Acme corp | Business & Finance homework help

ACME Corp is a publicly traded firm listed on the NASDAQ. Its current common stock price is 10 dollars per share. The company currently has 75 million dollars in sales. It expects sales to grow at 3 percent a year for the next several years. The company’s current fixed costs are 50 million dollars. The federal tax rate is 40 percent. The variable costs are 22.5 million dollars this year. There are 1,000,000 shares outstanding.

Don't use plagiarized sources. Get Your Custom Essay on
Acme corp | Business & Finance homework help
Just from $13/Page
Order Essay

The company has four capital projects that it would like to fund this year. If funded all four projects would be producing results for the firm one year from now. Project A has a life of 8 years, an initial investment of 2 million dollars, and an IRR of 12 percent. Project B has a 5 million dollar initial investment and a five-year life with an annual net cash income expected of 1,318,982 and an IRR of 10 percent. Project C has a life of 10 years, an IRR of 10 percent and a 4 million dollar initial investment. Project D is a 7-year project with an initial investment of 3 million dollars and a 9 percent IRR.

If the company uses debt, its investment banker suggests the following structure: 8 year maturity, equal annual principal repayments over the 8 years, and a 12 percent interest rate on outstanding principal.

The company pays no dividends on its common stock. The investment banker said to assume the firm would be able to issue common stock at the current market price, assuming the earnings per share will not be hurt in the future.

Preferred stock can be issued for a par value of 25 dollars per share and an annual dividend yield of 8 percent per share. Preferred dividends are not tax deductible to the company. Instead they are paid out of net income after taxes. Earnings per share on common stock should be calculated after preferred dividends have been paid. The numbers of shares of preferred stock are not included in the earnings per share calculation. This only includes common stock.

For this case, we are not going to require a marginal cost of capital analysis. Assume that all four projects are going to be done. The Price Earnings ratio that is calculated in problem number one should also be utilized, as appropriate in each of the five remaining problems to forecast the stock price.

Case Requirements

1. Prepare a baseline income statement and forecast for 2 years. (current year and year 1 and year 2) without the impact of the new capital program.

2. Prepare a current and 2 year forecast which shows the impact of the capital program on the company’s income statement, prior to selecting any funding options.

3. Prepare an income statement forecast (year 1 of forecast in item 2) that shows a 100 percent debt financing option. Please show the forecasted earnings per share and the forecasted stock price, assuming the current PE multiple remains the same. (just as in the example)

4. Prepare an income statement forecast as in number 3, using 100 percent common stock as the funding source.

5. Prepare an income statement forecast for year 1 (as in number 3) using a mix of debt, common stock, and preferred stock. The goal is to attempt to avoid reducing the current stock price and hopefully increasing the price. Show your assumptions clearly on your funding mix.

6. Do the problem in number five, assuming that the 3 percent increase in sales does not occur. Instead, assume that the sales remain flat from the current year to year 1. Again, calculate the best mix of debt and equity to maximize stock prices (or at least minimize the damage to the stock price) , assuming the current PE multiple remains unchanged.

Place Order
Grab 16% Discount On This Paper
Pages (550 words)
Approximate price: -

Why Choose Us

Quality Papers

We value our clients. For this reason, we ensure that each paper is written carefully as per the instructions provided by the client. Our editing team also checks all the papers to ensure that they have been completed as per the expectations.

Professional Academic Writers

Over the years, MyEssay.Help has managed to secure the most qualified, reliable and experienced team of writers. The company has also ensured continued training and development of the team members to ensure that it keep up with the rising Academic Trends.

Affordable Prices

Our prices are fairly priced in such a way that ensures affordability. Additionally, you can get a free price quotation by clicking on the "Place Order" button.

On-Time delivery

We pay strict attention on deadlines. For this reason, we ensure that all papers are submitted earlier, even before the deadline indicated by the customer. For this reason, the client can go through the work and review everything.

100% Originality

At MyEssay.help, all papers are plagiarism-free as they are written from scratch. We have taken strict measures to ensure that there is no similarity on all papers and that citations are included as per the standards set.

Customer Support 24/7

Our support team is readily available to provide any guidance/help on our platform at any time of the day/night. Feel free to contact us via the Chat window or support email: support@myessay.help.

Try it now!

Grab 16% Discount On This Paper

We'll send you the first draft for approval by at
Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

MyEssay.help has stood as the world’s leading custom essay writing services providers. Once you enter all the details in the order form under the place order button, the rest is up to us.

Essays

Essay Writing Services

At MyEssay.help, we prioritize on all aspects that bring about a good grade such as impeccable grammar, proper structure, zero-plagiarism and conformance to guidelines. Our experienced team of writers will help you completed your essays and other assignments.

Admissions

Admission and Business Papers

Be assured that you’ll definitely get accepted to the Master’s level program at any university once you enter all the details in the order form. We won’t leave you here; we will also help you secure a good position in your aspired workplace by creating an outstanding resume or portfolio once you place an order.

Editing

Editing and Proofreading

Our skilled editing and writing team will help you restructure you paper, paraphrase, correct grammar and replace plagiarized sections on your paper just on time. The service is geared toward eliminating any mistakes and rather enhancing better quality.

Coursework

Technical papers

We have writers in almost all fields including the most technical fields. You don’t have to worry about the complexity of your paper. Simply enter as much details as possible in the place order section.

                                                                                     Place Order macbook tamir - mersin escort - casino-masino.com - bahis