MBA 507-Assignment 1-Based on the annual income statements

Assignment #1: Review of MBA 507 MaterialMBA515: Winter 2013Due: 1/24/2013(40 points)1. (6 points) Based on the annual income statements and balance sheets found on http://money.msn.com/stocks what would you say about the financial performance of F5 Networks, Inc (ticker symbol: FFIV) in fiscal year 2012 compared to fiscal year 2011? Provide some numeric support for your conclusions.2. (6 points) What is the present value of the following series of cash payments: $1,200 per year for five consecutive years starting one year from today, followed by annual cash payments that increase by 3% per year in perpetuity (i.e. cash payment in year 6 is $1,200*1.03, cash payment in year 7 is $1,200*1.032, etc.)? Assume the appropriate discount rate is 8%/year.3. (6 points) Use the dividend discount model to value a share of Paccar’s stock as of December 31, 2012. Use Paccar’s Value Line report for a history of Paccar’s annual dividend payments and an estimate of their equity beta.4. (10 points) Estimate Weyerhaeuser’s weighted average cost of capital (WACC). Provide data sources and dates for each input used in your estimation of WACC.5. (12 points) Weyerhaeuser is considering spending $640.0 million on new equipment used in their operations. The new equipment falls into the 7-year class for depreciation purposes and also has an expected useful life of 7 years (the firm will use the MACRS depreciation method and a schedule can be found on the following page). The expected increase in revenue from this new equipment is $220 million in year 1 and is expected to grow by 10% per year over the life of the project. Operating expenses are 60% of revenue and working capital needs tend to equal about 10% of revenue. Finally, the expected salvage value after 7 years of use is $50.0 million. Should Weyerhaeuser invest in the new equipment?Recovery Allowance Percentages for PropertyOwnership Year 3-Year 5-Year 7-Year 10-Year1 33% 20% 14% 10%2 45% 32% 25% 18%3 15% 19% 17% 14%4 7% 12% 13% 12%5 11% 9% 9%6 6% 9% 7%7 9% 7%8 4% 7%9 7%10 6%11 3%100% 100% 100% 100%Depreciation Expenset = Initial Outlay * Recovery Allowance Percentaget(Note: there is no adjustment for salvage value in the calculation of depreciation expense using the MACRS method of depreciation)