.784px;”=””>ASSIGNMENT 08BU440 Financial Management IIDirections: Be sure to save an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English, spelling, and grammar.Respond to the items below.Part A: Cash Flow of Accounts ReceivableMyers and Associates, a famous law office in California, bills its clients on the first of each month. Clients pay in the following fashion: 40% pay at the end of the first month, 30% pay at the end of the second month, 20% pay at the end of the third month, 5% pay at the end of the fourth month, and 5% default on their bills. Myers wants to know the anticipated cash flow for the first quarter of 2009 if the past billings and anticipated billings follow this same pattern. The actual and anticipated billings are as follows.Fourth Quarter Actual BillingsFirst Quarter Anticipated BillingsOct.Nov.Dec.Jan.Feb.Mar.$392,000$323,000$296,000$340,000$360,000$408,000Part B: Straight Bank LoanRight Bank offers EAR loans of 9.38% and requires a monthly payment on all loans.a. What is the APR for these monthly loans?b. What is the monthly payment for the following?1. A loan of $200,000 for six years2. A loan of $450,000 for twelve years3. A loan of $1,250,000 for thirty yearsPart C: Selling BondsAstro Investment Bank has the following bond deals underway:CompanyBond YieldCommissionCoupon RateMaturityGravity Belts8.0%2% of Sale Price8.0%10 yearsInvisible Rays9.0%3% of Sale Price12.0%10 yearsSolar Glasses7.0%2% of Sale Price5.0%20 yearsSpace Ships12.0%4% of Sale Price0%20 yearsDetermine the net proceeds of each bond and the cost of the bonds for each company in terms of yield. The bond yield in the table is the market yield before the commission is charged. Assume that all bonds are semiannual and issued at a par value of $1,000.
