Based on the information for the T. P. Jarmon Company

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Based on the information for the T. P. Jarmon Company

FINANCIAL MANAGEMENT – ASSESSMENT B Page 1 of 6 ASSESSMENT Instruction : This Assessment is open-book. There is no space article, and you may representation your textbooks, other sustaining symbolical and and Excel financial coercionmulae coercion your intimation and protection. Please counter-argument integral questions. Question 1 (15 marks) (Agoing with financial announcements) Installed on the instruction coercion the T. P. Jarmon Posse coercion the year ended December 31, 2015: a) How considerable is the strong’s enmesh sinceing principal, and what is the claim relative? b) Complete a announcement of coin flows coercion the era. Interpret your results. c) Compute the substitutes in the et sheets from 2014 to 2015. What do you imbibe encircling T. P. Jarmon from these computations? How do these gum narobjurgate to the announcement

FINANCIAL MANAGEMENT – ASSESSMENT B
Page 1 of 6
ASSESSMENT
Instruction : This Assessment is open-book. There is no age proviso, and you
may explanation your textbooks, other sustaining esthetic and and
Excel financial coercionmulae coercion your intimation and aid.
Please defense integral questions.
Question 1 (15 marks)
(Working with financial announcements) Inveterate on the advice coercion the T. P. Jarmon Association coercion the
year ended December 31, 2015:
a) How greatly is the immovable’s entangle working important, and what is the claim fitness?
b) Complete a announcement of coin flows coercion the epoch. Interpret your results.
c) Compute the alters in the et sheets from 2014 to 2015. What do you imbibe encircling T.
P. Jarmon from these computations? How do these gum detail to the announcement of coin
flows?
Assets
2014 2015
Coin $15,000 $14,000
Marketable Securities 6,000 6,200
Accounts receivable 42,000 33,000
Inventory 51,000 84,000
Preremunerated solution $1,200 $1,100
Total cursolution property $ 115,200 $ 138,300
Entangle set and equipment 286,000 270,000
Total property $ 401,200 $ 408,300
Liabilities and Equity
2014 2015
Account unswervingable $ 48,000 $ 57,000
Accruals 6,000 5,000
Notes Unswervingable 15,000 13,000
Total cursolution liabilities $ 69,000 $ 75,000
Long account claim $ 160,000 $ 150,000
Vile stockholders’ equity $ 172,200 $ 183,300
Total liabilities and equity $ 401,200 $ 408,300
Table Q1-1. T. P. Jarmon Association Et Sheet coercion 12/31/2014 and 12/31/2015
FINANCIAL MANAGEMENT – ASSESSMENT B
Page 2 of 6
Sales $ 600,000
Close require of movables sold $ 460,000
Gross avail $ 140,000
Clear and attention expenses
General and administrative ($ 30,000)
Attention (10,000)
Depreciation (30,000)
Total clear and attention expenses ($ 70,000)
Rights anteriorly assessmentes $ 70,000
Taxes 27,000
Entangle pay profitable to vile stockholders $42,900
Coin dividends 31,800
Alter in retained lawfuls $11,100
Table Q1-2 Jarmon Association Pay Announcement coercion the Year Ended 12/31/2015
Question 2 (10 marks)
Your dispersion is becarepresentation brace contrivances. Its WACC is 10%, and the contrivances’ after-assessment coin flows (in
millions of dollars) would be as follows:
a) Apportion the contrivances’ NPVs, IRRs, MIRRs, orderic unswervingbacks, and discounted unswervingbacks.
If the brace contrivances are stubborn, which contrivance(s) should be selected?
b) If the brace contrivances are mutually odious and the WACC is 10%, which contrivance(s) should
be selected?
c) Plot NPV profiles coercion the brace contrivances. Identify the contrivances’ IRRs on the graph.
d) If the WACC was 5%, would this alter your advice if the contrivances were
mutually odious? If the WACC was 15%, would this alter your advice?
Explain your defenses
e) The crossaggravate rebuke is 13.5252%. Explain what this rebuke is and how it curiosity-behalfs the choice
betwixt mutually odious contrivances.
f) Define the MIRR. What’s the contrariety betwixt the IRR and the MIRR, and which
generally gives a reform purpose of the rebuke of recompense on the bombardment in a contrivance? Explain.
FINANCIAL MANAGEMENT – ASSESSMENT B
Page 3 of 6
Question 3 (15 marks)
a) Presuppose you are becarepresentation brace likely bombardment opportunities: a 12-year Treasury
compact and a 7-year, A-rated corporebuke compact. The cursolution genuine waste-free rebuke is 4%; and
inflation is expected to be 2% coercion the proximate 2 years, 3% coercion the aftercited 4 years, and 4%
thereafter. The manliness waste encouragement is honord by this coercionmula: MRP = 0.02(t – 1)%.
The liquidity encouragement (LP) coercion the corporebuke compact is honord to be 0.3%. You may
determine the omission waste encouragement (DRP), ardent the association’s compact rating, from the
table adown. Remember to withdunresponsive the compact’s LP from the corporebuke stretch ardent in the
table to get at the compact’s DRP. What produce would you ceetell coercion each of these brace
investments?
Rebuke Corporebuke Compact Produce
Stretch = DRP + LP
U.S. Treasury 0.83% —
AAA corporebuke 0.93 0.10%
AA corporebuke 1.29 0.46
A corporebuke 1.67 0.84
b) Ardent the aftercited Treasury compact produce advice, fabricate a graph of the produce flexion.
Manliness Produce
1 year 5.37%
2 years 5.47
3 years 5.65
4 years 5.71
5 years 5.64
10 years 5.75
20 years 6.33
30 years 5.94
c) Inveterate on the advice encircling the corporebuke compact granted in Disunite a, apportion produces
and then fabricate a fantastic produce flexion graph that shows twain the Treasury and the
corporebuke compacts. Comment which disunite of the produce flexion (the left laterality or lawful laterality) is
likely to be most gay aggravate age?
FINANCIAL MANAGEMENT – ASSESSMENT B
Page 4 of 6
Question 4 (15 marks)
The Barryman Drilling Association is projectning an on-market subsidizetail of $1 favorite desert of the
company’s 500000 distributes, which are popularly trading at a figure of $10. Stan Barryman is the founder
of the association and calm?} holds 10000 association distributes, which he originally purchased coercion $8 per distribute
(past than 12 months past).
a) If Stan decides to hawk 2000 of his distributes coercion $10 a distribute, what obtain be his after-tax
pay if his identical ultimate assessment rebuke is 47%?
b) The Barryman Drilling Association is rebecarepresentation its project to subsidize tail $1 favorite of its
humdrum distributes and instead projects to unswerving a $1 favorite amply franked coin dividend, which
amounts to $2 per humdrum distribute. If the association assessment rebuke is 30% and Stan Barryman’s
identical ultimate assessment rebuke is 47%, what assessment impost does this fashion coercion him? What obtain
be Stan’s after-assessment pay from the dividend dispensation?
FINANCIAL MANAGEMENT – ASSESSMENT B
Page 5 of 6
Question 5 (15 marks)
Helen Bowers, possessor of Helen’s Fashion
Designs, is projectning to petition a order of
credit from her bank. She has honord the
aftercited sales coercionecasts coercion the immovable coercion
parts of 2014 and 2015:
Estimates touching unswervingments obtained from the credit
department are as follows: serene amid themonth of
sale, 10%; serene themonth aftercited the sale, 75%;
serene the succor month aftercited the sale, 15%.
Payments coercion strive and unresponsive esthetics are made themonth
after these services were granted. Here are the honord
costs of strive plus unresponsive esthetics:
May 2014 $180,000
June 180,000
July 360,000
August 540,000
September 720,000
October 360,000
November 360,000
December 90,000
January 2015 180,000
May 2014 $90,000
June 90,000
July 126,000
August 882,000
September 306,000
October 234,000
November 162,000
December 90,000
General and administrative salaries are approximately $27,000 a month. Lease unswervingments inferior longaccount leases are $9,000 a month. Depreciation jaw are $36,000 a month. Miscellaneous expenses
are $2,700 a month. Pay assessment unswervingments of $63,000 are attributable in September and December. A progress
payment of $180,000 on a fantastic intention studio must be remunerated in October. Coin on index on July 1 obtain be
$132,000, and a poverty coin et of $90,000 should be maintained throughout the coin budget
period.
a) Prepare a monthly coin budget coercion the decisive 6 months of 2014.
b) Prepare monthly honors of the required financing or superfluity funds—that is, the amount
of coin Bowers obtain insufficiency to borrow or obtain feel profitable to endow.
c) Now prepresuppose receipts from sales follow in unintermittently during the month (that is, coin
receipts follow in at the rebuke of 1 30 each day), referable attributable attributablewithstanding integral outflows must be remunerated on the 5th.
Obtain this curiosity-behalf the coin budget? That is, obtain the coin budget you responsive be conclusive inferior
these assumptions? If referable attributable attributable, what could be produced to fabricate a conclusive honor of the peak
financing requirements? No calculations are required, although if you pick-out, you can explanation
calculations to illustrebuke the property.
FINANCIAL MANAGEMENT – ASSESSMENT B
Page 6 of 6
Question 6 (Please transcribe betwixt 300-500 utterance, 15 marks)
What issue would each of the aftercited events likely feel on the roll of pretended attention rebukes?
a. Households dramatically confirmion their savings rebuke.
b. Corporations confirmion their ask-restraint coercion funds aftercited an confirmion in bombardment
opportunities.
c. The council runs a larger-than-expected budget failure.
d. There is an confirmion in expected inflation.
Question 7 (Please transcribe betwixt 300-500 utterance, 15 marks)
a) Is it likely coercion conflicts to be betwixt the NPV and the IRR when stubborn
projects are substance evaluated? Explain your defense.
b) If the unswervingtail was the solely order a immovable explanationd to confirm or refrepresentation contrivances, what unswervingback
should it pick-out as the cutoff summit, that is, refrepresentation contrivances if their unswervingbacks are referable attributable attributable attributable adown
the selected cutoff? Is your selected cutoff inveterate on some economic criteria, or is it past
or close tyrannical? Are the cutoff criteria twin-fellow tyrannical when immovables explanation the NPV and/or
the IRR as the criteria? Explain.
c) Why do most academics and financial executives mind the NPV as substance the sole best
criterion and reform than the IRR? Why do companies calm?} apportion IRRs?

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